CEMETAL HARDWARE

P.O BOX 305-40100,

KISUMU

DOCUMENT NAME : BUSINESS PLAN.

PAPER CODE :

NAME OF PRESENTER : 1SAAC OMONDI

INDEX NUMBER : 7411052865

PRESENTED TO : THE KENYA NATIONAL

EXAMINATIONAL COUCIL (KNEC)
IN PARTIAL FULFILMENT FOR THE
AWARD OF DIPLOMA IN BUILDING
TECHNOLOGY

SURPERVISED BY :

DATE PRESENTED : JULY 2020

CENTRE NAME : THE KISUMU NATIONAL

POLYTECHNIC,
P.O BOX 143- 40100,
KISUMU

i
DEDICATION

I would like to dedicate this work to my beloved friends and relatives who
showed love, financial support and determination during this period of time,

ii
 DEDICATION

I Isaac Omondi declare that this is my original work and has not been presented for
any academic achievement or award to any examination body.
Sign: ………………..
Date: ………………..

iii
 ACKNOWLEDGEMENT
I wish to acknowledge this following people whose efforts have made it possible
for us to write this business plan both morally and financially. My lecturer
--------------------------------------------who helped me on how to go about it, dear
parents who have supported me financially and morally throughout and my class
mates who offered their help and assistance.

iv
 TABLE OF CONTENTS

Contents Page
DEDICATION.......................................................................................................ii
DEDICATION......................................................................................................iii
ACKNOWLEDGEMENT...................................................................................iv
TABLE OF CONTENTS......................................................................................v
EXECUTIVE SUMMARY...................................................................................1
CHAPTER ONE....................................................................................................3
BUSINESS DESCRIPTION.................................................................................3
1.1 The sponsor....................................................................................................3
1.1 Business name...............................................................................................3
1.2 Business Purpose...........................................................................................3
1.3 Form of Business Ownership.........................................................................3
1.4 Business Location..........................................................................................4
1.5 THE INDUSTRY..........................................................................................4
Industry Size........................................................................................................4
Industry Characteristics.......................................................................................5
Industry Trends....................................................................................................5
Industry Outlook..................................................................................................5
1.6 PRODUCTS/ SERVICES.............................................................................5
1.7 BUSINESS GOALS/OBJECTIVES.........................................................6
Short Term Goals/Objectives..............................................................................6
Long Term Goals.................................................................................................6
1.8 JUSTIFICATION OF BUSINESS OPPORTUNITY...................................6
1.9 ENTRY AND GROWTH STRATEGY........................................................7
Entry strategy.......................................................................................................7
Growth Strategies................................................................................................7
CHAPTER TWO...................................................................................................9
MARKETING PLAN............................................................................................9
2.1 CUSTOMERS...............................................................................................9
Individual customers............................................................................................9
Institutional customers.........................................................................................9

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 2.1.3 Commercial customers...............................................................................9
They are evenly distributed in the area and usually buy in bulk for resell table
below shows the commercial customers..............................................................9
2.2 COMPETITION............................................................................................9
2.3 MARKETSIZE/ SHARE.............................................................................10
2.4 PRICING STATEGY AND POLICY.........................................................11
2.5 SALES TACTICS.......................................................................................11
2.6 ADVERTISMENT AND PROMOTION STRATEGY..............................11
Advertisement Program.....................................................................................11
Promotion Program............................................................................................12
2.7 DISTRIBUTION STRATEGY...................................................................12
2.8 CUSTOMER SERVCES.............................................................................13
CHAPTER THREE.............................................................................................14
ORGANISATION AND MANAGEMENT PLAN...........................................14
3.1 ORGANIZATION STRUCTURE...............................................................14
The Organization Chart.....................................................................................14
...........................................................................................................................14
3.2 KEY MANAGEMENT PERSONNEL.......................................................14
3.3 OTHER PERSONNEL................................................................................15
3.4 RECRUITMENT, TRAINING AND PROMOTION.................................16
Recruitment Policy............................................................................................16
Training Policy..................................................................................................16
Promotion Policy...............................................................................................16
3.5 REMUNERATION AND INCENTIVES...................................................16
Remuneration Policy.........................................................................................16
Incentives...........................................................................................................17
3.6 LEGAL REQUIREMENTS........................................................................17
Licensing/ Permits Requirements......................................................................17
3.7 SUPPORT SERVICES................................................................................17
CHAPTER FOUR...............................................................................................19
PRODUCTION/OPERATIONAL CAPACITY...............................................19
4.1PRODUCTION FACILITIES AND CAPACITY........................................19
4.1.1 Repairs and Maintenance....................................................................19
4.1.2 Layout of the business premises...............................................................19
4.2 PRODUCT/ SERVICE DESIGN AND DEVELOPMENT........................20

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 4.3 PRODUCTION STRATEGY......................................................................20
4.4 REGULATIONS AFFECTING PRODUCTION........................................21
CHAPTER FIVE.................................................................................................22
FINANCIAL PLAN.............................................................................................22
5.1 PRE -OPERATIONAL COSTS..................................................................22
5.2 WORKING CAPITAL..............................................................................22
5.3 CASH FLOW PROJECTIONS...................................................................23
5.4 PRO-FORMA INCOME STATEMENT FOR CEMETAL FOR THE
YEARS ENDING..............................................................................................26
5.5 PRO-FORMA BALANCE SHEET FOR Cemetal Hardware.....................27
5.6 BREAK - EVEN POINTS...........................................................................28
5.7 PROFITABILITY RATIO..........................................................................29
5.8 DESIRED FINANCING.............................................................................30
5.9 PROPOSED CAPITALIZATION...............................................................30
Appendixes premises layout................................................................................31
SKETCH MAP OF THE BUSINESS LOCATION.........................................32

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viii
ix
 EXECUTIVE SUMMARY

1.0 BUSINESS DESCRIPTION

The business shall be a medium sized hardware whose major activity will be buying and selling
of hardware products to customers. The business is in the building and construction industry
whose major goal is to supply high quality and affordable hardware products to tender for this
market

The business name shall be Cemetal Hardware shop it will be located in Homabay town at corner
view center building at the ground floor. The business is a sole proprietor, the business is
justifiable since Kenyans are trendy and are investing in real estates. The lifestyle has risen to
demand for Hardware products.

2.0 MARKETING PLAN

The business shall serve individual, commercial and institutional customers. The market share
for these segments is 25%, 15% and 20% respectively.

The mode of transport to be used will be by road. Problems anticipated from distribution will
include theft and fluctuation of manufacturers' prices and will be overcome by insuring the
property and buying in bulk to curb fluctuation of prices.

It will use price discrimination and psychological pricing. The business will be advertised
through use of sign boards, posters and business cards. The business will use zero and one level
distribution strategy to reach its customers

3.0 MANAGEMENT PLAN

Promotion will be through salary increment for the skilled personnel and through salary
increment and giving of titles for the semi-skilled personnel. Recommendation from friends and
relatives for the semi-skilled personnel. Training will be off job through attending workshops,
exhibitions and seminars for the skilled personnel an on job through coaching and counseling for
the semi-skilled personnel. The business will get it permit from the city council of Kisumu and
its license and registration from the attorney general's office. The business will adhere to the by

1
laws governing the business and for its success will need support services which include
banking, insurance and auditing services.

Remuneration will be monthly and salary computed yearly. Incentives given will include 10
o'clock tea, payment for working overtime for all the business employees also the semi-skilled
personnel will be given protective clothing and shoes.

The business will adopt a line management and will have 8 working personnel with the manager
being the overall supervisor. The working personnel will be 18 years and above, holders of
Kenya's identity cards and must be fluent in English and Kiswahili. Recruitment will be formal
for the skilled personnel and through.

4.0 PRODUCTION /OPERATION PLAN

Production stately will be through mass production and production processes will involve
inquiry, quotation, ordering, and delivery, storing and selling to the customer.

The business will consider the regulations affecting operation which include paying its staff
above the minimum wage, fair compensation in case of injury and the registration of the
business. The business will require Ksh200, 980 for tools and equipments, Ksh 50,000 for its
stock and a monthly salary of Kshs 45,150.

Repair will be done by the supplier in case of breakdown, for maintenance machines will be
operated as required and protected from dust by cleaning and wiping after use.

5.0 FINANCIAL PLAN

Proposed income statement is also shown, it shows the gross profit, net profit before tax and the
net profit after tax for the 1st, there is also the proposed balance sheet that shows the assets and
the liabilities of the business for the 1 st three years of the business operation, the breakeven
analysis for the 1st three years of operation, profitability ratios which includes the gross profit
ratio of 44.61% the net profit ratio which is 20.46% and the return on capital employed ratio of
224.41%, The business cash flow is also shown; it shows how money will be flowing in and out
of the business. the desired financing of ksh 2,193,700 and the proposed capitalization of ksh
2,193,700 which is well tabulated. This describes the pre-operational costs which will be Kshs
416,640 and the working capital for 1st three years of its operation.

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 CHAPTER ONE

BUSINESS DESCRIPTION
1.1 The sponsor

The owner of the business will be Isaac Omondi. He is a Kenyan by birth, and currently resides in
Kenya city.
He is currently studying a diploma in Building technology at the Kisumu National Polytechnic.

He has experience in dealing with customers as he had been working as a hardware assistant
before joining the polytechnic. He plans to invest using a capital of about three million shillings.

1.1 Business name

CEMETAL HARDWARE
The name of the business will be Cemetal Hardware, while the Hardware shows the line of
products that the business will be dealing with, hence this name will be attracting them and is a
guarantee to them getting all the Hardware products of their need.

1.2 Business Purpose

The main business activity will be selling of hardware products since the type of business
established will be a hardware.

1.3 Form of Business Ownership

Legal requirements are few compared to other forms of business, decision making is easy
because no consultation is required and also the proprietor can keep all the business secrets

The proposed business will be a sole proprietorship venture where by Isaac Omondi shall be the
sole owner, where he will solely enjoy all profits and incur all loses if any, and she can decided
to plough back to the business.

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Capital input for the business
Sources Amount (Kshs)
personal savings and selling of personal assets 200,000
contribution from friends and relatives 60,000
loan from bank 20,000
angel investor 19,000
Total 29,000

1.4 Business Location

The business will be located along kisumu-Homabay road road, first office at Densol Petrol
station opposite Rock Motel. The location is strategic because it has developed in terms of
infrastructure like roads thus making it accessible for customers and for transportation of
products to and from the business premises, the cost of the premises is also reasonable hence
won't overwhelm the business in paying large amounts of rent, it is also near to potential
customers like hospitals, colleges, schools and commercial customers.

1.5 THE INDUSTRY

The business lies under the construction industry.

Industry Size
Due to the emergence of real estate constructions, shopping malls and super highways the
industry has grown and is continuing to grow. There is an encouraging annual returns
considering that construction materials do not rot and can never be out of demand therefore
profits is experienced. The industry size is tremendously growing because it offers the basic
needs of the people. It offers employment ranging from professionals to casual laborers.

4
The table below shows the demand for the products in the building and construction industry for
the last three years in percentage.
Product 2013 2014 2015
cement 8% 11% 12%
Iron sheet 6% 9% 13%
Nails 11% 14% 18%

From the table above the demand for the building and construction materials is increasing.

Industry Characteristics

Demand for hardware products is high due to the ever changing lifestyles of people. Real estates,
super highways and shopping malls are the new emerging construction trends in the area.

Industry Trends

The population growth of Kenya is growing rapidly from 30 million to 38 million this creates
room for need of building and construction materials..
Emerging of real has resulted to increased demand of hardware products giving market to the
industry

Industry Outlook
The industry is likely to grow due to the changes in the lifestyles of people and the socio
economic status of people which has changed placing them at better, cheaper and faster
electronic means of getting and receiving information which is promising to the industry.

1.6 PRODUCTS/ SERVICES

The owner intends to sell his products at an affordable price as compared to his competitors who
have taken advantage of the new demand. This will earn the owner loyalty form customers and
increase in the number of new customers.
These products will be available at a wide range of varieties where customers can choose which
brand they want.

5
The owner of the business has experience in terms of customer relations and has skills which she
has learned at The Kisumu National Polytechnic. Cemetal Hardware intends to offer quality
products from qualified manufactures who are registered by the government and certified by
Kenya Bureau of standards.

1.7 BUSINESS GOALS/OBJECTIVES

Short Term Goals/Objectives
 Attracting and retaining customers
 to earn a source of income
 to provide affordable and quality products to the community

Long Term Goals

 to pay back loans borrowed

 to open up other branches of the business in the country
 to create employment opportunities

1.8 JUSTIFICATION OF BUSINESS OPPORTUNITY

Socio-economic- Investors have also come up in the area and are venturing in supplying
hardware products, there is also increased demand of the construction of institutions like schools,
hospital, hotels, and residential houses and this creates a market gap that needs to be filled. the
lifestyles of the people has also changed and are adopting the modern technology in hardware
products and this leads to increased demand of the hardware products due to advancing in
technology. Residents in this area are economically stable because the better percentage of the
total population earn over Ksh 100,000 hence have the spending therefore there is increased
demand for hardware products and the business will be offering the products they require.
Government policy- The demand for hardware products is on the increase with population
growth- the population of Kenya is growing rapidly from 30 million to 38 million this creates
room for sales of electronics hence creating demand. The government is encouraging and
supporting of business through the youth funds .these funds will ensure availability of the capital
for the expansion of the business. The government has also relaxed regulations to encourage
private local investments.

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Demand-demand for this kind of business in the area is very high because they are few Hardware
in the area and the demand of these products is high.

Return on investment-the return on investment will be high because the business will get the
products from manufactures using the business vehicle at a cheap price and will sell at slightly
higher prices in the

1.9 ENTRY AND GROWTH STRATEGY

Entry strategy

The business will create a web page, Whatsupp group and a Facebook account for
advertisements purposes. To create awareness the business will be advertised by use of business
cards and leaflets which will be distributed to potential customers.
Quality products and services-other than employing qualified personnel the business will offer
quality products and services to customers. It will also offer after sale services to improve on
customer relations.
Discounts- the business will offer discount of quantity to customers. a discount of 5% will be
given for sale of over Ksh 5,000.

Growth Strategies
In promoting to the business growth, the business will use the growth strategies which include.

Diversification-there will be offer of after sale services like dusting, packing and transportation
and also advice will be given besides the major activities which will be charged at no cost this
will attract customers and contribute to the growth of the business.

Product development-using this strategy the business will be introducing new products to the
market and this will be achieved through attending workshops and seminars to know on the
developments. This will contribute to the growth of the business

Market penetration strategy- wood glue of small size will be attached to large products like
ceiling board this will attract customers and in return help in the growth of the business.
.

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8
 CHAPTER TWO

MARKETING PLAN
2.1 CUSTOMERS

The business will target different categories of customers from different places and with different
purchasing power the business customers will mainly be

Individual customers
These are customers who buy products for their own use or for the use of families they play an
important role in the day to day running of the business because they provide the business with
liquid stock needed for the daily stock.

Institutional customers
The business area is largely covered by many institutions. They usually buy in bulk for the use
by their customers or for personnel.

2.1.3 Commercial customers

They are evenly distributed in the area and usually buy in bulk for resell table below shows the
commercial customers

2.2 COMPETITION
Competition is necessary since it helps to improve the efficiency and the effectiveness of the
business. The business will have two major direct competitors

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The table below shows the competitors and the actions to take to overcome competition

Competitor Strengths Weakness Opportunities Threats

Korando -strategically -many -employ skilled - selling at
hardware Placed unskilled workers low prices
-offers workers -ensure proper - has many
slightly lower -poor customer customers
Prices customer relations
-has own relations -make
means of - operational
Transport operational hours reliable
-maintains hours not and operate
Efficient reliable during
Stock do not weekends
-good operate
Management during
weekends
Family -has been in -offers -sell at fair -trained
hardware existence for highest prices workmanship
Long prices -sell of all hard with a lot of
-have -only deals ware products experience
Established with selling needed by
Customers of cement customers
-located at a paints and always open
Strategic iron sheet employ
Place - closed workers
most of the who are
hours learned
employee and know the
only know national
mother language
tongue

2.3 MARKETSIZE/ SHARE

According to the market research, the market is not fully exploited. The existing competitors are
only two which is not enough according to the demand in the market. Cemetal Hardware intends
to secure a large amount of market share .Almost 55% of the market share is unexploited, thus
through frequent advertisements and promotions the business intends to realize the unexploited
market share.

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2.4 PRICING STATEGY AND POLICY
Customers who will buy products in large quantities will be allowed quantity discount of 10%.
Customers who will become loyal to the business will be allowed to purchase goods on credit at
an agreed paying period. The pricing of products will not be high as compared to the competitors
and not too low risking making losses. The enterprise will offer competitive prices for its
products in order to attract more customers. Pricing will be determined by various factors such as
competitor pricing, government policies and cost incurred by the business.

2.5 SALES TACTICS

The business intends to provide a wide range of products to facilitate the one-stop supermarket.
The business will be a one- stop supermarket where customers will come and buy all
construction and building materials at once.

2.6 ADVERTISMENT AND PROMOTION STRATEGY

Advertisement Program

 Color and the external face of the business- the business premises will be painted in a
conspicuous color that will be calling customers from far also the face of the premises
there will be well sketched drawings of the building materials and tools that the business
will be selling

 Calendars-will is produced once per year and given freely to customers inside will be a
sketch of the business premises, name of business, location and working hours.

 Media- this is a future plan as the business continues to grow since it’s quite expensive.
At this point the businesses will have to expand to other branches

 Signboards-there will be placed at strategic points where it will be exposed to all

customers; they will be showing the business name, location, address, major activities
and the working hours.

 Posters-there will be put all over the town and outside town where the business targets
customers

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  Business cards- the proprietor will give business cards to customers and also to potential
customers visiting the business premises
.

Promotion Program

The business will also use sales persons who will be expected to visit customers in their places of
work or in their residential area and distribute paper work relevant to the business the business
will also be buying small gifts to regular customers and also will be sending them appreciation
cards, Christmas cards and also new year greetings.

The business will be involved in social responsibilities in the locality to create awareness e.g.
fund raising, supporting certain tournaments like football leagues.

2.7 DISTRIBUTION STRATEGY

The mode of transport involved will be by road and the means to be used will by use of the
business vehicle. It will be facilitated by the better roads of kisumu road and it's the only mode of
transport that is readily available to both the customer and the business. Anticipated distribution
problems may include;
Strategies to solve the problem include;
Theft and destruction of products: will be solved by insuring the property and destruction of
products
Hiring a vehicle: it will be solved by the business buying its own vehicle, this will help to cut
down on transport prices and it will be readily available to the business.
Fluctuation of prices: it will be solved by buying products in bulk and storing them
Theft and destruction of property: it can usually occur as the products are being transported to or
from the business.
Hiring a vehicle: this is usually expensive and at times not readily available when needed
Fluctuation of prices: manufacturers can fluctuate prices depending on the manufacturing
process involved.

Being that the business will be a one- stop supermarket customer be coming to the business
premises to buy products or place orders through telephone or E-mail, their orders are then sent

12
to them according to their specifications. This will help the business to know the fast selling
products. It also ensures that products sold are of quality because the business gets the products
right from the manufacturers.

2.8 CUSTOMER SERVCES

Some of the after- sale services will include: free transport, free calendars and diaries.
The business intends to have customer retention services for example after –sale activities that
are ment to create a long-lasting impression to customers. This will signify the caring nature of
the business and ensure customers are loyal through repeat purchases.

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 CHAPTER THREE

ORGANISATION AND MANAGEMENT PLAN

3.1 ORGANIZATION STRUCTURE

The business is going to adopt a line management where by hierarchy of authorities will be
described by the lines in organizational chart.

The Organization Chart

Managing director

Human resource manager

Manager Merchandiser

Driver Cleaner Watchman

3.2 KEY MANAGEMENT PERSONNEL

Managing Director
Qualifications
 Should be aged between 25-50 years
 Diploma in supply chain
 Have good communication skills
 Must be computer literate

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Duties and Responsibilities
 Directing the organization in all forms of operations
 Controlling the operations of the business
 Staffing, recruitment, selecting and empowerment
 Planning for overall operations of the business
 Representing the business in the external environment

3.3 OTHER PERSONNEL

Job title Qualifications Duties and Number
Responsibilities of staff
Technician -holder electronic -Bank statement and 1
engineering
-computer literate Reconciliation
adjustments
-strong personal -maintaining debtors and
Values creditors ledger
-high integrity and -administering petty cash
honest work ethics vouchers
-debt collection and
expenditure control in
liaison with manager
Cashier -knowledge in -receiving payments I
Computerized -issuing receipts
Accounting -can also assist in
-strong and arranging store
Excellent
Communication
Skills
-public relations will be an
added advantage
store -excellent communication
-receiving and selling of 1
man/sh and negotiating skills products to customers
op -public relations -knowledge
-displaying goods to
attend in store keeping customers
ant -negotiating on prices
-maintaining of the store
cleaner/loade -must be a male and -cleaning of the business 1
r masculine -devoted to work premises
-honest and keen -loading and off loading

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3.4 RECRUITMENT, TRAINING AND PROMOTION
Recruitment Policy
Advertisements will be pinned on the public notice boards near the business and outside the
business premises. The applicants will be shortlisted and then summoned for interviews, it will
be founded on ones education skills, character and health. For the semi-skilled employees it will
be done through friends and relatives recommendations.

The business will strictly employ individuals of 18 years and above who are holders of Kenya
identity card. For the skilled employees’ recruitment will be formal.

Training Policy
The skilled employees will be trained off job; this will be done through attending seminars,
exhibitions, and workshop, for the semiskilled it will be done on job through coaching and
counseling.

Promotion Policy
The skilled labor personnel, promotion will be done through salary increment and as for the
semiskilled labor promotion will be through salary and by giving them titles e.g. watchman can
get the title of chief security officer.

3.5 REMUNERATION AND INCENTIVES

Remuneration Policy

Market rate and competitors salary scale will also be a determining factor.

They will be paid attractive salaries and on time so as to motivate, retain them and also make a
good employer- employee relationship. Employees will also benefit from annual and maternity
leaves where they will be paid.

The employees will be offered their salaries depending on the positions they hold, skills and
knowledge they have.

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Table showing remuneration of staff
Designation Monthly salary Number of staff Totals
Manager 25,000 1 25,000
Assistant manager 17,500 1 17,500
Cashier 11,250 1 11,250
Driver 10,000 1 10,000
Shop attendant 7,600 1 7,600
Cleaner 4,600 1 4,600
Watchman 4,600 2 9200
Totals 80,000 8 85,150

Incentives
The business will motivate its employees through:
 A party will also be given annually
 Skilled labor will be getting an annual leave and for the semiskilled protective clothing,
shoes, and other safety devices will be provided
 Overtime payments shall be made as per hour worked
 Hard working employees shall be given rewards like certificates
 Advance payment will also be given but with a valid reason
 There will also be getting 10 o'clock and 4 o 'clock tea
- .

3.6 LEGAL REQUIREMENTS

Licensing/ Permits Requirements
Table showing the license and permits the business will pay
License permits Sources Cost(Ksh) Status
single business city council of Kisumu 5000 renewable
permits annually
license registration Attorney general’s office 7,000 not renewable
certificate
ministry of health ministry of health Kisumu 700 renewable
permit annually
taxation license K.R.A 1500 not renewable

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3.7 SUPPORT SERVICES
1. Banking services: is of important to facilitate financial matters like loan and savings. This
service will be provided by
Kenya commercial bank
Location: Tuskeys 1st floor
Kisumu
2. Insurance services: the business will be insured against risks like theft, accident, fire and
others it is of important as it will compensate the business in case the risks occur .it will be
insured by
APA insurance company
Location: upper hill
Kisumu.
3. Legal services: will be sought in handling legal matters affecting the business, the service will
be offered by;
Anyul & sons advocates
Location: Almiran Plaza Kisumu
4. Legacy traders: will be needed to advise on goods that are in demand
Location: l& m building upper hill
Kisumu
5. Water services: Will be needed water to clean the business premises and to maintain the
drainage system of the business premises, it will be offered by,
Gulf water service
Location: Daraja Mbili

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 CHAPTER FOUR

PRODUCTION/OPERATIONAL CAPACITY
4.1PRODUCTION FACILITIES AND CAPACITY
4.1.1 Repairs and Maintenance
All the equipment will be repaired and maintained by the suppliers in case of any
breakdown since they are specialized in their sector of supply. In case of
breakdown within the warranty year, the machine will be taken back form repair
without payment. The business will ensure that all the machines are operated as
required, protected from dust and cleaned and wrapped after use.

4.1.2 Layout of the business premises

The owner intends to rent the business premises. The nature of the business
premises will allow for future expansion as there is still contraction going on the
building where the business premises situated. The business owner shall rent
spacious premises measuring 30m by 20m; it will be portioned in the following
sections:
Service area: this is the area where the products will be sold from it will also be
the display point. The cashier and the shop attendant will also be placed here.
Store: this is the section where storage will take place, since the products will be
bought in bulk Offices: there will be two offices one for the manager and the
other one for the accounts clerk. Outside there will be a bench where customers
will be sitting as their wait to be served also the loader will be sitting here. Next to
the store will be ample space for parking this will ensure easy off loading and
uploading.

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4.2 PRODUCT/ SERVICE DESIGN AND DEVELOPMENT
The business will buy hardware products that will be sold to customers. The table
below shows the products that will be bought on monthly basis.
Item Capacity Source unit cost total cost
cement 250 pieces Shadrac dealers 450 212,500
Iron sheet 150 Sadolin 550 82,500
Metal rode’s 100 dozens Galaxy 900 90,000
distributors
paint 30 pieces Industrial area 120 3600
Totals 11,060 377,250

4.3 PRODUCTION STRATEGY

For maximum productivity the business will use mass production. Products will
be bought in bulk and sold to customers in the required quantities. During peak
seasons extra laborers will be hired to assist in the work especially off loading and
arranging of the store.
Stage i
Inquiry: the business will first identify the needs of the customers whereby it will
identify potential suppliers who can offer the required products
Stage ii
Quotation: the supplier will give a quotation to the business with the prices
included which are vat inclusive
Stage iii
Ordering: the businesses will the
order the products required
stage iv
Delivery of goods: the driver will then goes for the products and deliver them to
the business premises and delivery book signed

Stage v

20
The products will be entered in the store ledger and bin cards for proper record
keeping and then stored
Stage vi
The shop attendant will raise requisitions form of the items required in the service
area from the store once issued out of the retail point the goods will be affected
from the stores ledger
Stage viii
From the counter the customers can buy the products they require on cash terms.
The sales will directly be feed in the E.T.R machine for accounting and book
keeping purpose.

4.4 REGULATIONS AFFECTING PRODUCTION

The business will pay its staff well as stipulated under the wages act cap 229. All
of them will be paid above minimum wage level. Under the trade disputes cap
234 the employees will be allowed through their trade unions to air their
grievances to the industrial court. Also there will be allowed to join any trade
union of their choice under trade union act cap 233.in case of any injury or loss
incurred during working hours the employees will be fairly compensated with the
reference to the compensation act cap 236. Any employee who is earning a
monthly salary of Ksh 13000 and above is entitled to pay P.A.Y.E (pay as you
earn)
Registration of business act cap 499 states that every business should have a name
different from other business. Regulations fee will be paid at the national chamber
trading license act cap 497 a licensing fee will be paid to the local authority.
License provides security to the both the customer and the business.

21
 CHAPTER FIVE

FINANCIAL PLAN
5.1 PRE -OPERATIONAL COSTS.
This shall consist of all the costs incurred before the business starts to
operate
Items costs (Kshs)
business registration 8,000
trade license and permit 7,000
rent and rent deposits 16,000
Insurance 3,000
tools and equipments 348,980
Stock 700,000
Advertisements 2,000
Water 1500
Telephone 1,000
Total 1,085,480

5.2 WORKING CAPITAL

PARTICULARS Year I Year II Year III
CURRENT ASSETS (Kshs) (Kshs) (Kshs)
Cash at hand 200,000 221,000 242,500
Stock 377,000 577,000 895,600
Debtors 356,000 350,000 320,100
Total 1,256,000 1,386,000 1,458,200
CURRENT LIABILITIES
Creditors 162,400 174,000 185,000
Total Current Liabilities 162,400 174,600 185,000
working capital 1,093.600 1,212,000 1,273,200

22
 5.3 CASH FLOW PROJECTIONS
5.3.1 CASH FLOW PROJECTION FOR CEMETAL HARDWARE FOR THE FIRST YEAR
Particulars Jan Feb Mar April May Jun July Aug Sep Oct Nov Dec Totals
cash inflow Ksh Ksh Ksh Ksh Ksh Ksh Ksh Ksh Ksh Ksh Ksh Ksh Ksh
Beginning 480,00 489,5 570420 602,9614,6 630,95 635,90 625,75 640950 662,22 670,12 659,7 7,283,19
balance
0 50 40 80 0 0 0 0 0 10 0
cash 1 40,000 470,00 468204500 445000 447700 450300 470000 475000 480000 47990 5485300
sales 10,000 0 0 00 0
Debtors 440 3522 22000 27770 32300 35700 37300 42200 32210 356000
0
total 190,00 87075 106786 1 l038 1099 109795 111137 110835 114665 117452 119232 1171 1313529
inflow 0 o 0 00 900 0 0 0 0 0 0 82 0 0
cash
outflow
Purchases 290,55 300,4 350,00 375,2 355,5 350,50 372,22 354,00 370,75 390,25 415,00 413,2 4,337,62
0 50 0 00 00 0 0 0 0 0 0 00 0
Salaries 85150 85150 85150 85150 8515 85150 85150 85150 85150 85150 85150 85150 1021800
0
Rent 8000 8000 8000 8000 8000 8000 8000 8000 8000 8000 8000 8000 96000
License 7000 7000
Insurance 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000 36000
Advertising 1500 1500 1500 1000 2000 1500 1300 1750 900 1600 1780 1670 18000
loan 10000 10000 10000 1000 10000 10000 10000 10000 10000 10000 10000 110000
payment
0
Electricity 750 600 800 650 500 1000 1200 950 900 750 730 600 9430
Water 400 430 470 520 500 400 450 600 530 470 500 400 5670
Telephone 1200 900 1000 900 800 700 800 750 1000 900 1400 1500 11850
Transport 2000 2500 3000 3500 2500 1000 1500 2500 3000 3280 3200 3650 31630
Miscellan 900 800 2000 1200 1000 800 900 700 1200 1000 850 9000 20350
eous
Total 400 40032 0 464920 48912 0 4689 462050 485620 467400 484430 504400 532610 53617 5696450
Outflow 50 0
NET CASH 489550 57042 0 002940 61468 0 6309 635900 625750 640950 662220 670120 659710 63565 7438840
50 0

23
 5.3.2 CASH FLOW PROJECTION FOR CEMETAL HARDWARE FOR THE SECOND YEAR
Particulars Jan Feb Mar April May Jun July Aug Sep Oct Nov Dec Totals
cash inflow Ksh Ksh Ksh Ksh Ksh Ksh Ksh Ksh 8000 8000 8000 8000 Ksh
Beginning 480,00 489,5 570420 602,9 614,68 630,95 635,90 625,75 7,283,19
balance
0 50 40 0 0 0 0 0
cash 1 40,000 470,00 46820 45000 445000 447700 450300 3000 3000 3000 3000 5485300
sales 10,000 0 0 0
Debtors 440 35220 22000 27770 32300 1300 1750 900 1600 356000
total 190,00 §7075 10678 1l038 10999 109795 111137 110835 10000 10000 10000 10000 1313529
inflow 0 o 60 00 00 0 0 0 0
cash 1200 950 900 750
outflow
Purchases 290,55 300,4 350,00 375,2 355,50 350,50 372,22 354,00 450 600 530 470 4,337,62
0 50 0 00 0 0 0 0 0
Salaries 85150 85150 85150 85150 85150 85150 85150 85150 800 750 1000 900 1021800
Rent 8000 8000 8000 8000 8000 8000 8000 8000 8000 8000 8000 8000 96000
License 7000 7000
Insurance 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000 36000
Advertising 1500 1500 1500 1000 2000 1500 1300 1750 900 1600 1780 1670 18000
loan 10000 10000 10000 10000 10000 10000 10000 10000 10000 10000 10000 110000
payment
Electricity 750 600 800 650 500 1000 1200 950 900 750 730 600 9430
Water 400 430 470 520 500 400 450 600 530 470 500 400 5670
Telephone 1200 900 1000 900 800 700 800 750 1000 900 1400 1500 11850
Transport 2000 2500 3000 3500 2500 1000 1500 2500 3000 3280 3200 3650 31630
Miscellan 900 800 2000 1200 1000 800 900 700 1200 1000 850 9000 20350
eous
Total 400 40032 0 464920 48912 0 46895 462050 485620 467400 484430 504400 532610 53617 5696450
Outflow 0 0
NET CASH 489550 57042 0 002940 61468 0 63095 635900 625750 640950 662220 670120 659710 63565 7438840
0 0

24
 5.3.3 CASH FLOW PROJECTION FOR CEMETAL HARDWARE FOR THE THIRD YEAR
Particulars Jan Feb Mar April May Jun July Aug Sep Oct Nov Dec Totals
cash inflow Ksh Ksh Ksh Ksh Ksh Ksh Ksh Ksh 8000 8000 8000 8000 Ksh
Beginning 480,00 489,5 570420 602,9 614,68 630,95 635,90 625,75 7,283,19
balance
0 50 40 0 0 0 0 0
cash 1 40,000 470,00 46820 45000 445000 447700 450300 3000 3000 3000 3000 5485300
sales 10,000 0 0 0
Debtors 440 35220 22000 27770 32300 1300 1750 900 1600 356000
total 190,00 §7075 10678 1l038 10999 109795 111137 110835 10000 10000 10000 10000 1313529
inflow 0 o 60 00 00 0 0 0 0
cash 1200 950 900 750
outflow
Purchases 290,55 300,4 350,00 375,2 355,50 350,50 372,22 354,00 450 600 530 470 4,337,62
0 50 0 00 0 0 0 0 0
Salaries 85150 85150 85150 85150 85150 85150 85150 85150 800 750 1000 900 1021800
Rent 8000 8000 8000 8000 8000 8000 8000 8000 8000 8000 8000 8000 96000
License 7000 7000
Insurance 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000 36000
Advertising 1500 1500 1500 1000 2000 1500 1300 1750 900 1600 1780 1670 18000
loan 10000 10000 10000 10000 10000 10000 10000 10000 10000 10000 10000 110000
payment
Electricity 750 600 800 650 500 1000 1200 950 900 750 730 600 9430
Water 400 430 470 520 500 400 450 600 530 470 500 400 5670
Telephone 1200 900 1000 900 800 700 800 750 1000 900 1400 1500 11850
Transport 2000 2500 3000 3500 2500 1000 1500 2500 3000 3280 3200 3650 31630
Miscellan 900 800 2000 1200 1000 800 900 700 1200 1000 850 9000 20350
eous
Total 400 40032 0 464920 48912 0 46895 462050 485620 467400 484430 504400 532610 53617 5696450
Outflow 0 0
NET CASH 489550 57042 0 002940 61468 0 63095 635900 625750 640950 662220 670120 659710 63565 7438840
0 0

25
5.4 PRO-FORMA INCOME STATEMENT FOR CEMETAL FOR THE
YEARS ENDING

Year I Year II Year III

Items
Sales 5,485300 5,778000 5943020
Cost of sales 3050700 3120500 3220700
Gross profit 2,434,700 2,657,500 2,722,320
Less expenses
Rent 9600 9600 9600
Salary 1021500 1021500 1100000
License 7000 7000 7000
Insurance 36000 36000 36000
Advertising 18000 16180 15000
Loan payments 110000 110000 110000
Electricity bills 9430 9000 9500
Water 5670 5780 5500
Telephone 11850 12000 12500
Transport and 31630 32280 35700
Maintenance
Miscellaneous 20350 20000 19750
expenses
Total expense 1367730 1366040 1446950
Net profit before 1066870 1291460 1275370
tax
Net profit after-tax 661,459.4 800,705.2 790,721.4
(38%)

26
5.5 PRO-FORMA BALANCE SHEET FOR Cemetal Hardware
Items Year I Year II Year III
Non- Current Assets
Equipments 125,390 112,500 109,540
Furniture 19,240 19,000 18,950
Vehicle 250,000 249,500 239,630
Total Non-Current Assets 394,630 381,000 368,120
Current Assets
cash at hand 200,000 221,000 242,500
cash at bank 350,700 359,700 368,500
Debtors 356,000 350,000 320,150
Stock 700,000 815,000 895,600
Total Current Assets 1,606,700 1,745,700 1,826,750
Total Assets 2,001,330 2,126,700 2,194,870
LIABILITIES
Long Term Liabilities
bank loan 500,000 380,000 230,000
Capital 1,501,330 1,595,250 1,695,400
Total LongTerm Liabilities 2,001,330 1,975,250 1,925,400
Current Liabilities
bank over draft 151,450 269,470
Total Current Liabilities 151,450 269,470
Total Liabilities 2,001,330 2,126,700 2,194,890

27
5.6 BREAK - EVEN POINTS

Items Year I Year II Year III

Sales 5485300 5778000 5943020
Fixed Costs
Rent 96000 96000 96000
Salaries 1021800 1021800 1100000
License 7000 7000 7000
Insurance 36000 36000 36000
Total Fixed Assets 1160800 1160800 1239000
Variable Costs
Electricity bill 9430 9000 9500
Water 5670 5780 5500
Telephone 11850 12000 12500
transport and 31630 32250 35700
maintenance
Advertisement 18000 16180 15000
miscellaneous 20350 20000 19750
expenses
Total Variable Costs 96930 95240 97950

28
1st year = {1160800x5485300}
96930
5485300
Break-even point for year 2nd year =1063870
2nd year = {1160800x5773000}-
95240
5778000
Break- even point for 3rd year= 1065560
3rdyear = {1239000x5943020}-97950
5943020

Breakeven point for year = 1141050

5.7 PROFITABILITY RATIO

5.7.1 Gross Profit Ratio
Gross profit ration = gross profitx 100
Sales
2434600 x 100
5485300
Gross Profit Ratio = 44. 61%
5.7.2 Net Profit Ratio
Net Profit Ratio = net profit before tax x 100 sales
1122070 x 100
5485300
Net Profit Ratio =20.46%
5.7.3 Return on Capital Investment
Return on capital investment = Net profit before taxx 100
Net asset value

Net asset value= (fixed assets + current assets) - current liabilities

29
Net asset value = (375240 +1499020) _1374260=500000

Net return on capital investment = 1122070 x 100

500000

Return on capital investment=224.41%

5.8 DESIRED FINANCING

This is the amount needed as pre- operational cost and the working capital.
ITEMS Amount (ksh)
Pre- operational cost 1086380
working capital 1830830
Total 2917210

5.9 PROPOSED CAPITALIZATION

The table below shows how the proposed capitalization will be raised.
Items Amount (kshs)
Personal savings and selling of personal assets 1000000
Family and friends contribution 617210
Angel investors 800000
Bank loan 500000
Totals 2917210

30
 Appendixes premises layout

G I
D E F
B H

C
I

A
Security
office

Key
A- Main entrance
B- Service area
C- Store
D- Managers office
E- Accounts clerk office
F- Gents washroom
G- Ladies washroom
H- Corridor

31
 SKETCH MAP OF THE BUSINESS LOCATION
Densol
Room Ber Busia Mini
Bar and mat K
restaurant
I
N
Cemetal G
hardware S
Rock
Motel E
Densol L
Pumps E
M
E
N
T
Daraja mbili market

Nyakongo
Primary School

Kisumu

32