SHAMBERERE TECHNICAL TRAINING INSTITUTE BUSINESS PLAN.

BUSINESS NAME:AKOMBA HARDWARE.

PRESENTER : FAITH AKOMBA PETER
INDEX NUMBER: 6141010105
TELEPHONE : 0759798956
SUPERVISOR : MR.ALEX PICHO
PURPOSE : TO BE SUBMITTED TO KENYA NATIONAL EXAMINATION
FOR THE AWARD OF DIPLOMA IN CIVIL ENGINEERING
CERTIFICATE

1
DECLARATION
I, FAITH AKOMBA PETER, declare that this business plan is my original work and has never been presented to the Kenya National
Examination Council before for the award of certificate in Diploma in CIVIL ENGINEERING
Name: FAITH AKOMBA PETER
Sign:………………………..
Date:……………………….

Name of supervisor: MR.ALEX PICHO

Sign:………………………..
Date:……………………….

2
DEDICATION
I dedicate this work to my loving parents, sisters and brothers for their good support throughout my course work. May God bless
them for the cooperation, financial and spiritual support.

3
 EXECUTIVE SUMMARY
1.1 BUSINESS DISCRIPTION

The name of the business will be AKOMBA HARDWARE, where AKOMBA is a family of my liking and hardware describes
the type of services that will be offered and the products to be dealed with.
The business will be working to make people get an affordable construction and farming materials of good quality.
The goal of the business is to create employment opportunities for everyone and most of all to make profit.

1.2MARKETING PLAN.
The owner of the business will be dealing with different types of customers like, domestic, passer-by and nearby customers, who
will be operating on day to day services. The business is targeting 70% of the market share due to the quality services while 30%
will be shared among competitors.

The competition will be stiff from Lumumba hardware and Mali Mali hardware stores.

1.3 MANAGEMENT PLAN.

The business will be a sole proprietorship form and will be managed by the owner with the help of:
1. General manager
2. Sales manager.
3. Accounts clerk.
4. Cleaners 5. Security officers.

1.4 OPERATIONAL PLAN.

The business will be dealing with construction materials, electrical materials and fittings like pipes and conduits, farm tools
needed and requirements. The business will require labor, materials, security and many others.

1.5 FINANCIAL PLAN.

The financial plan will mainly show the sources and calculations of capital required for the operation of the proposed business
enterprise. It will show profits, losses, cash flow balances and proposed capitalization.

4
 TABLE OF CONTENT
TABLE OF CONTENT..........................................................................................................................................................................
CHAPTER ONE.....................................................................................................................................................................................
BUSINESS DESCRIPTION.............................................................................................7
1.1BUSINESS LOCATION AND ADDRESS.................................................................7
1.3TYPE OF BUSINESS..................................................................................................7
1.4PRODUCTS AND SERVICES...................................................................................7
1.5ORGANIZATION AND MANAGEMENT...............................................................7
1.6GOALS OF THE BUSINESS......................................................................................8
1.7. JUSTIFICATION OF THE OPPORTUNITY........................................................8
CHAPTER TWO....................................................................................................................................................................................
2.1 MARKET PLAN.........................................................................................................9
2.2 CUSTOMERS..............................................................................................................9
2.3 MARKET SHARE......................................................................................................9
2.4 COMPETITION..........................................................................................................9
2.5 ENTRY AND GROWTH STRATEGY....................................................................9
2.5.1 ENTRY STRATEGY.............................................................................................................................................................
2.5.2 GROWTH STRATEGY........................................................................................................................................................
2.6 SALES........................................................................................................................10
2.7 PRICING STRATEGY.............................................................................................10
2.8 DISTRIBUTION STRATEGY................................................................................10
2.9 METHODS OF PROMOTION AND ADVERISEMENT....................................10
2.9.1 PROMOTION........................................................................................................10
2.9.2 ADVERTISEMENT...............................................................................................10
CHAPTER THREE..............................................................................................................................................................................
3.0: ORGANIZATIONAL AND MANAGEMENT PLAN.........................................12
3.1: ORGANIZATIONAL STRUCTURE....................................................................12
3.2: STAFFING AND THEIR QUALIFICATION......................................................12
3.3 RECRUITMENT, TRAINING AND PROMOTION............................................13
3.3.1 RECRUITMENT OF STAFF.............................................................................................................................................
3.3.2 TRAINING...........................................................................................................................................................................
3.3.3 PROMOTION......................................................................................................................................................................
3.4 LEGAL REQUIREMENTS.....................................................................................13
3.5 RENUMERATIONS, SALARIES AND ALLOWANCES...................................13
CHAPTER FOUR.................................................................................................................................................................................
4.1 PRODUCTION PLAN............................................................................................................................................................
4.2 PRODUCTION FACILITIES AND EQUIPMENTS...........................................................................................................
4.2.1 METHODS TO BE USED IN PURCHASING..................................................................................................................
4.2.2 MAINTENANCE AND REPAIR........................................................................................................................................
4.3 PRODUCTION STRATEGY...................................................................................14
4.4 FUTURE PLAN FOR BUSINESS...........................................................................15
4.5 PRODUCTION PROCESS......................................................................................15
4.6 GOVERNMENT REGULATION AFFECTING THE OPERATION................15
CHAPTER FIVE..................................................................................................................................................................................
5.0: FINANCIAL PLANNING.......................................................................................16
5.1: FINANCIAL OBJECTIVES...................................................................................16
5.2: PRE-OPERATIONAL EXPENSES.......................................................................16
5.3: WORKING CAPITAL............................................................................................16
5.5: PROFORMA INCOME STATEMENT................................................................16
5.6: PRO-FORMA BALANCE SHEET........................................................................17

5
5.7: CALCULATION OF BREAK-EVEN POINTS....................................................17
5.8: CALCULATION OF PROFITABLE RATIOS....................................................18
5.9: DESIRED FINANCING..........................................................................................18

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 CHAPTER ONE.
BUSINESS DESCRIPTION.
The name of the proposed business will be AKOMBA HARDWARE. The name was chosen because it was thought to be
unique to many customers in the area. It will be a high class hardware shop for the customers who really need quality and
affordable goods.

Motivation of the business was due to the following factors:

a. To create employment opportunities.
b. To earn money for living through the business.
c. To be able to make profits.
d. To be able to provide for the needs of people around.

1.1BUSINESS LOCATION AND ADDRESS.

The business will be located in Shamberere near west Kenya Company along Kakamega¬webuye highway. The location has got
security due to the presence of a police station at kambi. Its easily accessible, good infrastructure and good communication
networks.

BUSINESS LOGO

The business address:

AKOMBA HARDWARE
P.O BOX ,172
MALAVA
CONTACT; 0759798956
1.2FORMS OF OWNERSHIP.
The business will be a sole proprietorship, so the owner will be charged with all transactions thus will also enjoy the following
benefits:
• The proprietor enjoys the profit alone hence motivating her to work hard towards expansion of the business.
• There will be a high secrecy in the business.
• The proprietor will be the overall boss of the business thus is the final decision maker on any issues arising on the
business.
The owner will also be disadvantaged through:
- The owner suffers losses alone.
- Low rate of expansion
- It may be difficult to delegate duties
Basing on this the owner will apply the following techniques so as to enable him/her overcome the challenges.
 Personnel will be employed basing on their qualifications.
 In case of shortage of funds the business will borrow loans from banks.
1.3TYPE OF BUSINESS.
The business will involve selling of building construction materials, farm tools equipment and electronic fittings to the customers
depending on their needs and requirements. It will offer goods of high quality and of affordable prices.
The business will also be controlling and monitoring prices and quality of the products selling so as to attract more customers.

1.4PRODUCTS AND SERVICES.

The product will be of good quality and of affordable price and the buyer and consumer can be able to buy. The benefits from
products and services of the business of the business is to have profits minimization for sales in a day. The business owner
will offer M-PESA services for paying bills.

7
1.5ORGANIZATION AND MANAGEMENT.
The organization is the trainees of management under managing director. The managing director will attend seminars, consult
organization and use the knowledge acquired for effective operation. The personnel includes: managing director, accountant,
salesman, security person, suppliers and cleaners.

1.6GOALS OF THE BUSINESS.

The owner of the business has dedicated to set up specific goals for the business in order for it to grow.
1. To make profits so as the business to grow and expand.
2. To be able to open another high class hardware, which will offer all products including the imported products on
tenders offered to trusted supplies, thus more workers will be needed to effect the production and work availability in
the future to come.

1.7. JUSTIFICATION OF THE OPPORTUNITY.

The business will act as a source of employment to many jobless people hence raising their living standards and contribute revenue to
the government.
Good transport network makes it easy for customers to access the business. Political stability in the area makes the running of the
business smooth and encourages potential entrepreneurs to invest in the region and makes the business to grow and gain profit.
There are quality personnel who are skilled and experienced thus providing goods and services of good quality to the customers.
There is enough security in the region and this will ensure smooth running of the business.

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 CHAPTER TWO.
2.1 MARKET PLAN.
The market plan will enable the entrepreneur understand the:
• Nature of potential customers.
• Know the competitors.
• Helps the entrepreneur to gain the knowledge about the market share.
• Helps in understanding the sales tactics.
• Helps in determining the pricing strategy.

2.2 CUSTOMERS.
a) Potential customers.
The targeted customers are of different classes. They are small scale customers, large scale, institutional and private
organization customers. This will come through because the goods and after sale services offered will mostly ensure
customers satisfaction.
AKOMBA being a committed hardware shop which is aiming to providing quality and affordable good at
affordable prices with qualified personnel will attract customers looking for durable and pocket friendly goods.

b). small scale customers.

They will be in need of building and construction materials, farm tools and any other equipment required. The small
scale customers will include carpenters, masons, farmers and passer-by.

2.3 MARKET SHARE.

The business is targeting a high percentage of shares of 60% due to the good quality of products and services while the remaining
40%will be shared among the competitors.

2.4 COMPETITION.
In this area high competition is expected because of existence of other hardware’s. Analysis of strength and weakness between the
competitive hardware.
BUSINESS NAME STRENGTH. WEAKNESS.

AKOMBA HARDWARE Well established. Not popular in the market.

Qualified personnel.
Proper funding.
Affordable pricing.

Lumumba hardware. - Personal premises Poor facility.

- Qualified staff Poor moral on staffs.
- Good location.

Mali Mali hardware stores. - Well established. Poor site.

- Variety of products. Poor customer care services.
- Popular in market.

2.5 ENTRY AND GROWTH STRATEGY.

2.5.1 ENTRY STRATEGY.
The enterprise will enter the market through posters which will be posted at various notice boards around.
The owner will also use the following:
- Offer a discount on the first 50 customers to be served at the hardware.
- Sign posts will be placed at known points around to enable the customers to easily locate the business.
- Use of media so as to reach a lot of people within the country and have access to the hardware.

2.5.2 GROWTH STRATEGY.

The profit realised will be used to expand the business hence the business will grow rapidly. The business will also open branches in
other counties so as to reach all its customers and provide satisfactory services to them. There will be use of public relations where it
involves passing information with a view of creating and promoting goodwill. The owner will also advertise the products through all
possible mean to reach everyone.

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2.6 SALES.
Due the high competition the hardware will allow payment of goods in instalments according to agreement with the present.
The firm will also reward those employees who will work efficiently with accuracy and speed.
The management will appreciate those clients who will bring along themselves more customers through discounts thus encouraging
them to be permanent customers.

SALES

14%

26%
60%

AKOMBA LUMUMBA MALI MALI

2.7 PRICING STRATEGY.

The pricing strategy will be based on:
- Consumers price in regard to the willingness and the ability to obtain goods by the potential customers.
- Competitors price will adjust accordingly to enable the business grow.
- Price demands of the customers.

2.8 DISTRIBUTION STRATEGY.

The goods will be offered from the business premises to customers in need as well as offer door to door services but at an
agreed fee.
Orders via telephone call will be responded to. The proposed business channel shall be within the premises.
In deliveries we will use handcarts and motorbike but as time goes by we will acquire a van for the same purpose of
delivering goods.
Some problems will be encountered like
- Poor road network.
- Insecurity in some areas.
- Congestion of people and vehicles.

Some solution that would help increase distribution rate

- Frequent servicing of motorbikes due to breakdown in poor roads.

- Hiring of guards to safeguard the premises.
- Expanding of the roads by the government.

Business channel.
a) Producers
b) Wholesalers
c) Retailers
d) Suppliers
e) Customers/ consumers

2.9 METHODS OF PROMOTION AND ADVERISEMENT.

2.9.1 PROMOTION.
The owner of the business will use various ways in which will promote the business.
Rewarding those who bring other customers.
Giving free samples after sales services of certain products this makes customers feel motivated and buy more
on return.
Discounts are also offered to products as per agreement among the employees and customers.

10
 Credit facilities are also offered to potential customers and credit policy is strictly followed sales delivery of
goods.

2.9.2 ADVERTISEMENT.
The following methods will be used:
Posters.
Posters will be put in designated areas to give an overview of the business and its location.

Signboards.
Signboards will be kept to show directions hence easy identification and direction of the business.

Media and newspaper.

The advertisers are the public and private company that produces the product. We will publish products and
services for regular basis containing the business is run.
It will be printed so as to enlighten more customers.

11
 CHAPTER THREE.
3.0: ORGANIZATIONAL AND MANAGEMENT PLAN.
Management- These are executives of an organization. The business will be managed by the following team:
• General manager.
• Assistant manager.
• Sales manager.
• Accounts clerk
• Security officers.

3.1: ORGANIZATIONAL STRUCTURE.

GENERAL MANAGER.

ASSITANT MANAGER SALES MANAGER ACCOUNTS CLERK CLEANERS SECURITY

3.2: STAFFING AND THEIR QUALIFICATION.

STAFF QUALIFICTIONS DUTIES
GENERAL Should be 30 years old and must - Motivates the staff
MANAGER have a Diploma in building - Ensure availability of
construction. funds in the firm.
- Assign duties and
responsibilities to each
employee.
- Ensure the records are
accurate and up to date.
- Ensure smooth
administration of the
hardware.

Assistant manager. Must have a certificate in - Assists the manager

building construction. Should be - Ensure maintenance of
24 years and above. the business.
- Motivates the staff.
SALES MANAGER.  Should have a - Manage the firm in
Diploma or absence of the director.
Certificate in sales and - Advice the manager in
marketing. any area of concern.
- Should have a work - Ensure proper execution
experience of at least 2 of duties by the other
years. employees.
- Should have a good
leadership skills.

ACCOUNTS CLERK. - Should be a holder of at - Keep all records of the

least CPA1 final organization.
level or any equal - Prepare budgets.
qualification in - Prepare financial
accountancy and reports.
business - Pays the employees.
administration. Should Keep books of
-
be a
accounts.
- computer literate.

12
 CLEANERS. - Should be at least 19 - Work on general
years and above. hygiene of the business.
- Capable of working Ensure highest order of
under least supervision. - cleanliness.
Physically and mentally
- fit.

SECURITY - Be at least 25 years of - Ensure proper security.

OFFICERS. age. Take details of visitors
- Be honest and ready to - who enter and leave the
work under minimal hardware management
supervision. office.
- Be flexible.

3.3 RECRUITMENT, TRAINING AND PROMOTION.

3.3.1 RECRUITMENT OF STAFF.
The firm recruitments will be basically done so as to meet the conditions which the firm will be needing. Recruitment maybe done
when an employee has retired or lost his/her job due to misconduct. The advertisement will be made to inform the public of the
vacant position and the qualifications to be met.

3.3.2 TRAINING.
There will be training of the staff and teaching them how to run various activities in an organization in accordance to the position to
be held. This is to ensure the right people are chosen to work in their fields.

3.3.3 PROMOTION.
The promotion of the staff members will be based on working experience and duration. Duration of promotion depends on when the
person has served the company and how qualified he/she is and if their loyalty is with the business.

3.4 LEGAL REQUIREMENTS.

I. Certificate of ownership.
This will be obtained from the registrar of business located in Kakamega town. The business will adhere to rules and
regulations of the ministry including payment of NHIF and NSSF belonging to workers.

II. Business risks.

The business risk that may face the firm include;
a) Fire
This may be caused by electric faults or accidents. The business will purchase firefighting equipment and also create a
fire assembly point. It shall be insured against fire with Kenya Insurance Company.
b) Theft.
It shall be the role of security workers to ensure that the business
premises and property are well guarded.
As the business grows, it will acquire CCTV cameras which will be placed at strategic places to monitor the premises.

3.5 RENUMERATIONS, SALARIES AND ALLOWANCES.

POST NO OF BASIC ALLOWANCES. GROSS
EMPLOYEES SALARY. PAY/MONTH.
.
General 1 15400 10000
manager. 25400
Assistant 1 14000 8000 22000
manager.
Sales 1 13000 6000 19000
manager.
Accounts 1 11500 4500 16000
clerk.
Cleaners. 1 6000 3000 9000
Security 1 10000 4000 14000
officers.
Total. 6 720900 35500 105400
Total monthly salary and allowance will be ksh 105400. All this will depend with client registration. The above will be
met if the business is operating at maximum.

13
 As the firm will be growing and making more profits so will the employees salary be increased in accordance to the
laid down policy.

CHAPTER FOUR.
4.1 PRODUCTION PLAN.
The following techniques will be applied in developing the products of the business. Prices of various goods payable would be
readily available by the salesman, office messenger and the shopkeeper so that, the clients and any other people will be familiar
with prices payable.
There will be a large sign board to display the name AKOMBA HADWARE.
The business will offer the following products to its customers:
- Cement
- jembes
- electrical cables
- Nails
- spades ropes
- Pangas
- pipes
- hammers.
The above listed products shall be acquired from the suppliers and kept in the store for stock taking. They will be later be split into
various quantities then arranged on shelves.

4.2 PRODUCTION FACILITIES AND EQUIPMENTS.

The operation of the business is scheduled to start early January 2023, and there is need for equipment’s and machine to be put in
place for the enterprise to commence operation.
The business will also require the following equipment’s for operation.
- Computers
- motorbike
- Calculators counters
- fire extinguisher chairs
- Wheelbarrow.

4.2.1 METHODS TO BE USED IN PURCHASING.

The proprietor will purchase one computer from computech limited. The proprietor will also acquire calculators from the company on
a cash basis.
Reason for acquiring the equipment on cash include;
i. So as to be awarded discount on the items bought.
ii. To reduce future debts.
Motorbikes and wheelbarrow will be acquired on higher purchase.
Description. Quantity. Supplier. Unit Total
cost. amount.
Wheelbarrow. 1 Reliance.
Motorbike. 1 Yamaha 50000 50000
kakamega.
Calculator. 2 Computech. 750 1500
Computer. 1 Computech. 14000 14000
Chairs. 4 Local 300 1200
carpenter.
Tables. 2 Local 900 1800
carpenter
Counters 1 Local 600 600
carpenter.
Total.

4.2.2 MAINTENANCE AND REPAIR.

The person in charge of this will be the assistant manager, he/she will make sure the equipment’s are well taken care of.

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4.3 PRODUCTION STRATEGY
1. Monthly material requirement.

ITEM NO. DESCRIPTION QUANTITY. PRICE. TOATAL

. AMOUNT.
1. Paints. 20 tins 430 8600
2. Cement 50 bags 650 32500
3. Iron sheets 15 pieces 800 12000
4. Pipes 100 pieces 90 9000
5. Hammers 20 pieces 130 2600
6. Nails 17 packets. 110 1870
7. Pangas 10 pangas 150 1500
8. Ropes 20 ropes. 100 2000
9. Electrical 10000 10000
cables.
10. Fencing wire. 10 1200 12000
11. Jembes. 10 450 4500
Total. 13660 96570.

4.4 FUTURE PLAN FOR BUSINESS.

The future plan of AKOMBA HARDARE include;
a) To change the status into a limited company.
b) To open up more branches in the neighboring towns.
c) To expand into a high class hardware.

4.5 PRODUCTION PROCESS.

Placing the order of the stock.
Receiving and inspecting the stock.
Paying for the order.
Arrival for the customers in the shop.
Attendance to customers.
Departure of customers.

4.6 GOVERNMENT REGULATION AFFECTING THE OPERATION.

The business will strictly adhere to government regulation.

Environmental regulation act.

The government will ensure that the environment around the business does not affect the human beings and is
conducive by inspecting disposal of dust bins and other consequences effective to the individuals surrounding it.

Health regulation act.

The owner must ensure that the employees are healthy and must
work on ensuring each employee has NHIF card in case of anything /when an employee gets sick, the hospital bills
can be taken care of by the NHIF.

Consumer protection act.

The acts states that the goods should be of the right quality and the regulations are that all goods be delivered fully by
qualified persons.

Business permit.
This will be issued by Kakamega town council with fixed charges of registrations form kshs 1000.

Workers safety.
Workers should have safety materials such as gumboots, helmets which protects the body against minor injuries

15
 CHAPTER FIVE
5.0: FINANCIAL PLANNING
The business will allow strict financial management policy in order to generate profit and avoid loses.
5.1: FINANCIAL OBJECTIVES
a) To return the capital employed
b) To achieve the profit.
5.2: PRE-OPERATIONAL EXPENSES
The operational cost is to be as follows:
EXPENSES COST
Insurance 2,500
License and permits 5,000

Electricity 1,500
Advertisement 1,000
Tools and equipment 5,000

Water 1,000
Furniture 4,500
Stock 700,000
Rent 7,000
Total 727000
5.3: WORKING CAPITAL
Working capital=current assets- current liabilities.

5.4: PREPARATION OF PRO-FORMA CASH FLOW

DESCRIPTIO JAN FEB MARC APRIL MAY JUNE JULY AUG Sept OCT NOV DEC 5.5:
N H
Cash flow

Capital 330,00
0
Loan 450,00
0
Cash sales 100,00 125,00 120,000 115,00 150,00 140,00 170,00 175,00 195,00 200,00 220,000 250000
0 0 0 0 0 0 0 0 0
Total inflow 880,00 125,00 120,000 115,00 150,00 140,00 170,00 175,00 195,00 200,00 220,000 250000
0 0 0 0 0 0 0 0 0

Cash out flow

Rent 7,000 7,000 7,000 7,000 7,000 7,000 7,000 7,000 7,000 7,000 7,000 7,000
Salaries 63,200 63,200 63,200 63,200 63,200 63,200 63,200 63,200 63,200 63,200 63,200 63,200
0
Water 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000
Electrical 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,000 1,000
Transport 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500
Insurance 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500
Repair 8,600 8,600 8,600 8,600 8,600 8,600 8,600 8,600 8,600 8,600 8,600 8,600
advertisement 500 500 500 500 500 500 500 500 500 500 500 500
License and 8,000
permits
Loan payment 10,000 10,000 8,000 6,000 10,000 5,000 15,000 10,000 12,000 10,000 5,000 5,000

PROFORMA INCOME STATEMENT

DESCRIPTION YEAR 1 YEAR 2 YEAR 3
Cash sales 1,700,000 2,400,000 3,000,000
Discount 175,000 180,000 220,000
Received 260,000 270,000 300,000
TOTAL 2,135,000 2,850,000 3,520,000
less cost of sales 198,000 250,000 300,000
Gross profit 1,937,000 2,600,000 3,220,000
Less
expenses 27,200 30,000 40,000
Electricity 18,000 24000 30,000 0

16
license 8,000 7,500 8,000
transport 18,000 24,000 30,000
insurance 2,500 2,500 2,500
creditors 6,500 8,000 10,000
Rent 84,000 84,000 84,000
advertisement 6,000 6,000 6,000
Water 12,000 12,000 12,000
salaries 63,200 66,000 68000
TOTAL 245,400 264,000 290,500
Net profit before tax 1,691,600 2,336,000 2,929,500

Net profit of 507,480 700,800 878,850

tax@30%
Net profit after tax 1,739,000 2,350,000 2,920,000
5.6: PRO-FORMA BALANCE SHEET
DESCRIPTION YEAR 1 YEAR 2 YEAR 3
Fixed assets
Production 40,000 50,000 100,000
facilities
Furniture 4,500 5,000 10,000
Vehicle 18,000 24,000 30,000
Computer 10,000 20,000 25,000
TOTALS 56,000 77,000 139,000
Less depreciation
5% production 2,000 2,500 5,000
facilities
5% furniture 225 250 500
10% vehicle 1,800 2,400 3,000
10% computer 1000 2,000 2,500
TOTALS 3,025 4,650 6,000
current assets
cash at hand 550,000 600,000 580,000
cash at bank 120,000 225,000 332,000
Stock 250,000 280,000 300,000
Debtors 20,000 10,000 15,000
TOTALS 940,000 1,115,000 1,227,000
Total fixed assets 996,000 1,192,000 1,336,000
Current liabilities
Creditors 20,000 15,000 18,000
Bank overdraft 50,000 15,000 8,500
TOTAL 70,000 30,000 26,500
Long term
liabilities
Bank loan 300,000 150,000 100,000
TOTALS 300,000 150,000 100,000
Total liabilities 370,000 180,000 126,500
5.7: CALCULATION OF BREAK-EVEN POINTS
DESCRIPTION YEAR 1 YEAR 2 YEAR 3
Total sales 1,700,000 2,400,000 3,000,000
fixed cost
salaries 63,200 66,000 68,000
Rent 84,000 84,000 84,000
Insurance 2,500 2,500 2,500
license and permits 8,000 7,500 8,000
Bank loan 300,000 150,000 100,000
Interested on loan 50,000 15,000 8,500
TOTAL FIXED 507,700 325,00 271,000
COSTS
Variable costs
electricity 18,000 24,000 30,000
Water 12,000 12,000 12,000
Telephone 72,000 72,000 72,000
Advertisement 6,000 6,000 6,000
Transport 18,000 24,000 30,000
Repair and 103,200 108,000 96,000
maintenance

17
 TOTAL VARIABLE 229,200 246,000 246,000
COSTS
Contribution=Total sales-variable cost
= 1,700,000-229,200
= Ksh. 1,470,800
Contribution margin = Contribution X 100 Sales
=1,461,800 X 100
= Ksh. 146,180,000
Break-even levels of sales= fixed cost x 100 contribution margin = 507,700 x 100
= Ksh. 50,770,000

5.8: CALCULATION OF PROFITABLE RATIOS

NO.0 RATIOS FORMULA YEAR 1 YEAR 2 YEAR 3
F
ITEM
S
1 Profitabl Net 1,691,600/1700000 x 2,336,000/2,400,00 2,929,500/3,000,00
e ratio profit/sales x 100 0 x 100 0 x 100
100 =99.505% =97.333% =97.65%
2 Return on Net 1,691,600/1,012,50 2,336,000/1,214,00 2,929,500/99,000 x
total profit/total 0 x 100 0 x 100 100
assets assets x100 =167.071% =192.422% =2,959.090%
3 Return Net 1,601,600/
owners profit/owner s
equity equity x100
5.9: DESIRED FINANCING
Desired financial table

PARTICULARS AMOUNT
Pre-operational expenses 737,000
Working capital 470,000
Fixed assets 72,500
Total desired financing 1,279,500
5.10: PROPOSED CAPITALISATION
Proposed capitalization table

PARTICULARS AMOUNT
Total investment 120,000
Owners contribution 550,000
Borrowed funds 300,000

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