BUSINESS PLAN

TITLE BUSINESS NAME: DAIRY FARMERS

DEPARTMENT: GENERAL AGRICULTRE

NAME: HILLARY KANGOGO

ADMISSION NUMBER: 11191

COURSE NAME: CRAFT IN GENERAL

AGRICULTURE

CENTRE CODE: 5401010

CENTRE NAME: KAIBOI TECHNICAL

TRAINING INSTITUTE

PRESENTED TO: THE KENYA NATIONAL

EXAMINATION COUNCIL
FOR THE AWARD OF
CRAFT CERTIFICATE IN
GENERAL AGRICULTURE
 DECLARATION
I do declare that this business plan is my original work and has not been
submitted to any other institution for the award of certificate in general
agriculture.

NAME Hillary Kangogo

SIGNATURE: ……………………….

DATE: ……………………………..

2
ACKNOWLEDGEMENT
I hereby express my sincere appreciations to my supervisor Mrs Gladys for his
great support in building and molding this carrier knowledge in me. I also
recognize Kaiboi School of agribusiness staff for their great support in ensuring
the smooth running of school programmers headed by our principal Mr. Charles
Koech

3
DEDICATION
I dedicate this piece of work to my parents for their great support during learning
period in this college. I also extend my great pleasure to the director,
For his service and the chance to pursue my carrier opportunity at Kaiboi TTI

4
Contents
BUSINESS PLAN...................................................................................................1
TITLE BUSINESS NAME: DAIRY FARMERS...................................................1
CHAPTER ONE......................................................................................................7
1.0 EXECUTIVE SUMMARY...............................................................................7
1.1 BUSINESAS DESCRIPTION...........................................................................7
1.2 BUSINESS NAME............................................................................................7
FINANCIAL PLAN................................................................................................7
1.3 MARKETING PLAN........................................................................................7
1.4 ORGANISATION AND MANAGEMENT......................................................8
1.5 OPERATION AND PRODUCTION PLAN.....................................................8
CHAPTER 2............................................................................................................9
2.1 BUSINESS DESCRIPTION.............................................................................9
2.1 BACKGROUND INFORMATION..................................................................9
2.2 NAME OF THE BUSINESS.............................................................................9
2.3 BUSINESS LOCATION AND ADRESS.........................................................9
2.4 FORMS OF OWNERSHIP.............................................................................10
2.5 TYPES OF BUSINESS...................................................................................11
2.6 PRODUCTS AND SERVICES.......................................................................12
2.7 JUSTIFICATION OF OPPORTUNITY.........................................................12
2.8 INDUSTRY.....................................................................................................14
2.9 BUSINESS GOALS........................................................................................15
2.2.0 ENTRY AND GROWTH STRATEGY.......................................................16
CHAPTER 3..........................................................................................................17
3.0 MARKETING PLANS....................................................................................17
3.1 CUSTOMERS.................................................................................................17
3.2 COMPETITION..............................................................................................19
3.3 METHODS OF PROMOTION AND ADVERTISING..................................20
3.4 PRICING STRATEGY...................................................................................21
3.5 SALES TACTICS...........................................................................................22
3.6 DISTRIBUTION STRATEGY.......................................................................23
CHAPTER FOUR.................................................................................................24

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4.0 ORGANISATION STRUCTURE AND MANAGEMENT PLAN................24
4.1 ORGANISATION STRUCTURE...................................................................24
4.2 BUSINESS MANAGER AND QUALIFICATION.......................................25
4.3 PERSONNEL NUMBER, DUTIES/ RESPONSIBILITIES AND
QUALIFICATIONS..............................................................................................27
4.4 RECRUITMENT, TRAINING AND PROMOTION.....................................29
RECRUITMENT...................................................................................................29
4.5 REMUNERATION AND INCENTIVES.......................................................30
4.6 INCENTIVES..................................................................................................30
4.7 LICENCES PERMIT AND BY-LAWS..........................................................31
4.8 SUPPORT SERVICES....................................................................................31
CHAPTER 5..........................................................................................................32
5.1 FINANCIAL PLAN........................................................................................32
5.2 PRE OPERATIONAL COST..........................................................................32
5.3 ESTIMATING WORKING CAPITAL OF 2016, 2017 AND 2018...............32
5.4 PRO-FOMA INCOME STATEMENT FOR DAIRY ENTERPRISE FOR
YEAR ENDING....................................................................................................38
5.5 PRO-FOMA BALANCE SHEET FOR YEAR ENDED DEC 2016, 2017
AND 2018..............................................................................................................39
5.6 BREAK EVEN POINTS FOR LINN DAIRY ENTERPRISE YEAR 2017,
2018, 2019.............................................................................................................40
5.7 PROFITABILITY RATIOS OF DAIRY ENTERPRISE FOR THE YEAR
2016, 2017 AND 2018...........................................................................................42
5.8 DESIRED FINANCIAL OF DAIRY ENTERPRISE.....................................42
5.9 PROPOSED CAPITALIZATION FOR DAIRY ENTERPRISE....................42
REFERENCES....................................................................................................44

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CHAPTER ONE

1.0 EXECUTIVE SUMMARY

1.1 BUSINESAS DESCRIPTION

This chapter gives descriptive information of the whole business plan that
includes business description, marketing plan, organization and management,
operation and production plan and finally financial plan.

1.2 BUSINESS NAME

This chapter explains in details the business name, the location of the business. It
further tells the form of ownership, justification of the opportunity, the industry,
the business goals and entry and growth strategy.

FINANCIAL PLAN
Financial plan clearly explains the required capital how they are obtained and
used. The chapter further shows how net profit is to be arrived at, balance sheet,
the financial flow of the year of commencement and profitability ratio
arithmetically.

1.3 MARKETING PLAN

This chapter tells more about the customer’s opportunity and methods of
promoting and advertising the business.
It further tells how pricing is going to be done and describes the sales tactics and
how goods shall be distributed to other areas.

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1.4 ORGANISATION AND MANAGEMENT
This chapter shows organization structure, the management team, their
qualification and duties of each.
It also describes in details how new staff shall be recruited and the pay of each
member. It tells the legal requirements and how they shall be obtained and which
organization shall be involved in running of the business.

1.5 OPERATION AND PRODUCTION PLAN

The chapter tells about production facilities and capability, how production is to
be achieved and the process involved. It also explains about the regulation that
will affect the operation such as health regulation, license and a like.

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 CHAPTER 2

2.1 BUSINESS DESCRIPTION

2.1 BACKGROUND INFORMATION

The owner of the proposed business is Hillary Kangogo. The owner pursued the
primary education examination K.C.P.E in the year 2012 and qualified to pursue
secondary education in a provincial school named Chepkoilel High School which
is a school in Uasin Gishu County and completed in the year 2016 with an
aggregate grade of D (plain) and later joined National Youth Service in the year
2017 and underwent vocational training in disciplined force training school
Gilgil. After 6 months of training the owner proceeded to nation building at
Tumaini Field Station which took 1 year.

2.2 NAME OF THE BUSINESS

The name of the business is ELFARM DAIRY ENTERPRISE.
The name is derived from the owners’ name which is easy for the intended
customers hence attracting them. In addition, the name is easy to pronounce, spell
and cannot be found easily elsewhere and also makes the owner to be famous to
her intended customers.

2.3 BUSINESS LOCATION AND ADRESS

The business will be located At Iten Eldoret near Eldoret town. The business will
run under the name ELFARM DAIRY ENTERPRISE and the address will be:
ELFARM DAIRY ENTERPRISE,
PO. BOX 582
MOBILE: 0713826926
EMAIL: [email protected]

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This place was selected due to conducive environment for dairy farming; there is
well developed communication and transport network which makes transport
easier and communication with buyers for quality production from the enterprise.
There are farming lands near the enterprise where manure from the enterprise will
be sold for use in crop production hence improving soil fertility of the area.
The population of the area is high with high living standards which give the
business ready market as they have been walking for long distances in search of
dairy products.

2.4 FORMS OF OWNERSHIP

The enterprise will be a sole proprietorship form of business. The owner chooses
this form of business since decision making is easier, few legal formalities are
required, no sharing of the profit, close supervision of the business and can have
close contact with customers and employees.
The owner requires a capital of Kshs. 500, 000; this amount is to come from
various sources as represented on the table below:

Sources of capital.
Sources Amount Percentage
Owners savings 100,000 10%
Bank loan 250,000 25%
Parents grant 100,000 10%
Fiancé savings 50,000 5%

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2.5 TYPES OF BUSINESS

The business will be mainly whole sale but it will offer retail services to
its neighbors. At the start it will produce little and advance after a period
where it will only sell in large scale.
The business will start selling its products within the locality before its
development. The retail sale of the business will be on cash or paid at the
end of every week. This will help the business to cater for minor and agent
problems.
Sales of beef animals like bullocks, aged cows, deformed animals and
manure will be on small scale or retail.

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2.6 PRODUCTS AND SERVICES

The business will deal with dairy cows, heifers and young bulls. Dairy products
will be well packed for example milk in milk churns and sold in large scale to
dairy companies like K.C.C and brook side.
The little that remains is for consumption by the owners’ family members and for
retailers. The heifers will be reared to maturity for breeding purposes but if they
exceed the expected number extra will be sold to local farmers willing to buy and
able to manage them. The bulls will be sold at the age of four months to retail
farmers or to large scale beef farmers.
Transport of dairy product like milk and manure will be offered by the business to
the buyers place. The price of product will be offered as to per the buyers
expectation and the market price at that time.
Business will be flexible, give conducive environment to employees as they are
given off-duties, working in shifts and also motivate the workers.
Employees and the owner will offer good services to customers which will
enhance altitude of customers towards buying the business products.
The owner of the business will respect his workers and his customers to enhance
good working conditions and increase productivity.

2.7 JUSTIFICATION OF OPPORTUNITY

The knowledge, skills and experience of the owner will ensure the business is
undertaken well to attain its goals. Good management will enhance the business
not to run out.
Its main purpose is to ensure the owner is self employed and to feed her family.

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The economy will grow since there will be development of dairy industry and
source of job opportunities to the market dwellers. Dairy industry will lead to
development of the infrastructure because of transportation of dairy products to
the market and tours of other farmers from different parts of the country and
students coming for education trips to learn more on dairy production and dairy
product processing.
Many people will be employed in the business and other involvements which will
lead to rise of the living standard of the people living around the enterprise.
Since the growth rate is high there is development of social amenities like
learning institutions were people will be educated, hospitals will also be
established to improve health status of the people and hotels were people will go
for refreshment.

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2.8 INDUSTRY
Dairy enterprise production will fall under dairy industry. The business is to be
small and eventually grow to a large scale since the area its’ located in a dairy
zone of small scale farmers who are involved in dairy production in small
quantities.
Capital required to start the business is ksh500, 000 and has contributions from
external sources. The use of modern technology like A.I and milking machine will
be of great importance to the business. Chaff cutter will be used to chop the
animal feeds like nippier grass and maize stalks.
A silo is to be made for the following reasons:
To make the forage palatable due to its sweet aroma and the softness of the silage.
To preserve forage during the rainy season when it is difficult to make hay.
Make hard stems palatable by softening them by fermentation.
A forage stall shall be constructed to preserve hay and other forage to avoid
destruction. The business will use intensive method of rearing animals where a
zero grazing unit will be constructed for the following importance; Production of
clean milk.
Avoid time wastage by movement of workers. High production of milk since
animals loses less energy in movement. Maximum utilization of forage since
animals does not feed freely.
High production per unit area of unit feed.
Biogas production from the animals’ defecations.

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2.9 BUSINESS GOALS

There will be long term and short term goals set to be achieved by the owner of
the business. These goals are;

Long term goals

By the end of 6years the business is to produce 360000kgs of milk per year being
the highest producer of milk in the county and being termed as a national
producer.
By the end of 5 years the business to be an international dairy breed producer and
already registered with a stud herd.
Keep more than 200 dairy cows by the end of 6 years from the commence of the
business.
Produce over 1000 litres per day by the end of 5 years.
To establish several branches of the dairy business by the end of six years.
Produce over hundred calves per year by the end of four years.
Employ 100 workers by the end of the fifth year.
Own 10 hectares of Napier grass by the end of the third year.

Short term goals

Produce eighty litres of milk by the end of the first year.
Rear 8 dairy cows by the end of the first year.
Employ 4 milking men by the end of six months from commencing of the
business.
Produce high quality milk in the locality by the end of first three months.
Build a trench silo by the end of the year.

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2.2.0 ENTRY AND GROWTH STRATEGY
Entry into the business shall be at 2020 January when there will be plenty forages
in the locality and when most farmers have enough and can sell the surplus at
minimal cost.
The location of the business shall also aid the entry into the market, as it shall be
accessible to many customers.
To enable the customers know or see the business properly, there shall be a big
signpost at the road and in other four strategic positions.
Posters will be placed at the entrance of the University and hostel gates and for
confidence to customers about the business; there shall be face-to-face
communications with the customers to ensure they are satisfied with the
products given to them.
Discount shall be given to goods worthy of certain amount and this will initiate
and promote the customers relationship.
The business will become popular through the following;
Quality produce like dairy breeds and clean quality milk, fair prices that will
favour its customers and the business itself.
To have good communication skills and attitude with customers and this will
encourage close relationship between the customer and the business employees.
Thus motivating them to buy in large quantities hence expansion of the business
and grow prominently.
Professionals working in the production and produce being involved in the
business in production and marketing thus encourage expansion of the business.

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 CHAPTER 3

3.0 MARKETING PLANS

The potential customers of the dairy enterprise will be as follows; small scales
like families for consumption, restaurants and institutions.
Large scale, the largest percentage of milk will be sold to Brookside or any other
dairy industry.
Milk will be available to small scale farmers before 7:00am for their consumption
and at 4:30pm in the evening.
For large scale milk will be ready early in the morning at 5:00 am in order to
reach the industry early. This will be packed in clean chans for health purpose and
well labeled to avoid time wastage during recording and selling of milk to
customers.
Payment by small scale farmers will be through cash while institutions and
Brookside will be through bankers Cheques or deposit at equity bank account.

3.1 CUSTOMERS
Although there will be competition from other businesses like Tarakwo dairy
business who supply already processed and powder milk and other small scale
producers of milk from small scale farmers from the locality. Linn Dairy business
is to produce high quality milk which will be fresh, tasty and have high butter fat
content. This is to favour the taste and preferences of the customers.
To avoid high competition the distributing department will distribute the milk
early in the morning even before of opening of Tarakwo dairy business for its
dairy services.
Healthy well trained personnel will handle the product and a fair price will be
prevailed which will raise the demand of the product.

17
They are expects to sell 100lites of milk per day at the beginning of the business
and increase as the business advances. The business will produce high quality and
quantity of milk to meet the demand in the market.
The market share of the business is targeted to be 70% from a total population of
around 200,000 people of Kauruko area.
The remaining 30% will be shared amongst three competitors. The competitors
are as shown in the table below;

Competition Percentages
Tarakwo dairy product enterprise 10%
Mwea dairy enterprise 15%
Small scale enterprise 5%
Jofa dairy island enterprise 70%

The recorded population indicates population growth of 20% per annum. This
clearly indicates increase in demand of dairy product due to increase in
population.
Below is how market will be shared in the area inform of a pie chart.

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 Pie chart representing market share in the area.

Mwea dairy
15% product
enterprise
Riandudairy
10% product
enterprise 10%
5% Small scale
farmers 5%
70%
Island rhodes
dairy enterprise
70%

3.2 COMPETITION

The main competitors are small scale farmers, Tarakwo dairy enterprise and
Mwea dairy enterprise which are located three, four and eight kilometers from
Eldoret market respectively.
Competitor farms are small in size compared to Dairy enterprise since they are
run by small scale farmers who just sell their product within the locality.
The enterprise has high demand than other competitor farms as it is located near a
market centre where there is a high percentage of the population and several
restaurants.
The infrastructures are well developed and this will read to easier and faster
transportation of the product to the market places. In order to reduce competition
the business will offer fair prices to customers, offering transport and warrant to
customers who buy in large scale.

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3.3 METHODS OF PROMOTION AND ADVERTISING
Since the dairy enterprise has a lot of potential customers and operate by large
scale farmers, the business will create awareness to different customers through
advertisement its products. This can be done by use of posters, sign boards,
middle demand news papers.
All these should be simple, clear for visibility and understood by everyone.
The advertisement will be done once per week. Some of the products will be
taken to agricultural shows for awareness of the customers.

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 Table below shows the cost of advertising
ADVERTISING MEDIA FREQUENCY COST IN KSH
Newspapers One per week 2500
Sign boards 3 post signs 4000
Middlemen Thrice per week 2000
posters 8 posters 1500

3.4 PRICING STRATEGY

The dairy enterprise products will be sold at a price that favours both the business
and the customers. For any business to run it should operate with an aim of
making a profit with good management.
The price of one litre of milk will be Kshs 40.
A calf will cost Kshs 20000, a lorry of 3.1 tones of manure will cost Kshs 15000
and a mature heifer or cow will cost Kshs 100000.
Credit will be offered to customers who will pay at end month on milk while on
animals and manure sold there will be no credit but an insurance cover of the
animal against loss will be continued for the next one month for assurance of
health and productivity of the animal.
The sales will be paid cash or through a bank Cheques. A 10% discount will be
offered to product purchased for more than Kshs 15000 of value. The price will
be determined by supply and demand of the market of the dairy products.

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 3.5 SALES TACTICS
Enterprise will use differentiated marketing while selling its products and
qualified salesmen will be employed.
Distribution and sales department will be able to transport and promote the
product sales.
Direct selling will enable customers to bargain ask questions and get more
information about the product.
Good customer relationship will be maintained to portray a good name of the
enterprise and its level. This will be maintained by;
Using professional language during sales. Handling of customers with a lot of
care and ease. Etiquette and also being eloquent during communication. The
business will have sales representatives who will travel from place to place within
the locality selling products and delivering products to stations of large scale
customers.

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3.6 DISTRIBUTION STRATEGY
Enterprise intends to sell its products to dairy companies and even direct to
customers from nearby areas.
The business is to own a pickup for transport since there is a well tarmac road
which facilitate easy and faster transportation and distribution of dairy products of
the enterprise.
There will be a well laid down programme to enhance distribution in time and to
ease management of distribution.
Distribution will be done as stipulated on the programme and the time will be
specified to promote convenience and time observation by the employees
involved.

Distribution programme
Day of the Time
week
Morning Afternoon
Monday 4:30am 3:15pm
Tuesday 4:30am 3:15pm
Wednesday 4:30am 3:15pm
Thursday 4:30am 3:15pm
Friday 4:30am 3:15pm
Saturday 5:00am 4:00pm
Sunday 5:00am 4:00pm

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 CHAPTER FOUR

4.0 ORGANISATION STRUCTURE AND MANAGEMENT PLAN

4.1 ORGANISATION STRUCTURE

The owner of the business is to organize and manage the business in the manner
that it will favour the staff, customers and the business to run smoothly.
To manage the business the manager and the subordinate staff will formulate rules
and regulations to be adhered to by all employees.
The owner will serve as a manager and will employ other personnel to assist in
running of the business. Organization chart showing personnel to assist in the
running of the business is as shown below.

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 Organization structure of the business

MANAGER

SECRETARY

FIELD MANAGER

VETRINARY OFFICER DISTRIBUTION SECRETARY

CASHUAL SECURITY DRIERS SALES MEN

WORKER PERSONNEL
S

4.2 BUSINESS MANAGER AND QUALIFICATION

The business manager will be Am on Kirwa

There shall be a team of staff to assist in the running of the business. Their names
are as follows;
Secretary-Damaris cherono
Accountant- Sylvester kadege

Field manager- Ann chumba

Veterinary Officer- Derrick sang
Distribution secretary- Bernard maina
Drivers
Jonh mwangi
Sales men- Geoffrey otieno

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 Security personnel-David
-
- Onyango
- Kalewa

The team will be encouraged to cooperate and work hard for the success
of the business.

Qualifications needed for a manager

 Must be a Kenyan citizen.
 Must have entrepreneurial skills.
 God fearing person.
 An average aged person (30-35) years of age.
 Have experience of three years and above.
 Attained a mean grade of C+ plus and above and a diploma or degree
course in animal production or general agriculture.
 Must be responsible and caring.

Responsibilities of the field manager

 To setup business goals at the ground to achieve the managers
plans and to meet the purpose of the business.
 Recruit ground-men or workers who will work in the field.
 Control and supervise the staff members.
 Coordinate all operations carried out in the field.
 Set rules and regulations to be adhered to in the business.

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4.3 PERSONNEL NUMBER, DUTIES/ RESPONSIBILITIES AND
QUALIFICATIONS
Table showing personnel number, duties responsibilities and qualifications of the
staff.
DUTIES AND QUALIFICATIONS
PERSONNEL No RESPONSIBILITIES
Secretary 2 Record keeping. A Kenyan citizen.
Program notice to other workers. Must have attained secretarial
Informing manager of any and ICT course.
problem arising and any other Eloquent and has etiquette in
activity on going in the business. her language.
Experience of 2yrs
Veterinary 1 Planning deworming and spraying Have an experience of 3yrs.
officer programme. Pursued a diploma or a
Keeping animal records. degree course in animal
Treating sick animals and health and production.
administering vaccine to the farm Must be able to handle
animals. animals and administer drugs
Instructing on feed formulation to sick animals.
and feeding of the animals.
A.I of the animals and breeding Must have A.I techniques and
practices. technologically aware.
Drivers 2 Driving business vehicles. Must have a driving license.
Distributing the dairy products of Have an experience of 5yrs.
the business. Aged at the ages of (22-25)
Transporting business inputs like yrs.
fodder, minerals and concentrates Should be able to handle
and manure to the buyers. minor mechanical problems

27
 Driving the manager to the of vehicles.
business branches.

Sales men 3 Find market of the business Pursued sales and marketing
produce. course.
Carry out advertisements of the Self esteemed person.
business. Eloquent and has etiquette in
Take the sales record per day and his language and speeches.
deriver them to the distributing Attained the age of 26yrs.
secretary for analysis.
Watchmen 4 Guarding the business at night 24yrs and above of age.
and during the day. Attained a mean grade of D+
Guarding the gate during the day and above.
and controlling any movement in Must have been in a security
and out of the business. training school.
Inform the manager before
allowing any visitor into the
business.

Casual workers 10 Feeding the animals. A form four leaver.

Cleaning the animal shed. Must be above 19yrs of age.
Making silage and storing fodder Must be healthy and hard
in the stall. working.
Milking and weighing milk.
Feed rationing.

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4.4 RECRUITMENT, TRAINING AND PROMOTION

RECRUITMENT
This will be done on 15th of December 2016 before the opening of the business.
The manager will have to check the health status of every staff and physical
fitness for the job.
Recruitment will be by presentation of health documents, education certificates
and any other certificate required at the post of applicant demand or desire.
Posts will be hanged all over the place. Those who will qualify will be employed.

TRAINING
The training will take place immediately after recruitment. The staff will be
taught on how to adhere to the rules and regulations set in the business and the
precautions of breaking them.
The employees are to be trained on their different specialization of work. The
training will be a lecture where the staff will be seated in a hall. Code of conduct,
rules and regulations will be read and their repercussions when broken.

PROMOTION
Promotion will be according to the performance, obedient and education level of
the staff in the business. Punctuality and conduct will be checked for highest
promotion.
The business will offer free lunch, off time and breakfast to motivate and
encourage them to have positive attitude towards the business.

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4.5 REMUNERATION AND INCENTIVES

REMUNERATION
The wages and salary will be paid according to the agreement between the
manager of the business and the staff. There will be no delay of payment
of salaries and wages so as to make the workers work hard to meet the
objectives of the business.
The casual workers wages will be paid to the daily by the secretary.
Staff payment will be through their bank accounts so they are to record
their account number with the secretary.
Payment of the staff will be private and confidential to enhance efficiency
of the business and to avoid staff members under lowering themselves and
feeling lowered by the business.

4.6 INCENTIVES
Other than the basic salary given to staff there will be other provisions to be
offered to them.
This will include things like tours, parties and gifts for any improvement of the
profit.
A 10% commission will be given at every end of the year to all the staff members.
The table below shows the rate of payment of all staff.
JOB TITTLES NUMBER SALARY
Manager 1 10,000
Secretary 1 7,000
Veterinary officer 1 5,000
Drivers 2 7,000
Watchmen 2 8,000

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 Sales men 3 8,000

4.7 LICENCES PERMIT AND BY-LAWS

The owner of the business is to obtain a trade license from the ministry of
agriculture to dairy industry. He is to obtain a health license from the ministry of
health and pay for permit to the county council.
The permit and the license are to cost Kshs 1000 per month.

4.8 SUPPORT SERVICES

The dairy enterprise will seek supportive advice and services from banking and
insurance companies. It is also to get support from big business enterprises like
Mwea dairy farms and Komeno dairy enterprise
Riverside dairy enterprise to overcome shortcomings that may occur in the
business. The shortcomings may be in terms of losses and debts.

31
 CHAPTER 5
5.1 FINANCIAL PLAN

5.2 PRE OPERATIONAL COST

The proposed business pre operational cost is as follows which the owner used to
start the business
ITEM COST
License 20,000
Electricity 60,000
Advertisement 40,000
Rent 80,000
Transport 20,000
Recruitment and training 100,000
Water 70,000
Installation fee 30,000
TOTAL 420,000/=

5.3 ESTIMATING WORKING CAPITAL OF 2016, 2017 AND 2018

Particulars 2017 2018 2019

Current assets
Cash in hand 850,000 750,000 800,000
Cash at bank 750,000 700,000 720,000
Debtors 70,000 84,000 72,000
Stock 4,500,000 3,500,000 4,200,000
Total current 6,170,000 5,034,000 5,792,000
assets
Less current
liabilities 700,000 650,000 600,000
Creditors 100,000 95,000 90,000
Loan 250,000 240,000 260,000
Bank overdraft
Total liabilities 1,050,000 985,000 950,000
Working capital 5,120,000 4,049,000 4,892,000

Working capital=current assets-current liabilities

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WC =C.A-C.L
6,170,000-1,050,000

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2.4 PRO-FORMA CASH FLOW PROJECTION FOR YEAR 2017
Details JAN FEB MAR APR MAY JUNE JUL
Cash in flow
1,1oo,0 1,420,0 1,440,0
beginning capital 00 00 00 1,460,000 1,480,000 1,500,000

sales 200,000 190,000 195,000 195,000 196,000 170,000

debtors 4000 3,000 6,000 5,000
1,280,0 1,129,0 1,393,0
total cash in- flow 00 00 00 1,485,000 1,596,000 1,675,000
cash out flow
purchases 60,000 40,000 70,000 50,000 50,000 40,000
creditors 2,000
salaries 45;000 45,000 45,000 45,000 45,000 45,000
advertisement 5,000 5,000 3,000
loan repayment 4,500 4,500 4,500 4,500 4,500 4,500
water bills 300 250 200 150 250 240
rent 40,000 40,000 40,000 40,000 40,000 40,000
licenses 8,000
electricity bills 2,000 2,000 1,500 1,000 1,200 1,000
promotion 1,500 1,000 1,200 900
miscellaneous 1,400 1,300 1,200 1,000 1,100 1,200

total outflow 167,700 140,050 163,400 141,650 146,250 132,840

1,112,3 1,229,6
net cash 00 988,950 00 1,343,350 1,449,750 1,542,160
MARC
DETAILS JAN FEB H APRIL MAY JUNE JUL
cash in-flow
1,474,7 2,450,0 2,700,0
beginning capital 10 00 00 3,000,000 3,200,000 4,100,000

34
sales 200,000 190,000 195,000 195,000 196,000 197,000
debtors 3,000 7,000 2,000
1,677,7 2,640,0 2,902,0
total-inflow 10 00 00 3,197,000 3,396,000 4,297,000
cash outflow X
purchases 80,000 80,000 80,000 80,000 80,000 80,000
creditors 1,500 2,000 7,000
salaries 45,000 45,000 45,000 45,000 45,000 45,000
advertisements 4,000 2,000
loan repayment 4,500 4500 4500 4500 4500 4500
water bills 250 210 200 180 240 170
rent 40,000 40,000 40,000 40,000 40,000 40,000
licenses 9,000
electricity bills 1,200 800 700 1,100 1,250 1,100
promotions 2,000 1,000
miscellaneous 1,100 1,200 1,400 1,100 800 890

total outflow 187,050 173,210 171,800 173,880 172,790 180,660

1,490,6 2,466,7 2,730,2
net cash 60 9 00 3,023,120 3,223,210 4,116,340

35
 PRO-FORMA CASH FLOW FOR DAIRY ENTERPRISE 2018
DETAIL M
S JAN FEB AR APR MAY JUNE JULY
cash
inflow
5,9
5,966, 54, 5,945 5,937,
beginning capital 5,977,340 000 000 ,000 000 6,000,000 6,100,000
160
150,0 ,00 175,0 170,0
sales 160,000 00 0 00 00 105,000 145,000
debtors 4,000 6,000 8,000
6,1
total cash 6,116, 14, 6,126 6,107,
inflow 6,141,340 000 000 ,000 000 6,173,000 6,245,000
cash out
flow
65,00 75, 80,00 71,00
purchases 70,000 0 000 0 0 70,000 72,000
4,0
creditors 1,000 00 1,000
47,00 47, 47,00 47,00
salaries 47,000 0 000 0 0 47,000 47,000
advertise 2,5 21,000
36
ment 00
loan
repaymen
t
water
bills 240 200 260 180 240 230 130
40,00 40, 40,00 40,00
rent 40,000 0 000 0 0 40,000 40,000
licenses 7,000
electricity 1,2
bill 1,100 900 00 1,200 1,500 1,250 950
promotio 1,0
n 00 1,500
miscellan 1,1
eous 1,200 1,500 00 1,100 1,250 1,110 925
172
total 154,6 ,06 170,4 170,9
outflow 167,540 00 0 80 90 180,590 161,630
6,2
6,270, 86, 6,296 6,277,
net cash 6,308,880 600 060 ,480 990 6,353,590 6,406,630

37
5.4 PRO-FOMA INCOME STATEMENT FOR DAIRY ENTERPRISE FOR YEAR
ENDING

Details Year 2017 Year Year

2018 2019
Sales 2,130,000 2,407,000 1,904,000
Purchase 507,000 960,000 787,500
Gross profit 2,637,000 3,367,000 2,691,150
Expenses
Salaries 540,000 540,000 540,000
Advertisemen 15,500 7,000 7,500
t 480,000 480,000 480,000
Rent 6,800 4,200 4,500
Promotion 5,000 16,000 8,000
Creditors 14,200 13,075 14,020
Electricity 14,450 13,740 15,735
bills 54,000 54.000 54,000
Miscellaneous 8,000 9,000 7,000
Loan 2895 2,795 2,525
Repayment
License
Water bill
Total expense 1,140,845 1,139,810 1,075,280
Net profit 1,496,155 2,227,190 1,612,220
10% tax 149,615.5 222,719 161,222
provision 1,346,539.5 2,004,471 1,450,998
Net profit
after tax

38
5.5 PRO-FOMA BALANCE SHEET FOR YEAR ENDED DEC 2016, 2017 AND 2018

Details 2017 2018 2019

Assets
Fixed
assets 40,000 40,000 40,000
Office 400,000 500,000 350,000
equipments
Vehicles
Total 440,000 540,000 390,000
Current
assets 800,000 850,000 750,000
Cash in 70,000 75,000 50,000
hand 600,000 700,000 725,000
Cash at 80,000 90,000 85,000
bank
Stock
Debtors
Total 1,990,000 2,0255,000 2,000,000
current
assets
Liabilities
Bank loan 4,000 4,000 4,000
Owners 634,460.5 240,529 537,002
equity 1,346,539.5 2,004,471 1,450,998
Net profit 5,000 6,000 8,000
After tax
creditors
Total 1,990,000 2,255,000 2,000,000
liabilities

39
5.6 BREAK EVEN POINTS FOR LINN DAIRY ENTERPRISE YEAR 2017, 2018, 2019

Fixed cost 2016 2017 2018

Salaries 540,000 540,000 540,000
License 8,000 9,000 7,000
Rent 480,000 480,000 480,000
Loan 54,000 54,000 54,000
repaymen
t
Total 1,082,000 1,082,000 1,082,000
fixed cost

Variable cost
2016 2017 2018
Purchases 507,000 960,000 787,500
Creditors 5,000 16,000 8,000
Advertisement 15,000 7,000 7,500
Water bills 2,895 2,795 2,525
Electricity 14,200 13,075 14,020
bills 6,800 4,200 4,500
Promotions 14,450 13,740 15,735
Miscellaneous
Total variable 565,745 1,016,810 839,780
cost

Contribution margin of the 1st year(2017)

Cash Sales – variable cost
(2,130,000-565,845)
= 1,564,155

Contribution margin of 2nd year(2018)

2,407,000-1,016,810
=1,390,190

Contribution margin of the 3rd year (2019)

1,904,000-839,780
= 1,064,220

Contribution margin % of the 1st year (2017)

Contribution margin X 100

Sales
= 1,564,155 X 100
40
 2,130,000
= 73.4%

Contribution margin of second year (2018)1

= 1390190 x 100
2,407,000
= 57.75%

Contribution margin of 3rd year (2019)

= 1,064,220 x 100
1,904,000
= 55.89%

Breakeven level = total fixed cost

Contribution margin %
Breakeven level of 1st year
. = 1,082,000
73.40%
=147.4
Break even of 2nd year
= 1,082,000
57.80
=187.2
Break even of 3rd year
1,082,000
55.90
= 193.6

41
 5.7 PROFITABILITY RATIOS OF DAIRY ENTERPRISE FOR THE YEAR 2016, 2017
AND 2018
2015 2016 2017
Gross GP X 100 2,637,000 x 3367000 2691500
profit % SALES 100 x 100 x 100
ratio 2,130,000 2407000 1904000

=123.81% =139.9% =141.4%

Return on Profit after 2004471 1450998
equity tax X 100 1,346,539.50 x 100 x 100
owner’s
x100 240529 537002
equity
634460 =
=212.2% 833.4 =270.2
Return on Net profit 1,346539.5 x 2004471 1450998
investment after tax X 100 x100 x 100
100 1,100 000 1,100,000 1100000
Total =
investment 122.4% =182.2 = 131.9

5.8 DESIRED FINANCIAL OF DAIRY ENTERPRISE

items Amount
Proportional cost 420,000
w. capital 5,120,000
TOTAL 5,540,000

5.9 PROPOSED CAPITALIZATION FOR DAIRY ENTERPRISE

source Cost (kshs)
Owners saving 500,000
Loan 200,000
42
Relatives and friends 400,000
TOTAL 1,110,000

Appendix I (Project Members)

Mr. Egyeyu Henry -Chairman

Mr. Candwong Bernard - Vice chairman
Mr. Ewila Jimmy - Secretary
Mr. Ederu John Dickens - Treasurer
Mr. Ogaya Richard - Member
Mr. Apao Suzan - Member
Mr. Ikero Josephine - Member
Mr. Awinyo Mercy - Member
Mr. Ojony Julius - Member
Mr. Etanu David - Member
Mr. Otim Henry - Member
Mr. Etenu Dominic - Member

43
 REFERENCES

Sutton, G. (2013). Writing winning business plans: how to prepare a business plan that
investors will want to read and invest in. RDA Press, LLC.

Kulah, J. O. S. E. P. H. (2016). A critical study of the challenges faced by small and

medium enterprises’ master craftsmen in the welding and fabrication industry in the
Wa Municipality (Doctoral dissertation, University of Education, Winneba).

Wiacek, D. R. (2014). R&D Performance Business Plan.

Medlock, R., Gilmer, H., Miller, D., & Ream, A. (2019). Bridge Welding Reference
Manual (No. FHWA-HIF-19-088). United States. Federal Highway
Administration. Office of Research, Development, and Technology.

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