BUSINESS PLAN

BUSINESS NAME : GICHEHA ELECTRONIC ENTERPRISE

BUSINESS LOGO :

GICHEHA ELECTRONICS ENTERPRISE

PRESENTER : STEPHEN GICHEHA NJOKI

INDEX NUMBER : 2071012497
COURSE NAME : DIPLOMA IN ELECTRICAL AND
ELECTRONICS ENGINEERING
COURSE CODE : 2601
PRESENTED TO : THIKA TECHNICAL TRAINING
INSTITUTE
SUPERVISOR : MR. GATHURU

KENYA NATIONAL EXAMINATION COUNCIL IN PARTIAL FULFILLMENT FOR

THE AWARD OF DIPLOMA IN ELECTRICAL AND ELECTRONICS
ENGINEERING

EXAMINATION SERIES: JULY 2019

 DECLARATION

I declare that this document is my own original work and it has never been presented for any
award to any other college or university.

NAME: STEPHEN GICHEHA NJOKI

INDEX NO: 2071012497

SIGNATURE_____________________________ DATE_____________________________

This business is presented with my approval as Thika Technical Training Institute supervisor

NAME: MR. GATHURU

SIGNATURE____________________________ DATE__________________________

i
 ACKNOWLEDGEMENT

I sincerely thank the almighty God for the advantage and honour He has given to me throughout
the course

I most sincerely would like to send my regards to all those that helped me during the business
plan and compiling of the entire business plan.

My special gratitude goes to parents for moral support and classmates in general.

I also appreciate my supervisor for his consistent guidance throughout the business plan.

ii
 DEDICATION

I dedicate this business plan to my lovely parents who have financially supported me throughout
this business plan , I also extend my dedication to my classmates, brother and sisters who
morally supported me.

May the Almighty God bless you all.

iii
 TABLE OF CONTENTS
DECLARATION........................................................................................................................i
ACKNOWLEDGEMENT........................................................................................................ii
DEDICATION..........................................................................................................................iii
CHAPTER ONE........................................................................................................................1
1.0 EXECUTIVE SUMMARY...................................................................................................1
1.1 BUSSINESS DESCRIPTION...............................................................................................1
1.2 OPPORTUNITY AND ENTRY STRATEGY......................................................................1
1.3 THE MANAGEMENT TEAM.............................................................................................1
1.4 OPERATIONAL PLAN........................................................................................................1
1.5 FINANCIAL PLAN..............................................................................................................2
CHAPTER TWO.......................................................................................................................3
2.0 BUSINESS DESCRIPTION.................................................................................................3
2.1BUSSINESS NAME..............................................................................................................3
2.2 BUSSINESS LOCATION & ADDRESS.............................................................................3
2.4 FORMS OF OWNERSHIP...................................................................................................4
2.5 TYPE OF BUSSINESS.........................................................................................................4
2.6 PRODUCTS AND SERVICES.............................................................................................5
2.7 JUSTIFICATION OF BUSSINESS OPPORTUNITIES...................................................................... 5
2.8 INDUSTRY...........................................................................................................................7
2.9 GOALS OF THE BUSSINESS.................................................................................................................... 7
2.9.1 LONG –TERM GOALS.............................................................................................................................. 7
2.9.2 SHORT TERM GOALS.............................................................................................................................. 7
2.10 ENTRY AND GROWTH STRATEGY..............................................................................8
2.10.1 ENTRY STRATEGY.......................................................................................................8
2.10.2 GROWTH STRATEGY...................................................................................................8
CHAPTER THREE...................................................................................................................9
3.0 MARKETING PLAN............................................................................................................9
3.1 CUSTOMERS.......................................................................................................................9
3.2 COMPETITION..................................................................................................................10
3.3 STRENGTHS AND WEAKNESSES.................................................................................10

iv
3.4 MARKET SHARE.............................................................................................................11
3.5 ADVERTISING AND PROMOTION STRATEGIES.......................................................11
3.6 SALES STATISTICS..........................................................................................................12
3.7 DISTRIBUTION STRATEGY...........................................................................................12
3.8 PRICING STRATEGY.......................................................................................................12
CHAPTER FOUR...................................................................................................................14
4.0 ORGANIZATION PLAN...................................................................................................14
4.2 BUSSINESS MANAGERS AND QUALIFICATIONS.....................................................15
4.3 RECRUITMENT PROCESS...............................................................................................17
4.4 RENUMERATION AND INCENTIVES...........................................................................18
4.5 LICENCE,PERMITS AND BY-LAWS..............................................................................21
4.6 SUPPORT SERVICES........................................................................................................22
CHAPTER FIVE.....................................................................................................................23
5.1 OPERATIONAL FACILITIES...........................................................................................23
5 .2 OPERATIONAL / PRODUCTION STRATEGY..............................................................24
5.3 PRODUCTION / OPERATIONAL PROCESS..................................................................26
5.4 GORVERNMENT REGULATIONS AFFECTING OPERATION...................................26
CHAPTER SIX........................................................................................................................28
6.0 FINANCIAL PLAN............................................................................................................28
6.1PREPERATIONAL COSTS................................................................................................28
6.2 Working Capital Estimations...............................................................................................29
6.3 PROJECTION OF CASHFLOW STATEMENT FOR 1ST YEAR....................................30
6.4 PROJECTION OF CASHFLOW STATEMENT FOR THE FIRST YEAR ON
QUARTERLY BASIS...............................................................................................................33
6.4.1 PROJECTION OF CASHFLOW STATEMENT FOR 2ND YEAR................................33
6.5 PROJECTION OF CASHFLOW STATEMENT FOR 2ND YEAR ON QUARTERLY
BASIS........................................................................................................................................35
6.5.1 PROFORMA BALANCE SHEET AT START-UP AND AT THE END OF YEAR
ONE AND TWO.......................................................................................................................36
6.6 BREAK EVEN POINT CALCULATION.........................................................................37
6.7 CALCULATION OF PROFITABILITY RATIOS............................................................39
6.8 DESIRED FINANCING....................................................................................................40

v
 6.9 PROPOSED CAPITALISATION......................................................................................40

vi
 CHAPTER ONE

1.0 EXECUTIVE SUMMARY

1.1 BUSINESS DESCRIPTION

The proposed business will go by the name GICHEHA ELECTRONIC ENTERPRISE located at
Embakasi town. The business email address, telephone number and post office address will be
clearly outlined for its customers. It will be operated as sole proprietorship owned by Stephen

Gicheha Njoki

The business will be offering all kinds of electrical and electronic products and other services
such as installation, advisory services on safety measures on its products. The business intends to
provide high quality products and services. The main goal of the business is to make profit and
create employment for young entrepreneurs.

1.2 OPPORTUNITY AND ENTRY STRATEGY

As a result of my experience within the town where I have identified a variable market
opportunity. In order to intends to penetrate the market the proprietor intends to carry out
intensive promotional, advertisements and consumer packaging distribution as the business
grows.

1.3 THE MANAGEMENT TEAM

GICHEHA ELECTRONIC ENTERPRISE will be a sole proprietorship form of business to be

owned by Stephen Gicheha Njoki who is going to be the managing director and also the
Chief Engineer. The proprietor has sound business management background that is going to help
in the management of the business and have relevant skills in the construction industry.

1.4 OPERATIONAL PLAN

GICHEHA ELECTRONIC ENTERPRISE intends to draft proper operational plan for proper
operation of the business. The business will make sure it engaged for adequate stock to be

1
supplied throughout the year. Sometimes raw materials will be stored in the store room to avoid
shortages.

1.5 FINANCIAL PLAN

The manager plans to start a capital of Ksh. 2,100,000. The amount will be contained from
personal savings, friends and the family contribution and borrowing from reliable sources. The
cashier will control cash flow statements balance sheet, profit and loss account

2
 CHAPTER TWO

2.0 BUSSINESS DESCRIPTION

2.1BUSSINESS NAME

The name of the business will be GICHEHA ELECTRONIC ENTERPRISE. The name is a
creative imagination going by the kind of product the business will be offering.

2.2 BUSSINESS LOCATION & ADDRESS

The proposed business will be located in, Embakasi trading centre along Embakasi Kayole road

in skyward building.

The proposed business will be served with good communication due to network availability and

transport due to Embakasi- Kayole tarmac road and security due to presence Embakasi police

post and district officers office.

The location of the following business will be as shown in the map below.

FACTORS CONTRIBUTING TO GICHEHA ELECTRONIC ENTERPRISE LOCATION

a. Availability of raw materials

b. Availability of auxiliary services such as banks, health centres spots and flexible communication
facilities.
c. Potential customers are plenty.
d. Tight security in the area.

The business will bear the following address:

GICHEHA ELECTRONIC ENTERPRISE

P.O.BOX 41
Embakasi

3
 TEL: 0790 564840
EMAIL: gichehaenterprises@gmail.com

2.3 SKETCH OF LOCATION OF GICHEHA ELECTRONIC ENTERPRISE

TRAVELLERS HOTEL

GICHEHA ELECTRONIC MAINA CHEMIST

ENTERPRISE

CO-OPERATIVE BANK

EQUITY BANK

2.4 FORMS OF OWNERSHIP

The business will operate as a sole proprietorship. The owner will be the Chief Executive
Officer (CEO) and will give assistance in the running of the business. The advantages of the
business is starting with a low capital which is to come from the owners equity, loan from bank
and a few from relatives. Due to flexibility GICHEHA ELECTRONIC ENTERPRISE is
capable of adjusting to requirements of changing business conditions. Evaluation of a sole trade
also creates room for adjustment hence the credibility in providing better services.

Other advantages of this form of ownership include:

 It is easy to manage

 It creates self-employment

 It is simple in formation

4
  All the profit are enjoyed by the owns

 Decision making is faster

2.5 TYPE OF BUSSINESS

This is a start-up business, intending to start January 2021.

The business according to the environment will be selling electronic appliances that are used in
daily basis hence is a good choice as is set to meet our day to day needs as the technology
advances.

Major activities will be selling, importing, and installing goods as per order from a customer.

Minor activities will be such as doing free maintenance of all the appliances with warranty.

2.6 PRODUCTS AND SERVICES

The company will be selling all electronic gadgets and appliances.

Such will include, television ,Radios, DVD players ,computers and software programs
,refrigerators ,gas cookers ,kettles,(electric) ovens laptops, printers, integrated circuit
packages(IC), transistors, diodes and communication gadgets

All this will be in big small and medium sizes.

Vans will be bought weigh 3000kg for delivery of goods ,two vans.

The business also will be educating customers free of charge on maintenance of the items
bought.

Installation of communication systems and equipment

Electronics system consultant

Since the owner of the business has full knowledge about computer information and
telecommunication the services rendered will be more competitive and up-to data in technology
used to produce those services.

5
2.7 JUSTIFICATION OF BUSSINESS OPPORTUNITIES

Opportunity

The demand for electrical and electronic products in the area is increasing day by day.

The current operating businesses in the industry offer substandard products compared with
those of the proposed business which will be original and of the best quality.

The area lacks established businesses offering electrical installation services.

Threat

There is possibility of potential entrepreneurs venturing in the industry, hence further stiffening
completion for the market.

Existing businesses may with time realize their weaknesses hence increasing competition
pressure.

2.7.1 Specific needs the Business will satisfy

The business will meet the demand for electrical and electronics products.

The need for electrical based products such as electrical installation and repair for electrical and
electronic appliances will be met.

2.7.2 Contribution of the Business to the community

The business will ensure that the premises, products and prices and communications are free
from barriers, enabling all people to use them independently regardless of one’s ability, gender,
ethnic background, etc. This will give all members a sense belonging and feel included.

It will also recruit personnel who have the qualifications and have employment needs.

The business will engage itself with organizations in the community whose objectives are to
benefit the entire community positively.

2.7.3 Sustainability of the Business

6
The business will exercise the following to ensure long term sustainability;

Care about employees, customers, community and work to make positive social change

It will know how its operations affect the environment and actively work to reduce its impact

It will create a long term financial value

2.8 INDUSTRY
This kind of business venture is under telecommunication and information industry

In terms of growth rate, the business picks very smoothly as the appliances are needed in day to
day life and due to advancement in technology hence the demand ratio is high on the products
and services .

The technology used is environmental friendly since it does not pollute environment. It is also
up to date and will include use of compute for troubleshooting the system.

The size of the proposed business in the society will be medium because there are number of
industry competing with it for resources.

The kind of technology used in the industry is the modern technology

The business intend to the advanced way of selling and installing which will take a shorter time
to complete a task.

The average number of employee will be five to work in various department

2.9 GOALS OF THE BUSSINESS

2.9.1 LONG –TERM GOALS

The long term object shall be to open other branches within the nearby trading centre, expand the services
offered and goods sold.

2.9.2 SHORT TERM GOALS

 To be recognized country wide in distribution of services.

7
  To be the best company ranked for its good services.

 To offer skillful knowledge to workers and customers.

 To deliver goods in time hence building our customer relations.

2.10 ENTRY AND GROWTH STRATEGY

2.10.1 ENTRY STRATEGY

 Because the business is new, I will start by doing research of the surrounding and also of
other similar businesses.

 This will help identify how long they take and conduct themselves as the customer
,how they treat them and services offered to them.

 The research will include the price they offer their goods and services to customers

 This will enable me administer a strategy of venturing into the new market.

 Advertisement of goods and services is key; I will offer goods at fair rates thus drawing
the attention of customers.

 On the commerce of the business the first day will be the essence awareness of the
business.

 That will be the entry strategy.

2.10.2 GROWTH STRATEGY

 To keep a steady pace and maintain the quality of goods and services.

 To catch up with new arrivals and make the goods available ahead of my competitors.

 To expand the business by opening new branches

 To attract investors in the business so as to enhance the marketing ratio.

8
  This will be the growth strategy and will commence immediately the business starts.

CHAPTER THREE

3.0 MARKETING PLAN

3.1 CUSTOMERS

This is established to seek profitability of the customers for the business to gain viability in its
venture. GICHEHA ELECTRONIC ENTERPRISE will have customers of high demand of the
products and services offered .The business intends to excel by producing goods and services of
high quality. The immediate customers will include:

a) Individual customers
These are small scale customers who buy products in small quantities. To attract these
customers the business will offer small discounts up to a certain level of quantities.
b) Commercial customers

These types of customers are intended to uplift the business because they buy a lot of
products in bulk. Respective customers will also have their sides of discounts. These
traders are expected to buy these products with the aim or purpose of reselling them and

9
 their main purpose will be making a profit, compared to individuals who buy the
products in small quantities.

c) Institutional customers
These type of customers to the intended business will mean a lot since the demand will
be high
The business will be forced to purchase and manufacture in extreme quantities and the
product will be bought at special orders

10
3.2 COMPETITION

The owner will face competition during the business operation. Furthermore the owner will
manage the company over constraints of business environment. Nevertheless owners with the
same business will be accustomed to a particular business while others will overlook the
insufficiency of it. To attract these customers the business will improve on advertisement,
offering of reasonable discounts, good language to customers and many others. To the
outdoor research on other businesses and their current information to the world, the business
will be buying magazines, journals and newspapers for researchers seek. The business is
likely to succeed ahead of other competitors i. e

A) MALI ELECTRONICS
P.O.BOX 183-10308
EMBAKASI

B) KAMAU ELECTRONICS
P.O.BOX 30-10308
EMBAKASI.

GICHEHA ELECTRONIC ENTERPRISE will be situated at the centre of the town. Embakasi is
800m from the town while Kamau electronics is on the northern side of the market. The business
will run up well because of the following limitations from other companies:

 Poor selling techniques

 Overpricing
 Poor advertising
 Misunderstandings among the workers Poor consultancy services

3.3 STRENGTHS AND WEAKNESSES

GICHEHA ELECTRONIC ENTERPRISE has the following strengths:

 Best site
 Trained personnel
11
  Efficiency of workers

MALI ELECTRONICS

 Lack of experience
 Overpricing
 Big working space

KAMAU ELECTRONICS

 Good administration
 No discounts
 High levels of corruption

GICHEHA ELECTRONIC ENTERPRISE outweighed the competitors through the strengths that
have been depicted. Though the company has a small size it will dominate a wider market share.

3.4 MARKET SHARE

For good profit maximization of the business, it should have a standardized number of
customers. The business is likely to hold a big share compared to the other firms. Below is a
chart showing the market share:

The only best way the business intends to improve its profit is by producing and selling of high
quality products and to enhance good and simple community skill, because both demand and the
customers population are high hence there is a profitability that the rate of production should also
be high.

3.5 ADVERTISING AND PROMOTION STRATEGIES

Advertisement is of great importance in any enterprise. To search on the potential customers

GICHEHA ELECTRONIC ENTERPRISE will use the most effective and quickest method of
advertising.

12
These methods include:

 Classified advertisements-classified advertisements are one of the most effective

types of advertising. The business will use newspapers or magazines hence will
appear within days of placing
 Search engine optimization-The primary goal of search engine optimization is to get
the company a website listed on the first page of major search engines. That way the
business will generate more traffic to the site.

3.6 SALES STATISTICS

Good public relation being one of the best ways to attract customers, GICHEHA ELECTRONIC
ENTERPRISE will have a very organized way while dealing with its customers. It will
eventually make sure at least one item is bought. To overwhelm the customers attention the
owner focused to ensure sale statistics are put in place. After sales services will be offered for at
least 3 months following the sales. There will also be offering of credit to regular customers.

3.7 DISTRIBUTION STRATEGY

In distribution the owner considered aspects which constitute the following:

 The demand of the product in the market

 The purchasing power of the customer
 Urgency of the product in the region

The distribution strategy will be taken by the sole proprietor at a minimal cost .In some cases the
owner will participate in ensuring that the stock is replenished with appropriate stocking cost
every month of transaction. The supplier will avail the product to the owner’s premises with
transport charges.

3.8 PRICING STRATEGY

Due to fairness of some customers there will be a fixed price of all commodities and somehow
lower than other competitors in order to attract customers. Transportation of goods shall be given

13
to customers whose respective business will not exceed 20km from the proposed business.Prices
of production shall definitely vary from the type of business or owner to another.

14
 CHAPTER FOUR

4.0 ORGANIZATION PLAN

GICHEHA ELECTRONIC ENTERPRISE being a sole proprietorship owned by Stephen

Gicheha Njoki .Soon who will be the chief engineer and the managing director. He intends to
employ an assistant manager who will also be the sales manager.

4.1 ORGANIZATION CHART

MANAGER

CLEANERS
ACCOUNTANT HEAD OF WORKERS

DRIVER SECURITY OFFICERS

15
4.2 BUSSINESS MANAGERS AND QUALIFICATIONS
General manager

Qualification

a) He/she must be computer literate

b) Must have at least four year experience in leadership position
c) Must have good communication skills
d) Must have a diploma in business management

Duties

a) He will be the overall director

b) He will provide effective management skills
c) He will be in charge of providing effective marketing strategies
d) Ensuring that the business is a success by watching profit trend and making decision
accordingly

HEAD OF WORKERS

Qualification

a) Have a certificate in sales and marketing

b) Good communication and interpersonal skills

Duties

a) Keeping records on stock to ensure there is no over or understocking

b) Selling products to customers

Accountant

Qualification

a) Should have a diploma in accounting

b) Good communication skills
c) Two year experience in accounting

16
 d) Should be computer literate

Duties

a) Keeping books of account of the business

b) Recording daily financial transactions e.g cash inflows and outflows
c) Making available financial record at the end of each financial year

Cleaners

Qualification

a) Must have form 4 certificate

b) Should be self-driven
c) Should be able to communicate both English and Kiswahili

Duties

a) Ensure that business premises are clean all the time

Making available list of cleaning necessities to the accountant for procurement

Driver

Qualification

a) Must have a driving license from a recognized driving school

b) Have at least two years of working experience

Duties

a) In charge of all deliveries to be made to customers from suppliers

SECURITY OFFICERS

Duties and responsibilities;

 Should respond to incidences and emmergencies.

17
  Administrative tasks such as directing guests and preparing daily logs and monthly
reports on the status of propertys security.
 Maintain a record of all activities observed on the premises to keep the employer apprised
of the security situation and advise on any further measures that should be taken.
 Surveillance.
 The illegal activity at the employers property.

QUALIFICATIONS

 A doctors note on the health ability to work as a security guard issued by an occupational
and sport medicine practitioner.
 Evidence of completed primary school education.
 Should be over the age of 30 years.

4.3 RECRUITMENT PROCESS

 The job will be advertised on television and the interested people are to personally
present themselves to the managing directing for approval.
 The selected persons will be entitled to training to enable them familiarize with bussiness
objectives and its policies.

18
4.4 RENUMERATION AND INCENTIVES
Manager

Basic salary 10000

House allowance 4000
Medical allowance 2000
Leave allowance 1000
Commuter allowance 1000
Gross salary 18000

Accountant

Basic salary 8000

House allowance 1000
Medical allowance 1000
Leave allowance 800
Commuter allowance 800
Gross salary 11600

Seller

Basic salary 5000

House allowance 1000
Medical allowance 1000
Leave allowance 800
Commuter allowance 800
Gross salary 8600

Driver

Basic salary 3000

House allowance 1000
Medical allowance 1000
Leave allowance 800
Commuter allowance 800

19
 Gross salary 6600

Cleaner

Basic salary 1500

House allowance 500
Medical allowance 500
Leave allowance 500
Commuter allowance 500
Gross salary 3500

Job title No. of workers Salary

Manager 1 18000
Accountant 1 11600
Seller 1 8600
Driver1 1 6600
Cleaner 1 3500
TOTAL 49300

SUPPORT SERVICES

SERVICE PROVIDER
A. Auditor Scheme accounting farm
B. Banking Kenya Commercial Bank
C. Insurance Madison insurance
D. Security Tatu guard security

INCENTIVES

Incentives are additional remuneration or benefit to an employee in recognition of achievement

or better work.by giving incentives to the workers it will help GICHEHA ELECTRONIC
ENTERPRISE in the following ways;

20
  Increase productivity.
 To enhance commitment in work performance.
 To inculcate zeal and enthusiasm towards work.
 Get maximum of the workers capabilities so that they are exploited and utilized
maximally.

GICHEHA ELECTRONIC ENTERPRISE will give the following incentives to the workers;

 Job enrichment-This will be done by increasing responsibilities,giving important

designation,incresing the nature of work and content.
 Promotion opportunities-This will help the employers to feel satisfied and contented and
become more commited to the organisation.
 Illness and annual levers – GICHEHA ELECTRONIC ENTERPRISE is to cater for
expences of sick staff and also annual levers of upto 30 days will be offered to employees
with full salary intact.
 Transport will be offered to the workers.

4.5 LICENCE,PERMITS AND BY-LAWS

GICHEHA ELECTRONIC ENTERPRISE will ensure it is complied with the government

laws and regulations.By doing this the bussiness will be able to run smoothly without
government interference or closure if bussiness by local authorities and government
representatives,government compliances,regularly and approval that are put in place before
the bussiness starts its operation.It will also help the bussiness in the following ways:

 Provide prestige and an aura of stability to the bussiness hence attracting customers
and investors.
 It will help separate personal taxes and make it easier to report income and any
bussiness losses.
 It will provide the bussiness with access to certain groups that one would be unable to
participate if one could operate under personal name.
a) LOCAL AUTHORITY LICENSES

21
 The local authorities have by-laws that need to satisfy the order of conduct for any
bussiness.The bussiness is required by the county council to obtain an occupation licence that
is issued office payment of in occupation fee.This will permit GICHEHA ELECTRONIC
ENTERPRISE to occupy council plot space for purpose of carrying out the bussiness.

b) TRADE LICENCES

This is found in ACT CAP 497 of the laws of kenya.The trade licence is obtained free of
charge at the NAIROBI county offices.my trade is a regulation to have a trading licence
inorder to operate a bussiness in accordance with the terms of the current trade licences.

c) PERMITS

It is issued by the county council officers.It proves that the bussiness has been permitted by
the government to carry out the said activity.They are given for duration of time after which
it is supposed to be renewed.

d) PUBLIC HEALTH

This is found in ACT CAP 242 of the laws of kenya.It entails the sanitary and hygiene
conditions of the buildings eg.cleanliness,neatness,drainage,toilets etc,inorder to maintain
good public health.

4.6 SUPPORT SERVICES

a) POWER SERVICES
Kenya power and lighting company has effectively distributed power all over the
area.This will help with lighting systems and any other operations of the company.
b) INSURANCE

GICHEHA ELECTRONIC ENTERPRISE is to be covered by blue shield insuarance

company box 41 Saba saba .This is to cater for any risk that may occur.

22
 c) BANKING

GICHEHA ELECTRONIC ENTERPRISE is to bank money with kenya commercial

bank mwea branch.A current account is to be opened for the bussiness.The bank is to
provide financial assistance and advisory services to the company.

d) LAWYER

Samtones is to hire epoch advocates p.o.box 1360 Embakasi to spell out legal matters
of the firm.It is going to advice on matters of contracts of sale,loan repayment,theft and
defaulting payment and recovery of debts.

CHAPTER FIVE

5.1 OPERATIONAL FACILITIES

Facility Quantity. Cost unit Total cost Source/ supplier

No required

Machines

Tools and

Equipment

Computers 3 300000 60000

Telephone 2 1250 2500

CCTV camera 6 1333 800

Till 2 2750 5500

Subtotal 76000

Furniture and fittings

23
 Chairs 20 850 17000

Stationary 11 900 10000

Tables 8 1875 15000

Subtotals 42000

Grand total 118000

The business premises layout

In the shop it is to have rooms. One room would be the office of the manager, second room will
be the changing room of the workers. Third room will be the store and finally the main room
where sale of goods and services will be taking place.

Functions of rooms

1. Managers office – to call for a meeting which can be a quick with the workers .

2. To meet with customers with big orders and some paper work might be necessary .

3. To store records and data of the business for easy management and monitoring of the
business for easy management and monitoring of the business.

4. Changing room – in there is going to be a washroom , also workers can rest and change their
clothes in the room .

5. The store – this will be used to keep stock of some appliances before they ran out in the main
room so as to be brought and made for sale.

6. The shop ( main room ) – this is where items are placed for display and hence business takes
place in this room .

5 .2 OPERATIONAL / PRODUCTION STRATEGY

a) monthly cost of Raw materials

Items Amount

DVD player 100000

24
Refrigerators 250000

Televisions 120000

Radios 150000

Ovens 200000

Total 820000

b) MONTHLY COST OF LABOUR

JOB tittle Total monthly salary

Manager 41000

Head of workers 29000

Drivers 19000

Cleaner 85000

Accountant 24000

Security officer 16500

Total cost of labour 138000

c) MONTHLY OVERHEADS COST

Item Amount ( ksh)

Computer maintenance 2500

Parking fee 3000

Total overhead cost 5500

d) TOTAL COST OF PRODUCTION PER MONTH

25
 Item Amount

Cost of raw materials 820000

Cost of labour 138000

Overheads cost 55000

Total cost of production 963500

5.3 PRODUCTION / OPERATIONAL PROCESS

 When a customer place can order in advance through well mail or mail his goods are already
packed and ready to go. in this case , he / she might have paid half the cost and would be
coming to top up when he comes for order.

 When the customer comes, he is welcomed warmly and greeted while called by name , he is
asked how he is doing as he is been served .

 His goods are brought and then are verified .

 The customers then sign the invoice receipt and clears the remaining debt.

 He/ she is going to a place , the goods placed in the transport vehicles for transport .

 As he leaves , he is given a brochure of the shop and wished for a safe journey .

5.4 GORVERNMENT REGULATIONS AFFECTING OPERATION

The government regulations that affect the business include:

a) LEGAL FORMALITIES
These are formalities that the business is required to adhere to when going about to start
and establish itself and register , inquire licence and permits from the responsible
government department.

b) PERMITS

26
 It is obtained to enable the business carry out various activities that may fall under the
category of activities the government has control over or recruits them being done
without special permits.

c) HEALTH REGULATIONS
The business is to adhere to the regulations set out by the public health officers and
industrial act on the conditions of the working areas.

d) SAFETY REGULATIONS
The business s to adhere to the safety regulations set out to ensure that the working area
is safe for the workers this includes fire escapes and firefighting equipment.

27
 CHAPTER SIX

6.0 FINANCIAL PLAN

6.1PREPERATIONAL COSTS

Item Cash

License 60000

Rent deposit plus rent 70000

Stock 3000000

Vehicles ( van ) 1200000

Parking fee/ loading zone 30000

Insurance 10000

Fire equipment 5000

Construction fee/ carpentry 150000

Total preoccupation cost 4390000

28
6.2 Working Capital Estimations

Item 1st month 2nd month 3rd month

Rent 10000 10000 10000

Parking fee 2800 2800 2800

Electricity 4000 4500 4800

Water 200 150 300

Vat 16000 18000 20000

NHIF 550 550 550

wages ( workers) + allowances 138000 135000 136000

Total working capital Grand total 171650

29
 6.3 PROJECTION OF CASHFLOW STATEMENT FOR 1ST YEAR
Items Jan Feb Mar April May June July Aug Sept Oct Nov Dec Total
Cash in flow
Cash sales 125010 89600 120900 130200 89200 70980 68500 60800 100200 110270 140680 10500 1256840
Debtors 5000 4000 6000 7000 4000 2000 8000 6000 2000 4000 6000 54000
Loan 50000 50000
Total inflow 175010 94600 124900 190200 96200 74980 70500 68800 160200 112270 144680 156500 1468840
Cash Outflow
Purchase 92680 50200 65000 90700 30620 27200 20000 21680 60400 42600 74200 93200668480
Creditors 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 12000
Rent 30000 30000 30000 30000 30000 30000 30000 30000 30000 30000 30000 30000360000
Salaries 39000 39000 39000 39000 39000 39000 39000 39000 39000 39000 39000 39000474000
Electricity bill 200 200 200 200 200 200 200 200 200 200 200 200 2400
Travelling 500 500 500 500 500 500 500 500 500 500 500 500 6000
Advertisement 2000 2000 2000 6000
License 60000 60000
Water 1500 1500 1500 1500 1500 1500 1500 1500 1500 1500 1500 1500 18000
Repair 2000 2000 4000
Total cash outflow
143580 94400 109200 13640 85900 72900 65100 67380 108100 88300 119900 140400 1232160
Net cash 31480 200 15700 53800 10300 2080 4800 1420 52100 23970 24780 16100 236680
Cumulative cash 31430 31630 47330 101130 111430 113510 118310 119730 171930 195800 220580 236680 1499390

CASH FLOW STATEMENT FOR WHOLESALES AND RETAIL STATIONALY 2021

Items Jan Feb Mar April May June July Aug Sept Oct Nov Dec Total
Cash in flow

30
Cash sales 140500 146060 130200 120800 140200 120800 110700 140400 130800 100600 1101000 120200 1511260
Debtors
Loan
Total inflow 140500 146060 130200 120800 140200 120800 110700 140400 130800 100600 1101000 120200 1511260
Cash Outflow
Purchase 52000 48200 47200 52400 52000 42000 32000 52000 39000 43000 42000 3800 505600
Creditors
Rent 30000 30000 30000 30000 30000 30000 30000 30000 30000 30000 30000 30000 360000
Salaries 41000 41000 41000 41000 41000 41000 41000 41000 41000 41000 41000 41000 492000
Electricity bill 200 200 200 200 200 200 200 200 200 200 200 200 2400
Travelling 500 500 500 500 500 500 500 500 500 500 500 500 6000
Advertisement 2000 2000 4000
License 60000 60000
Repair 2000 2000 4000
Total cash outflow
103400 94400 93400 98600 92200 88400 80200 980200 85200 89200 88200 47000 1067400
Net cash 37100 51660 36800 22200 48000 32400 30500 42200 45600 11400 21800 73200 452860
Cumulative cash 37100 88760 125560 147760 195760 228160 258660 300860 346460 357860 379660 452860 2336872

CASH FLOW STATEMENT FOR YEAR ENDING 2021

Items Jan Feb Mar April May June July Aug Sept Oct Nov Dec Total
Cash in flow
Cash sales 130500 145070 120300 110100 140200 60000 60000 140200 130100 190600 105000 120000 1352070
Debtors
Loan

31
Total inflow 130500 145070 120300 110100 140200 60000 60000 140200 130100 190600 105000 120000 1352070
Cash Outflow
Purchase 22000 11600 18000 42200 16800 10800 11700 14280 13800 12000 12800 14200 200180
Creditors 1000 500 800 600 2900
Rent 30000 30000 30000 30000 30000 30000 30000 30000 30000 30000 30000 30000 360000
Salaries 42500 42500 42500 42500 42500 42500 42500 42500 42500 42500 42500 42500 510000
Electricity bill 200 200 200 200 200 200 200 200 200 200 200 200 2400
Travelling 500 500 500 500 500 500 500 500 500 500 500 500 6000
License 60000 60000
Water 1500 1500 1500 1500 1500 1500 1500 1500 1500 1500 1500 1500 18000
Repair 2000 2000 2000 6000
Total cash outflow
73900 59300 65700 90400 64500 58700 60000 61980 61700 60300 60500 61900 778880
Net cash 56600 85770 54600 19700 75700 1300 78220 68400 30300 44500 58100 573190
Cumulative cash 56600 142370 186970 216670 292370 293670 293670 371890 440290 470590 515090 573190 9021370

32
6.4 PROJECTION OF CASHFLOW STATEMENT FOR THE FIRST YEAR ON
QUARTERLY BASIS
CASH INFLOW JAN-APRIL MAY-AUG SEP-DEC
Cash brought 895000 810000 1165000
Forward
Cash sales 1510000 1180000 1297000
Debtors collection 99500 57000 75000
New capital 370000 150000 200000
TOTAL 1515500 2197000 2737000
CASH OUTFLOW
Purchases 660000 822000 1000000
Payment to Creditor 38500 40000 45000
Salaries and Wages 850000 920000 970000

Staff Allowances 30000 35000 42000

Transport 15600 18200 20000
Advertisement 10000 1300 1400
Water 15700 18500 22000
Electricity 28000 17000 22000
Postage 800 750 850
Bank charges 8600 9200 7500
Loan and interest 55000 42800 66000
Local government Taxes 30000
Maintenance 6600 7500
Permit
Occupational License 20000 20000
Insurance 56000
Total cash flow 1723100 1980750 2252250
total cash carried down 3238600 4177750 4989250
6.4.1 PROJECTION OF CASHFLOW STATEMENT FOR 2ND YEAR
CASH IN FLOW JAN FEB MARCH APRIL MAY JUNE JULY AUG SEP OCT NOV DEC
Cash brought Forward 180000 150000 190000 185000 200000 170000 1350000 120000 140000 165000 170000 200000
Cash sales 480000 200000 210000 300000 250000 350000 400000 480000 450000 485000 490000 500000
Debtors Collection 50000 50000 40000 35000 40000 60000 10000 50000 70000 65000 80000 70000
Total cash In flow 710000 470000 490000 520000 490000 580000 545000 740000 660000 715000 740000 770000
CASH OUTFLOW
Purchases 240000 150000 170000 190000 200000 210000 220000 230000 240000 250000 270000 250000
Payment to Creditors 20000 25000 20000 10000 15000 14000 13000 15000 20000 17000 18000 16000
Salary and Wages 200000 200000 200000 200000 200000 200000 200000 200000 200000 200000 200000 200000
Staff and Allowances 20000 20000 20000 20000 20000 20000 20000 20000 20000 20000 20000 20000
Transport 16000 10000 15000 17000 12000 13000 15000 17000 14000 12500 13800 14500
Water 8500 5000 5200 5320 5400 6500 7250 6500 5200 7800 7900 8000
Discounts 10300 5000 6000 7500 8000 9000 9500 9200 9350 10000 10500 10250
Electricity 9000 6500 7000 7250 7800 7500 7300 8000 8250 8500 8700 8800
Telephone 6750 6000 6200 6500 6800 7000 7200 7100 7050 6800 6700 6250
Bank Charges 1370 1000 1100 1200 1300 1400 1500 1300 1250 1225 1230 1350
Loan and Interests 3950 3500 3000 3200 3500 3700 3800 4000 3900 4100 4200 4150
Local government Taxes 10000 10000
Permits 20000 20000
Occupation License 50000
Insurance 30000
Total cash In flow 645870 432000 453500 467970 459800 522100 504550 518100 529000 537925 561030 539300
TOTAL CASH 64130 38000 36500 52030 30200 57900 40450 22190 131000 177075 178970 230700
CARRIED DOWN
6.5 PROJECTION OF CASHFLOW STATEMENT FOR 2ND YEAR ON QUARTERLY
BASIS
CASH INFLOW JAN-APRIL MAY-AUG SEP-DEC
Cash brought Forward 705000 625000 675000
Cash sales 1190000 1480000 1925000
Debtors collection 225000 160000 285000
New capital 70000 90000
TOTAL 2190000 2355000 2885000
CASH OUTFLOW
Purchases 750000 860000 1010000
Payment to 75000 57000 71000
Creditor
Salaries and Wages 800000 800000 800000
Staff Allowances 80000 80000 80000
Transport 58000 57000 54800
Discounts 28800 35700 40100
Advertisement 5000 8500 12000
Water 24020 25650 28900
Electricity 25800 23800 2800
Postage 1200 1000 800
Bank charges 4670 5500 5055
Loan and interest 13650 15000 15350
Local government Taxes 10000 10000
Maintenance 4500
Permit 20000 20000
Occupational License 30000
Insurance 60000
Total cash flow 1927490 1977500 2200455
total cash carried down 4117490 4332500 5085455

6.5.1 PROFORMA BALANCE SHEET AT START-UP AND AT THE END OF YEAR

ONE AND TWO
ITEM 1st Jan 2021 31st Dec 2021 1st Jan 2022
ASSETS KSHS KSHS KSHS
Current assets
Stock 800000 1000000 1500000
Debtors 200000 150000 100000
cash at bank 500000 800000 2000000
Cash at hand 400000 600000 900000
 Total assets 1900000 2250000 4500000
Fixed assets
Office equipment and 100000 120000 130000
Furniture
Less 12% depreciation 14400 15600
Building 800000
Less 12% depreciation96000
Total fixed assets 996000 134400 145600
Total assets 2896000 2384400 465600
Liabilities
Current liabilities
Creditors
Long term liabilities
Loan (bank) 200000 200000
Owners equity 400000 500000 600000
Net profit 600000 900000
Total long term 600000 1100000 1700000
Liabilities

6.6 BREAK EVEN POINT CALCULATION

Breakeven point is the point at which business expenses exactly matches the sales
volume and without making any profit or loss .It can be calculated mathematically or
graphically and can be expressed in;
 Total revenue that exactly offset of total expenses.
 Total unit production (cost of which is actually equal to the income derived their
sales)

Element of breakeven point

a) Fixed operating expenses

These are not directly related to the production of the products e.g insurance, office
expenses, wages and salaries, interest on loan etc.
b) Variable expenses
These are cash associated with production and selling of the goods e. g.material, labour,
packaging cost, sales commission
c) Total revenue
This is the figure representing the unit to be sold multiply by the sales per unit

ITEMS KSH

VARIABLE COSTS
Cost of stock 800000
Transport 50000
Stationery 100000
Telephone 10000
Water 7000
Direct labor 100000
Mixer 40000
Vibrator 10000
TOTAL VARIABLE COSTS 1117000

37
FIXED COSTS
Wages and salaries 200000
Advertisement 30000
Maintenance 20000
Insurance 50000
Interest on loan 30000
Taxes 100000
Bank charges 20000
Debts 20000
Total fixed cost 470000
Total variable/fixed cost 1587000

38
 Breakeven point calculation
Sales ksh4500000
Total variable costs ksh1587000
Total contribution=sales-total variable margin= 2913000
Contribution margin percentages=total contribution margin ×100
Sales
=64.7%
Total fixed cost =470000
Break even point=total fixed cost×100
Margin percentage
=726429

6.7 CALCULATION OF PROFITABILITY RATIOS

Gross profit percentage=gross profit×100

Sales
Return on equity=net profit after tax
Owner equity
i. RETURN ON INVESTMENT PERCENTAGE
=profit after tax+interest×100
Total investment
=1200000+100000×100
13000000
=10%
ii. SALE TO EQUITY(NET WORTH)
Computed by dividing sales by owners equity and is not expressed as percentage
=sales
Owner equity

39
6.8 DESIRED FINANCING

ITEM KSH

Pre-operational cost 500000

Working capital 1000000
FIXED ASSETS
Building 800000
Equipment/furniture 500000
TOTAL DESIRED FINANCING 2800000

6.9 PROPOSED CAPITALISATION

ITEM

Owners contribution 1000000

Bank loan 800000
Friends contribution 300000
TOTAL INVESTMENTS 2100000

40
 APPENDIX 1: SKETCH MAP OF BUSINESS LOCATION

SKETCH OF LOCATION OF GICHEHA ELECTRONIC ENTERPRISE

TRAVELLERS HOTEL

GICHEHA ELECTRONIC
ENTERPRISE MAINA CHEMIST

CO-OPERATIVE BANK

EQUITY BANK

41