BUSINESS PLAN FOR SWEET SPRING DEPOT

PRESENTED BY: ADMISSION NO: INDEX NO: PAPER NO: PRESENTED AT: KENYAINSTITUTE OF SURVEYING AND MAPPING SAMMY NJIHIA KAMAU DP070054 401040-002

PRESENTED TO: KENYA NATIONAL EXAMINATION COUNCIL (KNEC) BEING A PARTIAL FULLFILMENT OF THE REQUIREMENTS FOR THE AWARD OF DIPLOMA IN LAND SURVEYING EXAM SERIES: OCT/NOV 2009

DECLARATION
With utmost truthfulness and honesty, I declare that this is my original work and has not been presented elsewhere for anything related to academic or examination purposes. Name: Sammy Njihia Kamau

Signature:

CERTIFICATE OF SUPERVISION
I hereby certify that I have supervised each and every part of this project. Name: Signature: Date:

DEDICATION
This project is cordially dedicated to my parents Mr. and Mrs. James Kamau for their guidance and financial support they have given me. Secondly, the lecturers in humanities department for their ideas and guidance. Finally, I am sincerely grateful to all my colleagues in the Photogrammetry class.

TABLE OF CONTENTS DECLARATION CERTIFICATE OF SUPERVISION DEDICATION TABLE OF CONTENTS ACKNOWLEDGEMENT SECTION ONE 1.0 Executive Summary 1.1 Business description 1.2 Marketing plan 1.3 Organization and management plan 1.4 Operation plan 1.5 Financial plan SECTION TWO 2.0 Business Description 2.1 Business name 2.2 Business location and address 2.3 Form of ownership 2.4 Type of business 2.5 Products/Services 2.6 Justification of opportunities 2.7 Industry 2.5 Goals of business 2.9 Entry and growth strategies

3.1 3.2 3.3 3.4 3.5 3.6 3.7

SECTION THREE 3.0 Marketing plan Customers Market share Competition Methods of promotion and advertising Pricing strategy Sales tactics Distribution strategy SECTION FOUR 4.0 Organization and management 4.1 Business manager and qualification 4.2 Personnel, number and duties 4.3 Recruitment and training 4.4 Remuneration and incentives 4.5 Licences, permits and bylaws SECTION FIVE 5.0 Operation plan Production facilities and capacity Production strategy Production process Regulations affecting operations SECTION SIX 6.0 Financial plan Pre-operational cost Estimates of working capital Preparation of cash flow projections Preparation of proforma income statements Calculation of break even point Calculation of profitability ratios Desired financing Proposed capitalization SECTION ONE 1.0 EXECUTICE SUMMARY Sweet Springs Depot is a sole proprietorship type of business. It will offer first class sales and delivery services to all its customers with full commitment and dedication. 1.1 BUSINESS DESCRIPTION Sweet Spring Depot will be a sole proprietorship type of business which will be located at a shopping center called free area which is located three kilometers from Nakuru town and is on Nakuru-Nairobi highway. The business will be started early in the year 2010. The main business activities will include purchasing soft drinks mainly sodas and mineral water from manufacturers and supplying them to Nakuru town and neighboring towns like Njoro and Bahati. The business therefore will be offering sales services and transportation of the mentioned products.

5.1 5.2 5.3 5.4

6.1 6.2 6.3 6.4 6.5 6.6 6.7 6.8

1.2 MARKETING PLAN The target customers comprise traders in the said areas running retail shops, restaurants and also social events like weddings, and company meetings. Effective methods of advertising will be employed to reach out to all these customers when the business starts. 1.3 ORGANISATION AND MANAGEMENT PLAN The business will be purchasing the products on cash and short term credit. The manager will oversee all the activities in various departments and will be assisted by the other employees. The duties and responsibilities will be divided clearly to ensure smooth running of activities in the business. Every employee will be supervised by his or her immediate boss. 1.4 OPERATION PLAN All the activities in the business will be done in a very co-coordinated manner to avoid any hitch that may occur along the way. As a manager I will be responsible in organizing all the sections and also make contingency plan where necessary. I will establish and maintain a good trading relationship with my customers and suppliers in order to build trust among ourselves. I will also ensure the products I receive are genuine and have met the Kenya Bureau of Standards requirements. 1.5 FINANCE PLAN I intend to start the business with a capital of Ksh. 6,000,000. I intend to raise this money from a bank loan of about Ksh.2200000. loan from Youth fund of about Ksh.2, 300,000 and my personal savings and friends contributions of about Ksh.1, 500,000. I intend to establish a proper documentation of all financial transaction that will be showing the financial status of the business at any point in time. SECTION TWO 2.0 BUSINESS DESCRIPTION 2.1 BUSINESS NAME The name of the business shall be SWEET SPRING DEPOT. This name bonds very well with this kind of business considering that the business deals with beverage drinks. It is therefore very easy to associate the drinks and the sweet spring as the source. 2.2BUSINES LOCATION AND ADDRESS The business address shall be SWEET SPRING DEPOT P.O. BOX 15104 NAKURU Email: sweetspringdepot@yahoo.com It shall be located at a place called Free Area which is a shopping centre located about three kilometers from Nakuru town. It is also found along the Nakuru Nairobi highway.

2.3FORM OF OWNERSHIP

This shall be a sole proprietorship whereby as a manager, I shall oversee all the activities of the business. I will be formulating the policies of this business and at the same time seek consultative services on various issues touching on the business. I will enjoy all the profits realized by the business and also all the losses incurred by the business. My choice for this form of ownership is due to some of its outstanding advantages such as quick decision making, ease of starting and also being in touch with the customers. 2.4 TYPE OF BUSINESS The business deals with purchasing sodas and mineral water from the manufacturing companies and distributing them at both retail and wholesale. The business will also be offering some transportation services to its customers. 2.5 BUSINESS PRODUCTS AND SERVICES The business products will include will include mainly all soda brands from Coca-Cola Company such as Fanta, Sprite, Coke, Stoney, Krest, and Mineral water from Keringet Mineral Water Company. The services to customers will be transportation, some credit supplies and also some sale tips. 2.6 JUSTIFICATION OF OPPORTUNITIES Nakuru town is growing and expanding at a very high rate. This has lead to increased business activities. Nakuru town also serves as headquarter for Rift Valley province. The weather in the area for a considerable period in a year is normally dry and therefore the business can trade during this period. The business location is quite strategic since it is near the highway and also close to other shopping centers like Lanet and Bahati. 2.7 INDUSTRY The business falls under Manufacturing and Transport Industries since it deals with manufactured products and also engages in transportation. These two industries have been growing rapidly due to some factors like: 1) Improved infrastructure 2) Improved popularity of some products like bottled water 3) Government support These Industries performance also varies with seasonal events like religious festivals such as Christmas and the time of the year. Basically, during festivities, the business performance is normally good. The manufacturing industry aims at adopting the new technology in its operations in order to I improve quality and efficiency of production. 2.8 GOALS OF BUSINESS For any business to grow and expand there must be set goals that will give the business a sense of direction. Therefore goal setting is a crucial step in achieving the success of a business. Some of the goals am setting for the business include: I) Creating job opportunities for people with qualifications like driving and store keeping. II) Profit maximization to avoid in expanding the business III) To act as a perfect link between the retailers and manufacturers and also to avail the products to retailers at the right time and price. IV) To offer the best after-sales-services to customers

2.9 ENTRY AND GROWTH STRATEGY The entry strategy shall be to offer transport services to customers for free. I will also organize for a door to door visits to major retail shops especially in Nakuru town to inform them of the existence of my business and services am offering. My transportation vehicles will also bear posters advertising the business. I also intend to publish posters and distribute them to prospective customers. GROWTH STRATEGY The starting capital is sufficient to jump start the business. This will enable smooth start of the business. During the initial stages of the business all the profit will be ploughed back to allow growth. The business marketing segment shall remain alert to capture any new customers. The business shall adopt the most desirable method to carry out the advertising during any change in market trend. SECTION THREE 3.0 MARKETING PLAN 3.1 CUSTOMERS The customers will be divided into three groups. These groups will be retail shops, businesses like hotels and pubs and finally people having events like weddings and meetings. The three groups of customers are located in Nakuru town and within the neighboring areas distance of not more than twenty kilometers. 3.2MARKET SHARE The area has a total population of approximately 2million people. The town is expanding with emergence of new estates and businesses. I expect to cover and serve about 45% of all my potential customers. The market share is bound to fluctuate due to some factors like climatic conditions. Pipeline depot and Menengai depot being the main competitors, I expect them to cover 30% and 15% respectively. The remaining 10% will be covered by the other small depots. The representation of the market share is shown in the pie chart below

3.3 COMPETITION The main competitors of my business are Pipeline depot and Menengai depot. They are both located about a kilometer away. I intend to attract customers by doing the following: 1) Charging reasonable transportation fee 2) Delivering orders on time 3) Offering short term credit to regular customers

4) Employing qualified personnel who will handle customers with courtesy 3.4 METHOD OF PROMOTION AND ADVERTISING The initial advertising will target the major customers whereby Ill organize for a sales group to go and approach them directly. In future, I will use posters, print media specifically newspapers and also on radio in various vernacular stations. Advertising will take place continuously while promotions will be taking place occasionally. The initial profits will cater for advertising and promotion expenses. The sales volume will be used to gauge the effectiveness of the advertising. 3.5PRICING STRATEGY I will initially conduct a survey of the existing prices of similar products and services within the market targeted area. This survey will help in setting the best prices of products and services. The prices will also be affected by some factors like demand, cost of running the business and environmental conditions like weather changes. 3.6 SALES TACTICS I will ensure that the products I deal in are original from the manufacturers and will always be in right quantity and quality. This will ensure that no products are returned to the business after purchase due to defects. I will also ensure that there will be enough stock at all times. 3.7 DISTRIBUTION STRATEGY The business distribution chain will cover the following areas: Free area, Lanet, Bahati, Njoro, and Nakuru town. The furthest from these areas is 20kilometers from the business location. These, combined with good road networks in the area will create a smooth distribution flow. In future, I intend to expand the distribution chain to cover areas like Molo and Mau. SECTION FOUR 4.0 ORGANISATION AND MANAGEMENT 4.1 BUSINESS MANAGER AND QUALIFICATION

NAME TITLE DUTIES

SAMMY NJIHIA KAMAU MANAGER 1) Chief Administrator 2) Provides the initial capital 3) Recruit employees 4) Formulate business policies

5) Supervise and co-ordinate the other departments 6) Set goals and targets for the business QUALIFICATION -Diploma Photogrammetry & Remote Sensing -CPA II -Computer literate

4.2 PERSONNEL NUMBER AND DUTIES PERSONNEL ACCOUNTANT NO 1 DUTIES -Receiving payment from customers. -Releasing money to buy stock -Compute and prepare business final accounts and statements -Keeping the list of suppliers -Monitoring the stock -Organize for new or replacement of assets -Assign duties to store assistants -Ensure the business assets are in good condition and safe -Organize for the repair of motor vehicles and buildings -Assign duties to drivers, watchmen and cleaners. -Perform all the duties assigned to them by the procurement officer -Supplying the products to the customers -Ensuring the vehicles are well maintained -Cleaning the store and offices -Ensuring security to the business premise and the vehicles

PROCUREMENT OFFICER

ADMINISTRATIVE OFFICER

STORE ASSISTANTS

DRIVERS

CLEANERS WATCHMEN

3 2

4.3 RECRUITMEENTAND TRAINING I intend to advertise the following positions

Accountant Procurement officer Administrative officer I will hire the services of a recruiting firm to interview the applicants and come up with the best. The qualified candidates will consequently assist in the recruitment of store keepers, drivers, watchmen and cleaners. As a manger I shall encourage the top officers to go for part time short term courses, where the business will offer interest free loans to these officers. 4.4 REMUNERATION AND INCENTIVES The salaries will vary according to employee roles and job groups. As the business progress, he employees will receive salary increment proportional to their job groups. The starting salaries will be as follows, per month: Manager Accountant Procurement officer Administrative Officer Store assistants Drivers Watchmen Cleaners 40,000 25,000 25,000 25,000 15,000 15,000 10,000 10,000

4.5 LICENSES, PERMITS AND BY-LAWS LICENSES The business shall acquire the trade license from the Local Authority in order to comply with the law. INSURANCE The workers, business premise and the vehicle will be insured so as to cover for any damage that may occur in the course of running the business. BY-LAWS 1) All employees will be required to observe punctuality when reporting to work. 2) All staff should be in the right attire during working hours 3) The employee will be held liable for any act of negligence or impropriety 4) The vehicles will not be authorized to carry unauthorized goods or passengers 5) The employees will be required to treat the customers with courtesy SECTION FIVE 5.0 OPERATIONAL PLAN Production facilities will be acquired before the business commences both on credit and on cash terms.The facilities will fall under three categories as follows: ACCOUNTS DEPARTMENT ITEM QTY NEEDED COST PER ITEM TOTAL COST

Computer Chairs Cabinets Table TOTAL

1 3 2 1

45,000 2,000 2,500 3,000

45,000 6,000 5,000 3,000 59,000

PROCUREMENT DEPARTMENT ITEM Computer Table Chairs Telephone Calculators TOTAL ADMINISTRATIVE DEPARTMENT ITEM Mini trucks Computer Tables Chairs TOTAL QTY NEEDED 3 2 2 5 COST PER ITEM 600,000 45,000 1,500 500 TOTAL COST 1,800,000 90,000 3,000 2,500 1,895,500 QTY NEEDED 1 2 4 1 2 COST PER ITEM 45,000 3,000 1,000 2,500 500 TOTAL COST 45,000 6,000 4,000 2,500 1000 58,500

5.2 PRODUCTION STRATEGY These will be a systematic strategy of carrying out activities. The amount of stock to be purchased will be guided by sales projection and other market factors. The sources of supplies will be manufacturing companies mainly Coca-Cola Company and Menengai Mineral Water Bottling Company. The three departments will be required to work hand in hand to ensure there is smooth flow of business activity. The manufacturer of the products am engaging in are wel established and they will be delivering goods to my business premise. The business shall have total of twenty employees including the manager. All of them will render direct service to the business. Every employee will work in his relevant department with clear responsibilities.

5.4 REGULATIONS AFFECTING OPERATIONS The location of the business falls under Nakuru County Council and therefore a trading license must be obtained from this council. Motor vehicle drivers will be required to hav valid driving license at all times. The management will ensure that all vehicle have complied with the traffic regulations. The business will put emphasis on safety regulations within the business premise. All stores and offices will have emergency exit and will be equipped with fire extinguishers. Staff working in the stores will be given a proper attire during working hours. The business management will be organizing clean ups for areas surrounding the business premise in order to comply with public health regulations. SECTION SIX 6.0 FINANCIAL PLAN The financial plan will act as a tool in assisting and determining the progress and all the financial activities in the business. It shows the status of a business financially at all times. 6.1 OPERATIONAL COST This is the cost incurred before the business commences. The following are materials and equipment required during the start of the business. ITEM(S) Fixed assets Licenses and Permits Office equipments Electricity Telephone TOTAL COST KSHS. 2,000,000 150,000 30,000 3,500 2,000 2,185,500

6.2 ESTIMATION OF WORKING CAPITAL Working capital is the excess of total current assets over the current liabilities. Its arrived at by deducting the difference between the total current assets and the total current liabilities. WC = CA CL PARTICULARS CURRENT ASSETS Cash in hand Cash at bank Debtors Stocks Total Current Assets CURRENT LIABILITIES Creditors Loan and Interest Bank Overdraft YR 1 250,000 700,000 400,000 900,000 2,250,000 400,000 8000,000 500,000 YR2 300,000 720,000 460,000 920,000 2,400,000 350,000 750,000 300,000 YR3 450,000 690,000 430,000 890,000 2,460,000 380,000 600,000 100,000

Total Liabilities

1,700,000

1,400,000

1,080,000

6.3 PREPARATION OF CASH FLOW PROJECTION This will show the income and expenditure and the flow of money in and out of the business over a period of time. It helps to determine whether the firm can meet all its expenses and realize profit.
ITEM JAN - MAR APR - JUNE JUL - SEPT OCT - NOV

CASH INFLOW Cash sale Collection from debtors Total Cash Inflow CASH OUTFLOW Purchases Rent Salary Electricity Creditors Advertisement Licences Stationery/Postage Total Cash Outflow Net Cash for Quarter

1,720,000 80,000 1,800,000 600,000 50,000 250,000 15,000 20,000 15,000 4,000 3,000 957,000 843,000

1,800,000 100,000 1,900,000 580,000 50,000 250,000 15,000 18,000 16,000 3,000 932,000 968,000

1,840,000 50,000 1,890,000 600,000 50,000 250,000 15,000 20,000 14,000 3,000 949,000 943,000

2,200,000 60,000 2,260,000 800,000 50,000 250,000 15,000 25,000 20,000 3,000 1,163,000 1,097,000

PREPARATION OF PROFORMA INCOME STATEMENT This will help determine whether the business is running at a loss or profit. It will therefore help determine payments of salaries and means of improving business in order to expand.

ITEM Sales Cost of good sold Gross profit OPERATING EXPENCES Salaries/Wages Insurance Electricity Advertisement Stationery/Postage Rent License TOTAL NET PROFIT BEFORE TAX PROVISION FOR TAX NET PROFIT AFTER TAX

ENDING YR1 7,560,000 2,580,000 4,980,000 250,000 50,000 15,000 65,000 3,000 50,000 4,000 437,000 4,543,000 817,740 3,725,260

ENDING YR2 7,200,000 2,420,000 4,780,000 250,000 60,000 15,000 60,000 3,000 50,000 4,000 442,000 4,338,000 780,840 3,557,160

ENDING YR3 8,200,000 3,600,000 5,600,000 250,000 60,000 15,000 70,000 3,000 50,000 4,000 442,000 5,158,000 928,440 4,229,560

6.5 PREPARATION OF PRO-FORMA BALANCE SHEET ITEM ASSETS Current Assets Cash Debtors Bank Stock Total Current Assets Fixed Assets Vehicles Accumulated depreciation 15% Book Value Computers Accumulated depreciation 10% Book value Furniture and fittings Accumulated depreciation 5% Book value Total Fixed Assets TOTAL ASSETS ITEM LIABILITIES Current Liabilities Creditors Taxation Bills payable Total Current Liabilities Long Term Liabilities Bank loan Owners equity Drawings Total Long Term Liabilities TOTAL LIABILITIES YR1 250,000 400,000 700,000 900,000 2,250,000 1,800,000 1,800,000 150,000 150,000 100,000 100,000 2,050,000 4,300,000 YR1 20,000 817,740 185,580 1,023,320 1,500,000 1,500,000 294,680 3,294,680 4,300,000 YR2 300,000 420,000 680,000 1,200,000 2,600,000 180,000 (270,000) 1,530,000 150,000 (15,000) 135,000 100,000 (5,000) 95,000 1,760,000 4,360,000 YR2 30,000 847,740 205,580 1,083,320 1,000,000 2,000,000 294,680 3,294,680 4,360,000 YR3 350,000 320,000 700,000 1,500,000 2,870,000 1,530,000 (153,000) 1,000,000 135,000 13,500 121,500 95,000 9,500 85,500 1,207,000 4,077,000 YR3 40,000 853,320 107,000 1,000,320 900,000 1,950,000 222,680 3,072,680 4,077,000

6.6 CALCULATION OF BREAK-EVEN POINT Break even point is the volume of sales at which the business neither makes profits nor loses. It is calculated as follows: Fixed Cost x 100 Contribution margin % Contribution margin = Total Sales Variable Costs

Contribution Margin % = Contribution Margin x 100 Total Sales COSTS FIXED COST Salary Licences/Permits Insurance Total VARIABLE COST Telephone Electricity Rent Advertisement Creditors TOTAL YEAR 1 Contribution = Sales Total Variance Cost 7,560,000 189,000 =7,371,000 Contribution Margin (cm) = 7,371,000 = 0.975 7,560,000 BREAK EVEN OF SALES IN KSHS. Fixed Costs Contribution Margin 340,000 = 348,717.94 0.975 = 348,718 YEAR 2 Contribution = Sales Total Variance Cost 7,200,000 186,900 12,000 42,000 50,000 65,000 20,000 189,000 13,000 40,000 49,000 66,000 18,900 186,900 13,500 38,000 46,500 58,000 21,900 177,900 YR1 250,000 4,000 50,000 340,000 YR2 250,000 4,000 50,000 340,000 YR3 250,000 4,000 50,000 340,000

7,013,100 Contribution Margin (CM) = 7,013,100 = 0.974 7,200,000 BREAK EVEN OF SALES IN KSHS. Fixed Costs = 340,000 Contribution Margin 0.974 = 349,075.9 = 439,076 YEAR 3 Contribution = Sales Total Varance Cost 8,200,000 177,900 8,022,100 Contribution Margin (CM) 8,022,100 = 0.978 8200000 BREAK EVEN OF SALES IN KSHS. Fixed Costs Contribution Margin 340,000 = 347,648.26 0.978 = 347,648 6.6 CALCULATION OF PROFFITABILITY RATIOS Profitable Percentage ratio helps depict whether they are decreasing or improving 1) Gross Profit % Year 1 Gross Profit (%) = Gross Profit Net Sales 4,980,000 x100 7,560,000 = 65.87%

Gross Profit % Year 2 Gross Profit = Gross profit Net Sales 4,780,000 x 100 7,200,000 66.39% Gross Profit %Year 3 Gross Profit (%) = Gross Profit Net Sales Gross Profit (%) 5,600,000 x 100 8,200,000 68.29% 11) Return on Equity = Net Profit before Tax Owners Equity R.O.E for year 1 = 4,543,000 x 100 4,600,000 98.76% R.O.E for year 2 = 4,338,000 x 100 4,730,000 91.71 % R.O.E for Year 3 = 5,158,000 x 100 4,980,000 = 103.57% 111)Return On Investment = Net Profit after Tax Total Investment R.O.I for Year 1 = 3,725,260 x 100 6,000,000 62.08%

R.O.I for Year 2 = 3,557,160 x 100 6,000,000 59.28% R.O.I for Year 3 = 4,229,560 x 100 6,590,000 71.68% 6.7 DESIRED FINANCING This indicates all the finance required to start off the business and keep it in progress ITEM Pre-operational Cost Working Capital Total Desired Financing 6.9 PROPOSED CAPITALISATION AMOUNT KSHS 2,013,000 550,000 2,563,000

This is a brief description of proposed capitalization of the business PARTICULARS Personal Contribution Funds from borrowing TOTAL CAPITALISATION AMOUNT KSHS 1,500,000 4,500,000 6,000,000