cenTecn Computer Designs 2013

CHAPTER ONE

1.0. BUSINESS DESCRIPTION

1.1. BUSINESS NAME

The business will take a unique name, KenTech Computer Designs, and is therefore correct
and accepted to be abbreviated as KCD.

1.2. BUSINESS LOCATION/ADDRESS

KenTech Computer Designs will be located at Nairobi CBD area, Bazaar Plaza, on the
junction of Moi Avenue and Biashara Street.

Email address: [email protected]

Physical Address: P.O BOX 28978 – 00200

Nairobi

This location is appropriate because of the following reasons:

 Fully developed infrastructure which does not hinder with the operations of the
business that are infrastructural dependent, such as transportation.

 Availability of customers in form of institutions, organizations, businesses, urgencies,

government offices, unions and individuals that offer ready market to the business.

 Nearness to many sources of materials and other resources which form the basis of
the operation and running of the business, such as tonners, cartridges, empty DVDs
and CDs, computers, printers, papers (printing papers and photo papers) cables and
electronic equipments.

 Availability of enough space for use during future need in terms of changes and
growth of the business.

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1.3. FORM OF BUSINESS OWNERSHIP

KenTech Computer Designs (KCD), will be a solely owned business by Kennedy Leshan
Sankale, and therefore takes the form, sole proprietorship form of business.

A sole proprietorship type of business is considerably the best form due to the following
major reasons, as far as KCD is concerned:

 It requires a limited/small capital to start operating

 It will be under full control of one person, and thereby easy to identify and solve the
problems that may affects the operation of the business.
 It takes simple accounting records than limited liability companies and partnership
typed businesses.
 Sole proprietorship enjoys a better knowledge of the market by the owner.
 The presence of full training acquired by the owner gives the business to enjoy a full
experience of the owner and thereby growth.

The business will have a starting capital raised as follows:

a. Bank Loan 300,000

b. Owners equity 300,000
c. Contribution by willing friends and family 400,000

TOTAL STARTING CAPITAL 1,000,000

1.4. TYPE OF BUSINESS

The business will be a purely computer oriented type. Designing will therefore be the core
objective of the business.

This includes products and services such as: graphics designs, website developing and
designing, graphics production and sound and video editing.

The status of the business is at start up level, and will start to operate in January 2014.

The major reason as to why I would like to start the operations of the business in January
2014, is to ensure that between now and 2014, all other arrangements which includes raw
materials, capital and the venue of the business are readily prepared.

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1.4.0 Major activities in the business

 Web design
 Graphics designs

1.4.1 Minor activities in the business

 New blank CDs and DVDs

 Printing, photocopying, lamination and binding

1.5. PRODUCTS AND SERVICES

The table below gives the details of all the products and services that KCD will operate in. it
shows, product forms, product types, products lines and targeted markets.

Table 1 Products and services Table

SN Product form Product type Product lines Targeted market

Graphics designing Identity logos Branding, designing and New upcoming institutions,
I creating of logos organizations e.g. schools,
hospitals, businesses.
Publications Magazine, newspapers Existing institutions, organizations,
and books urgencies and individuals who want
to express their products and
services to the public.
Adverts Artworks, posters, flyers, Individuals, organizations,
news letters institutions, businesses who want to
post an event or advert.

Cards Event cards, staff cards, Individuals, event planners,

business cards, invitation institutions, organizations
cards
II Website Web designing Maintenance and NGOs, Schools, Industries,
Production of websites, hospitals, businesses, industries,
writing mark up. companies.
Website Worldwide web, internet, NGOs, Schools, Industries,
development private network (intranet) hospitals, businesses, industries and
companies.

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The table above realizes the products form, type and lines as well as the target market in the
field.

It shows that KenTech Computer Designs (KCD) will deal with four major forms of products
and services which are:

 Graphics designs
 Website designs

1.6. JUSTIFICATION OF OPPORTUNITY

There are several social and economic developments in the area that have readily expressed a
need for this particular business.

The following are the major developments within the area that have expressed a need for the
start up of this business:

 Need to market the products and services offered in many upcoming enterprises in
town, and this will need designed publications prepared by KCD to let the public be
aware.

 With the growth of many organizations, and now that it's good that the public locate
them easily, KCD realizes that it is important to design and develop websites for easy
location and directory to these upcoming enterprises.

 The many events in the location which includes, weddings, meetings, trainings,
seminars, exhibitions, concerts, orientations, school intakes and product launch events
will always need a message to notify the public or a group of social users on the date
and the venue of these events which will thereby require a designed template or a
news letter which KCD realizes that this will inform the public.

 Many organizations and institutions realizes that, advertisements are the key aspects
to the growth of any organization, therefore KCD gives options of advertisement for
such enterprises which are growing, this includes posters, flyers, business cards and
website which are readily offered by KenTech Computer Designs.

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KenTech Computer Designs will be encouraged by some factors to grow and develop
without any challenge.

These factors include the following:

 Starting capital is not a large sum, and therefore it can be easily raised
 Government policies are friendly to the business, such as taxation and registration of
the sole proprietorship.
 There will be large investments since KCD will be dealing with a diverse products
and services.

1.7. INDUSTRY

The industry to which this business belongs to is termed to be Information and

Communication Technology (ICT).

Kenya provides investment opportunities in the ICT sector targeting both local and export
markets. As a regional hub and a financial capital of the East and Central Africa region,
Kenya's Competitive advantage as an ICT investment destination is supported by various
investor friendly factors that include:
 Availability of a well-trained labor force
 Diversified experience
 Access to the region market
 Investor friendly arrangements
 Investment insurance
 Strategic location

1.8. GOALS OF THE BUSINESS

KenTech Computer Designs has the following goals that are required to be achieved as from
the start of the business.

1.8.1. Short term goals:

 To market the business to all companies, institutions and organizations in town
 To attend to an average of fifty clients in every single day
 To market the business to other regions out of Nairobi
 To have a website of the business which will refer the customers to the business and
give them a list of products and services offered in the business.

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1.8.2. Long term goals:

 To expand the business and have a branch or two in selected locations
 To employ at least seven staff for easy operations and running of the organization
 To be the most recognized designing business in the country by show of clients
 To diverse products and services from physical to online selling of products and
services

1.9. ENTRY AND GROWTH STRATEGY

1.9.1. Entry strategy

KenTech Computer Designs will seek to attract the public awareness on its existence in the
market.

A thorough promotion of the business is necessary to ensure that the business picks its
desired direction quickly and on the correct time.

The following methods that will be adopted as an entry strategy of the business into the
market:

 Public address systems, such as in churches, meetings and seminars. This will tell
the public the name of the business name, type of the business, the physical location
and products and services offered.
 Advertisement strategy will also be essential and it will be done through various
advertisement Medias such as local radio stations, adopting posters to strategic areas
in town, such as recreational areas and schools as well as streets, using and giving out
of fliers, giving free T-shirts ant capes containing a print of the business details.
 Penetration pricing strategy where the business will start with a low cost strategy to
attract customers in the business.
 Free products and services strategy where applicable to ensure that customers are
happy and can easily refer back or come with their friends.
 Music strategy will be adopted to attract people, especially the youth into the
business.

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1.9.2. Growth strategy

The following are the major areas that KenTech Computer Designs will strategize to ensure
that there is growth in the business:

 Branches strategy - Opening several branches to capture more customers, after one
the business intends to open a new branch in Moi Avenue of Nairobi.
 Market development strategy – the business shall be loaning its products and services
to its customers to ensure that they keep in touch with the business and thereby
growth.
 Diversification strategy – the business will diversify to sell new blank DVDs and
CDs, sell of printing papers, office stationeries, printing, photocopying, typing,
lamination, scanning and envelopes.

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CHAPTER TWO

2.0. MARKETING PLAN

2.1. CUSTOMERS

KenTech Computer designs realize that the business will be serving three main categories of
it's in the market, and therefore a possibility to adjust incase of the change of every other
category of the users.

2.1.0. Individual customers

The category, individual customers, will in this business exist to buy products and services
for individual use.

Products such as event cards, business cards, staff cards and invitation cards will therefore
see individual category acquiring them.

This category of customers includes:

 event holders needing event cards and invitation cards

 Directors, managers, accountants, doctors, teachers, waitress and all other
staff in every organization and institution who may need staff cards and
business cards.
 Musicians, choirs, singers and actors who want their video and audio to be
edited and synchronized.

2.1.1. Commercial customers

There should exist commercial customers who will be aiming to make profits through buying
and selling of products and services from KenTech Computer Designs

This takes into account the buying of publications, magazines general news letters designed
books and photography and artworks.

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2.1.2. Institutional customers

This particular category of customers will only be acquiring products and services from
KenTech Computer Designs for use by institutions. They include:

 Schools, hospitals, colleges, training institutions and universities that may need staff
cards, business cards, newsletters, books, posters, fliers and identity logos.
 Schools, hospitals, colleges, training institutions and universities needing websites for
their institutions.

2.2. MARKET SHARE

Every category of each consumer is required to give a market to KenTech Computer

Designs.

Table 2.2.0 below summarizes the market share of each category of consumers
(individual consumers, commercial consumers and institutional consumers).

Table 2 Business market share

No. Segment Total Total Target Computation Market Share

Population Population
1. Individual 1,000,000 15,000 (15,000/1,000,000)*100 1.5%
customers (Kenya-
Advisor.com)

2. Commercial 25,000 1,000 (1,000/25,000)*100 4%

customers (Kenya-
Advisor.com)

3. Institutional 9,000 500 (500/9,000)*100 5.5%

customers (Kenya-
Advisor.com)

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2.3. COMPETITION

Within the location, there are many established competitors under the field of computer
designs. The following are the major competitors in the location:

a. Xpressive Design & Advertising

Xpressive Design & Advertising is a solely owned business located in Avenue House, 4th
floor, Kenyatta Avenue, Nairobi, Kenya. They mainly specialize with graphics designs and
website development as well as advertisings.

b. Weledi Arts Ltd

Weledi Arts is a company that specializes with website designs and graphics designs. It is
located in Utumishi House, Nairobi, Kenya

c. Sokoletu Creative Limited

This company is located in 4th Avenue Market, 4th Avenue / Magadi Road, OngataRongai,
Kenya; it mainly specializes with both graphics and website designs.

d. Onpoint IT Solutions International

It is located in Ragati Rd, NHIF Building 1st Flr, and Nairobi, Kenya and specializes in
wesite creation and graphics designs.

Table 3 below gives the analysis of the major competitors in the location where KenTech
Computer Deigns will be located.

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Table 3 Competitor analysis

Competitor Location Strength Weakness

Xpressive Design & Avenue House, 4th Strategic location Small number of staff
Advertising floor, Kenyatta Avenue, Well advertised Lacks modern technology
Nairobi, Kenya

Weledi Arts Ltd Utumishi House, Has been in the Low profits due its nature
Nairobi, Kenya field for long time (company)

Sokoletu Creative 4th Avenue Market, 4th Good location and Personnel are not
Limited Avenue / Magadi Road, well competent
OngataRongai, Kenya marketed/promoted

Onpoint IT Solutions Ragati Rd, NHIF Well marketed Location not well planned
International Building Flr, Diversified
1st activities
Nairobi, Kenya

2.3.0 Strategies to overcome competitions

KenTech computer Designs will employ the following techniques to cope and overcome the
competition by other related businesses.

 Opening branches in other locations to capture more customers

 Using of modern technology
 Extending closing hours
 Employing highly skilled staff
 Strategic location where all customers can access the business services
 Offering mobile services to customers

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2.4. METHODS OF ADVERTISEMENT AND PROMOTION

The business being new in the market, there is a need of applying much of advertising
strategies, as well as promoting the name of the business to be famous in the market.

2.4.1 Methods of Promotion

KenTech Computer Designs will perform several methods in order to ensure that the
business is fully promoted and the population is aware of the existence of the business.

The major promotion technique that the business will concentrate on is promotion through
advertisement, because currently advertisement is the major method that reaches a large
number of people in the market.

The following reasons explain why promotion should be given priority in KenTech
Computer Designs:

 To increase and maintain demand for products and services offered in KCD
 To increase and maintain the market share of KCD products and services
 ‘To make noise' and raise the awareness of KCD products and services
 To create or enhance a brand image

2.4.1 Methods of advertisement

This will be the most common method of promoting the business as well as the products and
services offered.

The following are the major techniques and methods that will be taken into account while
undertaking advertisement of KenTech Computer Designs and its activities:

I. Media advertisement – KenTech Computer Designs will use the most common radio
stations like citizen radio and KBC idhaayataifa to make adverts to the public on its
existence. Television advertisement will also come in as an advertisement strategy.
The TV stations will include KTN and NTV.

II. Print Media – KenTech Computer Designs will be distributing printed media
containing details such as, the name of the business, the location of the business, the
products and services offered in the business and the contact details of the business.

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The print media that the business will use are posters, brochures, flyers, magazines,
newspapers, newsletter, placement on the yellow pages and bulletins.

III. Electronic media – KCD will also concentrate on posting adverts and communicating
via electronic media. The business will use the following to market the products and
services: phone calls and short messages services, telemarketing, e-mail
conversations, social media such as face book and twitter and online chat groups.

2.5 PRICING STRATEGY

The following are the major factors that will highly affects pricing in KenTech Computer
Designs:

a) The government policies – if the government policies such as taxation policies and
registration cost are high, then this clearly tells that the prices of the products and
services must be high than normal to bring back reasonable profits to the business.

b) Demands– when the population of the area demands more than the business can
supply, then it simply means that the business can adjust to get more profits by taking
the advantage of the higher demand in the market.
c) The supply of materials – when there is a lot of surplus products in stock, then the
business may be forced to decrease the prices of the products so that the respective
customers can turn up in large numbers.

d) Cost of production – when the cost of production of the products and services
offered in KenTech Computer Designs is high, the prices should also be increased to
make reasonable profits in the business.

e) Consumer characteristics – the behavioral aspect in many consumers may be

brought by many aspects such as geographical placement in the area and lifestyle of
different groups of consumers, therefore the business will try as much as possible to
set its prices according to the characteristics of the different classes of the users that
are available in the area.
KCD also understands that consumer characteristic vary from category to another,
e.g. the behavior of institutional consumers is different with that of commercial
consumers as well as that of individual consumers and thereby this makes prices to
vary from category to category.

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2.5.0 Methods of pricing

Given the above factors that will directly affects pricing in KCD, the business has come up
with several methods of pricing. They include the following:

2.5.1 Demand oriented pricing strategy

Prices will vary from product to product according to the demand. When the demand of a
product is high, then the business will adjust its price in the market to take advantage over the
demand, but when the demand is low, then the business will drop the prices to encourage
consumers to buy more.

2.5.2 Cost oriented pricing strategy

The business will record all the costs and the expenses that a product has incurred from the
stage of raw material to a finished product and then getting the value, the profit needed will
be added. These expenses include transport used, bills and cost of raw materials such as
papers.

2.5.3 Consumer oriented pricing strategy

This includes price discrimination whereby the price of a product for the categories of
customers will be varying, e.g. the price of newsletter will differ from individual customers,
commercial customers and institutional customers.

In other occasions, pricing will be adjusted by a unit to call upon the customers, like using
19,999 in website designing instead of 20,000.

Given the above scenarios, table 4 below gives a summary of the prices of all the products
and services that KenTech Computer Designs seeks to offer to the customers.

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Table 4. Products and Services prizes

Product/Service Product/Service Market Price

Type
Websites Web designing and Institutions, organizations 26,000
developing and businesses

graphics Staff card Employees in 25

organizations and
institutions
Business Card Professionals e.g. 15
directors, managers,
accountants etc.
Flyers Institutions, event holders, 20
organizations and
businesses
Posters Institutions, event holders,
organizations and 120
businesses
Brochures Institutions, event holders, 350
organizations and
businesses
Newsletters, Institutions, event holders, 900 - 8000
magazines, books organizations and
businesses
Identity logos Institutions, organizations 2,500
and businesses

2.6 SALES TACTICS

KenTech Computer Designs realizes that there is a need to increase sales in the business time
by time.

Following are the major tactics that will help to increase the sales in the business as well as
attracting more customers to buy and use more products and services that are offered in the
business.

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2.6.0 Discounts

Customers who buy and acquire reasonable amounts and quantity of products and services
from the business will be appreciated by discounts.

An example of where discounts is applicable, is, when a customer comes in the business
seeking business cards, KenTech Computer Designs will give extra copies of cards, like
30more copies, to encourage the customer to come back again in case the need arise again or
if there is another different need seeking to be satisfied.

2.6.1 Free Products

Customers are awarded free products on purchase of the products offered in the business so
that they can refer more customers to the business as they also come back again for more
products and services.

Among the free products that KCD will offer are, T-shirts, pens, caps, calendars, books and
pictures all baring the a print of the details of the business.

2.6.2 Loans

KCD will allow customers to acquire products and services on loan to make easy for
customers to enjoy them when there is no ready cash from customers.

Customers will be given a maximum time by the business to settle the loaned items.

2.6.2 Mobile services

KCD will be offering mobile services to the customers to ensure that these who don't find
time to avail themselves to the premise are also included in the sales plans of the business.

Services such as getting passport sized photos to be attached to the staff cards will be done
directly where the customers are based at.

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2.7 DISTRIBUTION STRATEGY

KCD distribution strategy will a zero level distribution having in mind that all the major
products and services comes from the business and are directly produced by the business.

KCD being a designing business, simply means that every customer goes direct to the
business location, seeks a product or a service according to his/her preference and then the
product is delivered direct to that customer according to how it was agreed.

2.7.0 Mode of transport

KenTech Computer Designs will facilitate transportation of the products, taking them to
where they are easily accessed by the customers.

The mode of transport that is reliable around the business location is “bodaboda” and at times
the Taxi mode of transportation.

This will serve all categories of customers, i.e.

 Individual customers
 Commercial customers and
 Institutional customers.

2.7.1 Distribution Challenges

The following challenges are expected as a result of distribution of products to the market
(customers):

 Deterioration of the paper based materials in case of harsh weather conditions like
rains.
 Misplacement of small-sized designed materials
 Failure of customers to respond on time to the distributed products, they may end up
being obsolete

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2.7.2 Strategies to overcome distributions challenges

KCD will undertake the following measures to ensure that these distribution related
challenges are well dealt with and will not affects the operations of the business:

 Sealing of ready finished products until they reach the market to ensure that the
environmental factors do not negatively affects their physical appearance as well as
their format.
 Keeping the small-sized designed cards and other materials in their respective caskets
to avoid lose and misplacement.
 To deal with the issue of obsolete KCD will necessitate the distribution of products to
the market only when they are required and are in demand.

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CHAPTER THREE

3.0 ORGANIZATION AND MANAGEMENT PLAN

3.1 BUSINESS MANAGER AND QUALIFICATIONS

The business will be headed by the manager entitled, Operations Manager who is the sole
proprietor of this business currently holding a diploma of technology in library and
information science, by the name Kennedy LeshanSankale.

Responsibilities of the operations manager:

The manager will be in charge of the following:

 Offering supervisory responsibility to all other staff

 Acting as a link between the business and other related businesses of the same type in
the area.
 Approving decisions proposed by other members
 Ensuring quality service is rendered to all customers as well as the staff.

3.2 OTHER PERSONNEL, THEIR DUTIES AND QUALIFICATIONS

3.2.0 Accountant (1)

Duties of an

accountant

 Generating and carrying out monthly financial reports of the business

 Organizing financial plans in the business
 Keeping and managing of accounts for every product, asset, liability or service in the
business.

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Qualifications of an accountant

 Any CPA certification

 Proficiency in computer operations
 KCSE certificate with an average of C+
 Certificate of good conduct

3.2.1 Cashier (1)

Duties and responsibilities of a cashier

 Organizing for payments of all other staffs and personnel in the business
 Issuing receipts and receiving cash and cheques upon any transaction made in the
business.
 Organizing and paying bills and the rent of the business
 Keeping records of each transaction made in the business in a database.
 Reporting financial procedures to the accountant for bookings.
 Sales records and sales managing

Qualifications of a cashier

 Business management certification

 Have a knowledge in accounting
 Computer proficiency
 KCSE certificate
 Certificate of good conduct

3.2.2 Computer designers (2)

Duties and responsibilities of computer designer

 Receiving and recording while also executing customers requests

 Website designing upon a request by customers
 Graphics designs in regard to customers preferences
 Delivering finished materials, products and services to the respective customers
 Marketing and promoting of the business when needed
 Attending to customers in the reception

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Qualifications of Computer designers

 Diploma in ICT
 Proficiency in computer applications, website designs and computer designs
 KCSE certificate with a mean grade of C-
 Good conduct certificate
 Good communication skills

3.2.3 Support staff (1)

Duties and responsibility of support staff

 Carrying out messengerial duties in the business

 Cleaning and organizing the office
 Organizing breakfast for the rest of the staff

Qualification of support staff

 KCSE certificate of a mean grade of D

 Certificate of good conduct

3.3 RECRUITMENT, TRAINING AND PROMOTION

3.3.0 Recruitment

KenTech Computer Designs will recruit the staff and the personnel of the business through
the following methods:

 The job title will be advertised in the newspaper

 The selection of the candidates who will proceed for interviews will then take place
after the application duration is over.
 The shortlisted candidates will be call for interviews
 Succeeding candidates in the interviews will be appointed in the business.

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3.3.1 Training

After an appointment letter has been issued, the business will organize for training for the
appointed candidates.

KenTech Computer Designs will consider the following methods in order to make the staff
be competent and be able to handle issues in the real practical scenario.

 Workshops – staff will be offered a three day workshop immediately on reporting to

the business. This workshop will be targeting to improve the communication skills,
performance and relationships between themselves.
 Seminars – a one week seminar will be planned to improve the skills of duty
operations of the employees. The seminar will also seek to improve the understanding
of the staff towards the job as well as how and where their departmental boundaries
should not exceed.
 Coaching – The business will undertake coaching in terms of supervision to the staff
to ensure that they are doing the right thing and what will be offered to the customers
will the best product. This will also seek to make them be efficient in their
departments.
 Counseling – this will be done to ensure that the relationship and the communication
between the staff and the customers keeps growing to enhance the understanding of
the objectives set and goals required to be meet by the business.

3.3.2 Promotion

It is known that promotion must be done at some point in the business which is intended to
increase employee performance and the output of the business.

KenTech Computer Designs will thereby carry out promotions in all other departments of the
business.

To motivate the staff, the following techniques and methods of promotion will be observed
when the business picks the momentum.

 Title – at some point during the operation of the business, one or some of the staff
will be give senior titles to encourage and enhance their performance. Due to the fact
that the staffs in the business are limited, at the growth of the business KCD will seek
to add and recruit more staff into the business and this will see the title of the existing
staff being promoted to supervisors and senior supervisor.
 Credit – KCD will also increase the salary and wages of the staff to motivate them
and thereby increasing their performance in the job.

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3.4. REMUNERATION AND INCENTIVES

All the staff in the business will be under a permanent basis, and will therefore paid by means
of monthly salaries.

For the first six months as the business waits to pick the momentum, the remuneration
guideline will take the form as indicated in the table below, and this will be increased by 50%
when the business gain the momentum:

Table 5. Remuneration and incentives

Job Title Basic salary House allowance Transport allowance Total

Manager 7,000 2,000 1,000 10,000

accountant 6,000 2,000 1,000 9,000
Cashier 5,000 2,000 1,000 8,000
Designers 4,000 2,000 1,000 7,000
Support staff 3,000 2,000 1,000 6,000

The table above gives the remuneration guidelines for business.

In a period of six months the business will increment the salaries of all the staff by 50% of
the normal.

3.5 Licenses, Permits and By-laws

For this business to start operating, it must be registered and acquire licenses and permits
from the respective departments of the government.

The table below summarizes the licensing, permits and by-laws that KenTech Computer
Designs will be required to undertake.

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Table 6.Licenses, Permits and By-laws

License source cost status

Business Name Search Registrar of companies, Sheria 900 Not renewable

house

Business permit City council 7,000 Renewable, annualy

KRA registration Kenya Revenue Authority 3,200 Not renewable

3.6 SUPPORT SERVICES

KenTech Computer Designs will seek to rely services from other organizations to enhance its
services and operations.

The following ere the service providers and the nature of the services that they will be
providing to KenTech Computer Designs:

3.6.0 Bank

KCD will be relying with banks to bank cash, cheques, forward cash to other accounts if
need arises, payment of salaries and goods via banks and saving cash for future
developments.

3.6.1 Insurance

Insurances companies will be issuing assurance to the business in case of accidents and other
emergencies.

However, National Hospital Insurance Funds will also be crucial to cover the staff in case of
any illness. This means that when all members are registered by NHIF, their medical bills
will be assured in case of emergence.

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3.6.2 Telecommunications

Telecommunications companies will come upon to the business premise to give

communication services to enhance the communication from one department to another.

KCD will seek this service from communication service providers.

3.6.2 The Kenya Power and Lightening Company (KPLC)

KPLC will be responsible for provision of power for machines and light in the offices.
Depending on the consumption of power in a month, there should be a monthly electricity
bill. This is the most important of all services, as the business is technological oriented,
therefore powering of machines is a necessity to the business.

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CHAPTER FOUR

4.0 OPERATIONAL/PRODUCTION PLAN

KenTech Computer Designs will need to acquire several items which will assist in the
running, operation and production process in the business.

In the below table, all the facilities that are of vital important in the operation of the business,
have been summarized together with their cost and the suppliers as identified by this plan.

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4.1 OPERATIONAL/PRODUCTION FACILITIES

Table 7.facilities

FACILITY CAPACITY QUANTITY COST/UNIT TOTAL SOURCE/SUPPLIER

(level of output) COST
Machines
1 Computers 4.1 channel 4 16,000 64,000 Conrad Kenya Services
(complete)
2 Printers 550-sheet 2 12,000 24,000 Copier Force (K) Ltd
3 Laminating 80g:20sheets 1 9,500 9,500 Copier Force (K) Ltd
machine
4 Binding Machine 700 sheets 1 11,800 11,800 Conrad Kenya Services
5 Scanner 2 Sheet-feed 1 7,000 28,000 Conrad Kenya Services
SUB-TOTAL 137,300

Tools/Equipme
nts
1 Paper cutter A4/A3 1 4,000 4,000 Conrad Kenya Services
2 Software Win 10 3,000 30,000 Conrad Kenya Services
vista/xp/win7
3 UPS 500VA 4 6,000 24,000 Conrad Kenya Services
4 Trash 20l 1 700 700 Afro Plastics (Kenya)
5 Digital camera 12 mega pixel 1 17,000 17,000 Conrad Kenya Services
6 blank DVDs 480 mb each 40packets 300 300 Conrad Kenya Services
7 backup drive 1 tera-byte 1 12,000 12,000 Conrad Kenya Services
8 Calculator Scientific 1 1,000 1,000 Office Max
9 clear ruler 30cm 1 100 100 Office Max
10 phone line Telcom enabled 5 3,000 15,000 Conrad Kenya Services
SUB-TOTAL 104,100

Furniture and
fittings
1 Computer desk 3m*4m 5 6,000 30,000 CopyriteFurnitures Ltd
2 File Cabinets and 5m 3 5,000 15,000 CopyriteFurnitures Ltd
Carts
3 Office chairs 1 seater 6 3,000 18,000 Victoria Furniture Ltd
4 Office sofa set 6m, leather 1 9,000 9,000 Victoria Furniture Ltd
5 Carpet 7m*8m 2 1,500 3,000 PVC Carpet Stall
SUB-TOTAL 75,000

GRAND 316,400
TOTAL

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The table above summarizes the machines, tools, equipments, furniture as well as fittings that
would be required by the business to facilitate operation and production.

The business premise layout

The work stations and the layout will be arranged in such a manner that communication and
flow of information will be enhanced.

It will operate under two major rooms, where one room will have three work stations while
room two will have two work stations.

The following are the major work stations that will be observed in KenTech Computer
Designs:

ROOM 1

This is the first room of the business which will take three work stations as listed below:

a. Work station 1 (WS1): This is the first work station in the business. This
willaccommodate any of the two designers, but will strictly cater for graphics
designing activities only as it will contain a computer which is equipped with
software and drivers for designing of graphics.This department will also cater for
reprographic services, conservation services and sale of CDs, DVDs and publications
of different kinds.
b. Work station 2 (WS2):The second work station will be taken by the web designer,
which will be responsible for all activities that include web designing, web
development and web creation.
c. Work station 3 (WS3): The third station will be taken by the operations manager of
the business who will be incorporating all other activities in the business.

ROOM 2

The second room in the business will take two workstations, but not as big as room one.

a. Work station 4 (WS4): This work station is answerable for the accountant and
accounting is the major activity that will be taking place here.
b. Work station 5 (WS5): This is the work station of the cashier in the company which
will be responsible for pays and bills clearance, and will be working closely with the
accountant, and that is why they are in the same room.

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The sketch below, represent the business layout as described above according to the work
stations and the departments in KenTech Computer Designs.

WS1: Designer graphics

WS2: Designer - web

WS3: Manager
WS4: Accounta t

WS5: Cashier

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4.2 OPERATION AND PRODUCTION STRATEGY

The following are the measures required to be adopted in the business to ensure efficient
supervision, minimum cost and maximum output as per the objectives of this particular
business:

 Accounting for each and every material used in the business and ensuring that the
final product of that raw material will bring in the maximum profit required.
 Delegation of duties will be taken as an important aspect in the business to ensure that
every procedure has the maximum support required to maximize the output in the
business as well as minimizing the cost.
 The business will encourage alternative option of acquiring materials and will as well
scan the suppliers of raw materials to make a conclusion on the best and the least
expensive materials that are required in the business thus minimizing the total and
current expenses in the long run at the business.
 KenTech Computer Designs will concentrate in database creation and maintenance
which will alert the officers and in particular the accountant in the business when
materials are limited in the business so that an action can be taken in terms of
acquiring stock.

Stated below are the operational cost in the business, i.e. monthly cost of raw materials,
monthly cost of labor and monthly overheads costs.

a. Monthly cost of raw materials

The table (table 8) below summarizes the monthly cost of raw materials in the business.

Table 8. Monthly cost of raw materials

Item Amount (Kshs)

Pens 2,000
printing papers (all sizes) 12,000
Pencils 1,200
DVDs/CDs and envelopes 16,000
File folders 11,000
Envelopes 7,000
Fountain pens 3,000
Laminating porches 8,000
Paper glue 1,000
TOTAL COST OF MATERIALS 61,200

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The above table gives the total cost of raw materials in one month which has been reflected
as Kshs. 61,200.

b. Monthly cost of labor

Labor is also an expense in the business. The labor cost in one month in the business has
been summarized in the below table (table 9).

Table 9. Monthly cost of labor

Job Title Total Monthly Salary (Kshs)

Manager 10,000
Accountant 9,000
Cashier 8,000
Designer (website) 7,000
Designer (graphics) 7,000
Support staff 6,000
TOTAL COST OF LABOR 47,000

The above table gives a summary of the total labor cost of the staff in the business as quoted
earlier in chapter four of this plan, (3.4 Remuneration and incentives),which is 47,000.

c. Monthly overheads costs

It is noted that, there are indirect expenses which are required to operate and run the business
and at the same time facilitate production and operation.

The table (table 10) below gives a summary of all these overheads expenses.

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Table 10. Monthly overheads costs

Item Amount (Kshs)

Rent 25,000
Electricity 2,000
Water 2,000
Telephone 2,000
Mail 1,000
Transport 3,000
Advertisement 10,000
Insurance 3,000
Loan payment 20,000
Interest on loan 5,000
Taxes 6,000
TOTAL OVERHEAD COSTS 79,000

Monthly overhead costs as presented in the above table is Kshs. 29,000 in maximum, but this
is usually not fixed as electricity and water normally fluctuate according to the consumption.

d. Total cost of production per month

The below table, (table 11) gives the total operation and production expenses shown in table
8, 9 and 10 above.

Table 11. Total costs of production per month

Item Amount (Kshs)

Cost of materials 61,200

Cost of labor 47,000

Overheads costs 79,000

Total cost of production/operation 187,200

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4.3 PRODUCTION/OPERATIONAL PROCESS

4.3.0 Website development process

Designing a web site is a process consisting of six phases:

1. Project Definition
2. Site Structure
3. Visual Design
4. Site Development
5. Testing
6. Launch Plus

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4.3.1 Graphics production process

1. The Brief 5. Reflection

2. Research 6. Positioning
3. Visual Research 7. Presentations
4. Sketching &Conceptualizing 8. Celebration

1. The Brief

The initial accumulation of information from the client is the most important step, either by a
face to face interview or a questionnaire. This is where the business must establish the design
brief. We really need to understand our clients very thoroughly before getting started.

2. Research

After molding the design brief, getting to know our client's businesses is the next crucial step
in making a graphics designing successful. Research includes general reading on the industry
itself, sometimes on its history, and on its competitors. If budgets allow, external research
can be carried out.

3. Visual Research

This is research not into the clients business, but into the actual graphic style. This is where
we seek out a look, a style, an approach or attitude, usually to attain a period or style that we
are unfamiliar with, or to refresh ourselves with what is new or successful. E.g. Find logos of
similar businesses and critique them. This is where you look for inspiration.

4. Sketching &Conceptualizing

Developing the graphic design concept(s) is where creativity comes into play, this is where
the designers in KenTech Computer Designs must create the graphics by using the design
brief and the research conducted. KCD designers will use a napkin to sketch, a sketchbook or
computer as paper, this is all a matter of personal choice, however using a computer first up
is not recommended and will not be common in KenTech Computer Designs.

When conceptualizing, the designers are mainly concerned with the graphic style and image
of a piece but at times, they try to convey deep meaning or some sort of visual puzzle.

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5. Reflection

Taking breaks is as important as the physical research and the design brief. It is so easy to get
stuck in a creative cul-de-sac (learn how to be creative) and get tired of a project and this is
why graphics designers take breaks. By resting, the designers' ideas mature and develop in
the back of their head. When they go back to their project in KenTech Computer Designs,
they have renewed enthusiasm, insight and opportunity. This is also a good stage to get
feedback from others.

7. Positioning

This is where designers choose how to work, they either position themselves like contractors
and take orders according to their client's wishes (i.e. don't advise their clients of design
matters) or they position themselves like a business and build themselves a long term
relationship (i.e. Guide clients to a more appropriate solution much alike how a lawyer does).
Designers in KenTech Computer Designs have to choose how they wish to work.

8. Presentation

This is where the designer must present their work to the client.

They can choose whether to show the client a huge variety of logo design concepts (if it is
hard to gauge a client's taste) or they could choose to showcase just a few select logo
designs. This is another debatable issue.

In this case, for the purpose of proper time management, Kentech Computer Designs will
adopt the behavior of presenting only the best 1 or 2 concepts.

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4.4 GOVERNMENT REGULATIONS AFFECTING OPERATIONS

Operations in KenTech Computer Designs can be affected in two major ways, either
economic policy or legal changes.

Economic policy

Taxation policy affects business costs. For example, a rise in corporation tax (on business
profits) has the same effect as an increase in costs. Businesses can pass some of this tax on to
consumers in higher prices, but it will also affect the bottom line. Other business taxes are
environmental taxes (e.g. landfill tax), and VAT (value added tax). VAT is actually passed
down the line to the final consumer but the administration of the VAT system is a cost for
business.

Another area of economic policy relates to interest rates. In this country the level of interest
rates is determined by a government appointed group - the Monetary Policy Committee
which meets every month. A rise in interest rates raises the costs to business of borrowing
money, and also causes consumers to reduce expenditure (leading to a fall in business sales).
Government spending policy also affects business.

Legal changes

The government of the day regularly changes laws in line with its political policies. As a
result the business continually has to respond to changes in the legal framework.

Examples of legal changes include:

a. The creation of a National Minimum Wage which has recently been extended to under-18.

b. The requirement for businesses to cater for disabled people, by building ramps into offices,
shops etc.

c. Providing increasingly tighter protection for consumers to protect them against

unscrupulous business practice.

d. Creating tighter rules on what constitutes fair competition between businesses.

Today British business is increasingly affected by European Union (EU) regulations and
directives as well as national laws and requirements

CHAPTER FIVE

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CHAPTER FIVE

5.0 FINANCIAL PLAN

5.1 PRE-OPERATIONAL COSTS

While preparing to start the actual activities in the business, there are cost which must be
incured in the business.

The pre-operational costs that are mandatory to the operation of the business are summarised
in the table below (table 12):

Table 12. Pre-operational costs

ITEM AMOUNT (Kshs)

Labor 47,000
3-month Rent 75,000
Machines 137,300
Tools and equipments 104,000
Funiture and fittings 75,000
Licenses, Permits and By-Laws 11,100

TOTAL PRE-OPERATIONAL COSTS 449,400

The above table signifies the total cost that the business will incur in preparation to start the
operations in the business.

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5.2 WORKING CAPITAL ESTIMATIONS

KenTech Computer Designs will require some amount of cash in the normal circumstances
of operations. Working capital is the different between the sum total of the current assets less
the sum total of the current liabilities;

Working Capital = Current assets – Current liabilities

Table 13 below shows a summary of working capital estimations in the company for three
years from 2014 to 2016:

Table 13: Working Capital for the first three years

Item Year 2014 Year 2015 Year 2016

Amount (Kshs) Amount (Kshs) Amount (Kshs)

Current assets
Cash at bank 600,000 620,000 650,000
Cash in hand 80,000 50,000 60,000
Stock 20,000 100,000 120,000
Debtors
Total current assets 700,000 770,000 830,000

Fixed Assets
Machines 137,000 110,000 100,000
Tools and equipments 104,000 35,000 20,000
Funitures and fittings 316,000 50,000 15,000

Total fixed assets 557,000 195,000 135,000

Total assets 1,257,000 965,000 965,000

Liabilities
creditors 50,000 75,000 90,000
Bank loan 400,000 100,000 100,000
Friends contribution 200,000 100,000 100,000
Owners equity 300,000 100,000 100,000
Total liabilities 950,000 375,000 390,000

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The assumption made is that all friends were willing and able to give their contribution in
raising the working capital of the business as well as all assets are not prone to challenges
such as theft and destruction.

The working capital for the first three years have been estimated as follows:

 Year 2014: 700,000 – 650,000 = 50,000

 Year 2015: 770,000 - 275,000 = 495,000
 Year 2016: 830,000 - 290,000 = 540,000

5.3 PROJECTED CASH FLOW STATEMENTS

Earlier in this document, it stated that acquiring a loan is one of the methods of raising capital
to start this business, with regard to this loan, the payment will be done monthly. i.e. 20,000
every month for the first 15 months of operation.

There will be also a loan interest of 1.67% of the total amount every month, which is
equivalent to 5,000 each month for 15 months.

Projected cash flow statements for KenTech Computer Designs for the first theree years of
operation:

Table 14. Projected cash flow statements for the year 2014

the below table shows the projected cash flow statement for the year 2014, at which loan
repayment and interest on loan is proceeding and will take 15 months up to the tear 2015
March.

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Paticulars Jan Feb Mar April May Jun Jul Aug Sep Oct Nov Dec Total
Cash in Flow
Opening balance or 96,400 84,200 144,800 102,400 65,500 20,600 122,200 284,400 238,900 130,000 104,100 1,394,000
balance b/f
Owners equity 300,000 300,000 300,000 300,000 300,000 300,000 300,000 300,000 300,000 300,000 300,000 300,000 3,600,000
Bank loan 300,000 - - - - - - - - - - - 300,000
Cash sales 160,000 250,000 289,000 188,000 199,000 201,000 300,000 380,000 250,000 203,000 200,000 198,000 2,818,000
Debtors 3,000 35,000 51,000 50,000 60,000 45,000 88,000 85,000 50,000 70,000 65,000 80,000 682,000

Total cash in flow 763,000 681,400 724,200 682,800 661,400 611,500 708,600 887,200 884,800 811,900 695,500 682,100 8,794,400

Cash out flow

Pre-oprational cost 449,400 449,400 449,400 449,400 449,400 449,400 449,400 449,400 449,400 449,400 449,400 449,400 5,392,800
Purchases 61,200 20,000 10,000 11,000 21,000 15,000 13,000 20,000 35,000 45,000 10,000 15,000 276,200
Payment to creditors 30,000 10,000 3,000 1,000 5,000 10,000 9,000 10,000 30,000 46,000 11,000 17,000 182,000
Salaries and wages 47,000 47,000 47,000 47,000 47,000 47,000 47,000 47,000 47,000 47,000 47,000 47,000 564,000
Rent 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 300,000
Electricity 2,000 1,500 1,000 2,000 2,000 1,500 1,000 2,000 2,000 2,000 1,000 2,000 20,000
Water 2,000 1,000 1,000 1,000 1,500 2,000 2,000 2,000 2,000 2,000 1,000 1,000 18,500
Telephone 3,000 2,300 1,000 1,000 2,000 1,000 2,000 1,000 2,500 3,000 1,000 2,000 21,800
Transport 3,000 2,000 2,000 4,000 2,000 2,000 1,000 2,000 4,000 3,000 2,000 3,000 30,000
Advertising 10,000 5,000 6,000 5,000 7,000 4,000 3,000 10,000 15,000 25,000 10,000 13,000 113,000
Insurance 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 36,000
Loan payment 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 240,000
Interest on loan 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 60,000
Taxes 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 72,000

Total cash out 666,600 597,200 579,000 580,400 595,900 590,900 586,400 602,400 645,900 681,400 591,400 608,400 7,326,300

Net cash for the month 96,400 84,200 144,800 102,400 65,000 20,600 122,200 284,400 238,900 130,500 104,100 73,700 1,468,100

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Table 15. Projected cash flow statement for the year 2015

Loan repayment and interest on loan ends on March this second year of operations.

Paticulars Jan Feb Mar April May June July Aug Sep Oct Nov Dec Total

Cash in Flow
Opening balance or 1,468,100 1,423,100 1,231,900 1,254,900 1,172,900 1,136,900 1,268,900 1,618,900 2,059,900 2,454,900 2,743,900 3,060,700 20,895,000
balance b/f
Cash sales 80,000 76,000 90,000 30,000 100,000 200,000 400,000 450,000 400,000 500,000 512,800 410,100 3,248,800
Debtors 20,000 30,000 35,000 10,000 19,000 50,000 100,000 150,000 100,000 10,000 15,000 25,000 564,000

Total cash in flow 1,768,,100 1,549,100 1,556,900 1,494,900 1,491,900 1,586,900 1,968,900 2,418,900 2,759,900 3,164,900 3,471,700 3,695,700 27,107,800

Cash out flow

Pre-operational cost 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 1,800,000
Purchases 60,000 38,200 20,000 70,000 80,000 55,000 60,000 65,000 40,000 120,000 100,000 90,000 798,200
Payment to creditors 20,000 17,000 15,000 10,000 35,000 25,000 50,000 55,000 25,000 60,000 70,000 80,000 462,000
Salaries and wages 47,000 47,000 47,000 47,000 47,000 47,000 47,000 47,000 47,000 47,000 47,000 47,000 564,000
Rent 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 300,000
Electricity 2,000 1,000 2,000 2,000 2,000 2,000 2,000 2,000 1,000 2,000 2,000 2,000 22,000
Water 2,000 2,000 2,000 2,000 2,000 1,000 1,000 2,000 2,000 2,000 2,000 1,000 21,000
Telephone 2,000 1,000 3,000 2,000 2,000 1,000 2,000 1,000 2,000 1,000 2,000 3,000 22,000
Transport 3,000 2,000 4,000 5,000 3,000 3,000 4,000 3,000 4,000 5,000 4,000 5,000 45,000
Insurance 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 36,000
Loan payment 20,000 20,000 20,000 60,000
Interest on loan 5,000 5,000 5,000 15,000
Taxes 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 72,000

Total cash out flow 345,000 317,200 302,000 322,000 355,000 318,000 350,000 395,000 305,000 421,000 411,000 412,000 4,217,200

Net cash for the 1,423,100 1,231,900 1,254,900 1,172,900 1,136,900 1,268,900 1,618,900 2,059,900 2,454,900 2,743,900 3,060,700 3,283,700 22,890,600
month

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Table 16. Projected Cash Flow for statement for the year 2016

Paticulars Jan Feb Mar April May Jun Jul Aug Sep Oct Nov Dec total
Cash in flow
Opening 22,890,600 22,340,600 21,723,600 21,070,600 20,422,600 19,773,600 19,136,600 18,540,600 17,963,600 17,384,600 16,813,600 16,061,600 211,231,600
balannce or
balance b/f
Owners equity 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 600,000
Cash sales 45,000 60,000 100,000 115,000 121,000 135,000 180,000 208,000 220,000 230,000 261,000 270,000 615,000
Debtors 10,000 20,000 50,000 55,000 60,000 68,000 70,000 71,000 75,000 78,000 79,000 79,000 615,000

Total cash in 22,995,600 22,470,600 21,923,600 21,290,600 20,653,600 20,026,600 19,436,600 18,869,600 18,308,600 17,742,600 17,203,600 16,460,600 214,391,600
flow

Cash out flow

Pre-operational 300,3000 350,000 360,000 365,000 367,000 375,000 377,000 385,000 388,000 390,000 391,000 396,000 4,414,000
cost
Purchases 100,000 120,000 180,000 183,000 186,000 186,000 187,000 187,000 189,000 189,000 295,000 395,000 2,399,000
Payment to 150,000 160,000 190,000 192,000 193,000 197,000 198,000 201,000 203,000 205,000 309,000 310,000 2,508,000
creditors
Salaries and 47,000 47,000 47,000 47,000 47,000 47,000 47,000 47,000 47,000 47,000 47,000 47,000 564,000
wages
Rent 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 300,000
Electricity 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 24,000
Water 2,000 1,000 2,000 2,000 2,000 2,000 1,000 1,000 1,000 1,000 2,000 2,000 19,000
Telephone 3,000 2,000 3,000 3,000 3,000 2,000 3,000 2,000 2,000 2,000 2,000 3,000 30,000
Transport 5,000 4,000 3,000 3,000 4,000 3,000 5,000 5,000 5,000 5,000 3,000 3,000 48,000
Advertisement 10,000 25,000 39,000 35,000 40,000 40,000 40,000 40,000 51,000 52,000 55,000 57,000 475,000
Insurance 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 36,000
Taxes 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 72,000

Total cash out 655,000 747,000 853,000 868,000 880,000 890,000 896,000 906,000 924,000 929,000 1,142,000 1,253,000 10,467,000

Net cash for 22,340,600 21,723,600 21,070,600 20,422,600 19,773,600 19,136,600 18,540,600 17,963,600 17,384,600 16,813,600 16,061,600 15,207,600 203,924,600
the month

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5.4 PRO-FORMA INCOME STATEMENT

KenTech Computer Designs is not an existing business, it a proposed business, therefore the
income statement is pro-forma and not a real profit and loss account.

Pro-forma income statements for KenTech Computer Designs for the years ending 30th Dec
2014, 30th Dec 2015 and 30th Dec 2016:

Table 17. Pro-forma income statements

paticulars 30th Dec 2014 30th Dec 2015 30th Dec 2016
Sales 8,794,400 27,107,800 214,391,600
Less cost of sales 5,326,300 4,217,200 10,467,000
Gross profit 3,468,100 22,890,600 203,924,600

Expenses
Purchases 276,200 798,200 2,399,000
Payment to creditors 182,000
Salaries and wages 564,000 564,000 564,000
Rent 300,000 300,000 300,000
Electricity 20,000 22,000 48,000
Water 18,500 21,000 19,000
Telephone 21,800 22,000 30,000
Transport 30,000 45,000 48,000
Advertising 113,000 - 475,000
Insurance 36,000 36,000 36,000
Loan repayment 240,000 60,000 -
Interest on loan 60,000 15,000 -
Taxes 72,000 72,000 72,000

Total expenses 1,932,200 1,955,200 3,991,000

Net profit before tax 1,532,900 20,935,400 199,933,600
Tax (30% of income) 459,870 6,280,620 59,980,080
Net profit after tax 1,073,030 14,654,780 139,935,520

The assumptions made is that the taxation rate is at 30% of the total income, the loan
repayment is 20,000 each month for 15 months and the interest on loan is 1.67% of the
total amount, equivalent to 5,000 every month for 15 months.

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5.5 PRO-FORMA STATEMENTS OF FINANCIAL POSITIONS

KenTech Computer Designs is not an existing business, and therefore the balancce sheet is
termed as a pro-forma.

Table 18. Statement of financial position as at the begining of year 1 to the end of year 2:

Assets Start End of year 1 End of year 2

Current assets
Cash in bank 300,000 1,468,100 22,890,600
Cash at hand 300,000 50,000 40,000
Stock 61,200 60,000 120,000
Debtors 3,000 10,000 20,000

Total current assets 664,200 1, 588,100 23,070,600

Fixed assets
Machines 137,000 110,000 100,000
Machine depreciation (20%) 27,400 22,000 20,000
Tools and equipments 104,000 35,000 20,000
Tools/equipments depreciation (10%) 10,400 3,500 2,000
Funiture and fittings 316,000 50,000 15,000
Funiture/fittings depreciation (20%) 63,200 10,000 3,000

Total fixed assets 656,600 210,500 160,000

Total assets 1,320,800 1,798,600 23,230,600

Liabilities
Current liabilities
Creditors 50,000 75,000 90,000
Friends contribution 200,000 100,000 100,000

Total current liabilities 250,000 175,000 190,000

Long-term liabilities
Owner’s equity 300,000 350,000 400,000
Bank loan 240,000 60,000 0
Retained earnings 60,000 15,000 0

Total long-term liabilities 600,000 425,000 400,000

Total liabilities and equity 850,000 600,000 590,000

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Assumptions made is that the depreciation rate of machines is 20%, for tools and
equipments is 10% and that of funiture and fittings is 20%.

5.6 BREAK-EVEN POINT CALCULATION

Break-even point is a point where total costs (expenses) and total sales (revenue) are equal.
Break-even point can be described as a point where there is no net profit or loss.

Break-even point, BED = contribution margin%

Fixed costs CM

% = Contribution Margin / Sales x 100

Table 19. Variable Costs

Item Amount
Pre-operational costs 11,636,800
Purchases 3,473,400
Payment to creditors 3,152,000
Electricity 66,000
Water 58,500
Telephone 73,800
Transport 123,000
Advertisement 588,000
Interest on loan 75,000
Loan repayment 300,000

Total variable costs 19,546,000

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Table 20. Fixed costs

Item Amount
Salaries/Wages 1,692,000
Rent 900,000
Insurance 108,000
Taxes 216,000

Total fixed costs 2,916,000

CM = 4,961,000 – 19,546,000

= - 14,585,000

CM% = -14,585,000 / 4,961,000 x 100

-294%

BEP = CM / Fixed Costs

= -294 / 2,916,000

= + - 0.01%

This break-even point tells that the business will sustain with profit margin of 0.01% of the
total sales and will also survive with loss not exceeding 0.01%.

5.7 PROFITABILITY RATIO

Having the net profit, gross profit, return on investment and return on equity, their ratio has
been expressed in KenTech Computer Designs:

a. Gross profit ratio

GP ratio = Gross profit/sales x 100

Year 2014: GP = 3,468,100 / 8,794,400 x100

GP = 39.4%

Year 2015: GP = 22,890,600 / 27,107,800 x 100

GP =84.4%

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Year 2016: GP = 203,924,600 / 214,391,600 x 100

GP = 95.1%

b. Net Profit ratio

NP ratio = Net Profit before Tax / sales x 100

Year 2014: NP = 1,532,900 / 8,794,400 x 100

NP = 17.4%

Year 2015 = 20,935,400 / 27,107,800 x 100

NP = 77.2%

Year 2016: 199,933,600 / 214,391,600 x 100

NP = 93.2%

c. Return on Equity

Return on equity = Net Profit after Tax / Owners equity x 100

Year 2014: Return on Equity = 1,073,030 / 300,000 x 100

= 375.7%

Year 2015: Return on equity = 14,654,780 / 3,600,000 x 100

= 407.1%

Year 2016: Return on equity = 139,935,520 / 14,654,780 x 100

= 954.9%

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d. Return on Investment

Return on Investment = Net Profit after tax + Interest / Total investment

Year 2014: Return on Investment = 1, 073,030 + 60,000 / 1,000,000

= 1.1%

Year 2015: Return on Investment = 14,654,780 = 15,000 / 1,000,000

= 14.7%

Year 2016: Return on Investment = 139,935,520 = 0 / 1,000,000

= 139.9%

5.8 DESIRED FINANCING

Desired financing shows the amount that the business should possess for investing, if
everything worked as planned.

Table 21. Desired finances

Item Amount (Kshs)

Pre-operatonal costs 11,606,800

Working capital 1,085,000

Contigengency funds 1,000,000

Total Desired Financing 13,691,800

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5.9 PROPOSED CAPITALIZATION

Proposed capitalization shows the total amount invested in the business as of the start of
operations.

Table. 22 Proposed capitalization

Source Amount (Kshs)

Owners equity 300,000

Bank loan 300,000

Friends contribution 400,000

Total Investment 1,000,000

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BIBLIOGRAPHY

 Survey of Kenya
 Government of Kenya
 Kenya Bureau of Statistics
 Kenya ICT Board

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APENDIX A – Directory Sketch of Business Location

Uhuru Highway Uhuru Highway Uhuru Highway

Nation Center

Ufundi Cop. Plaza

Central
UoN Police Station Kenyatta Avenue
Bazaar Plaza University Way
Gevanjee Garden Business Location: Bazaar Plaza

Moi Avenue Moi Avenue

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