DEVINE DESIGN ENTERPRISE

EMAIL: puritymakungu698@gmail.com

TITTLE: BUSINESS PLAN

PRESENTED BY: PURITY MAKUNGU

INDEX NO: 5031111936

CENTRE CODE: 503111

COURSE CODE: 2707

SUBJECT CODE: 2707/305

SUPERVISOR: MR SIMON ODENYO

PRESENTED TO THE KENYA NATIONAL EXAMINATION

COUNCIL IN PARTIAL FULFILLMENT OF THE AWARD OF

DIPLOMA IN CIVIL ENGINEERING

SERIES: NOVEMBER 2023

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DEDICATION
With much gratitude and concern, I warmly dedicate this project to my friends, staff, and most
importantly my family members who really showed their support in financial terms to make my
ambitions successful. They motivated and guided me so much in order to achieve my goals. I
acknowledge and appreciate them so much and may the almighty God bless and give them long life.

i
ACKNOWLEDGEMENT
I kindly express my appreciation to my parents for their financial support they extended to me,
otherwise I could not have completed this project. Special thanks to my supervisor Mr. Simon for his
guidance and concern throughout the project. I also give much thanks to all my fellow students to
whom I went for assistance where required. Much appreciation to the almighty God too for the
strength and health to see through this project.

ii
DECLARATION
I hereby declare that this is my original work and has not been extracted from anywhere other than
the knowledge I have acquired in class and in the field throughout my course work. No part of this
project should be printed, stored in any retrieved system or even transmitted by any means without
the prior permission of the owner.

Name: …………………….
Index no: ……………………..
Signature: ________________________
Date: ________________________

Supervisor …………………………
Signature;
Date;

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Table of Contents
DEDICATION.......................................................................................................................................................i
ACKNOWLEDGEMENT.....................................................................................................................................ii
DECLARATION.................................................................................................................................................iii
EXECUTIVE SUMMARY..............................................................................................................................vi
1.1 Business Description..................................................................................................................................vi
2.0 Marketing Plan...........................................................................................................................................vi
3.0 Organization and Management Plan..........................................................................................................vi
4.0 Operational Plan.........................................................................................................................................vi
5.0 Financial Plan............................................................................................................................................vii
CHAPTER ONE.................................................................................................................................................1
BUSINESS DESCRIPTION...............................................................................................................................1
BUSINESS NAME..............................................................................................................................................1
BUSINESS LOCATION/ADDRESS................................................................................................................1
FORM OF BUSINESS OWNERSHIP..............................................................................................................1
TYPE OF BUSINESS.........................................................................................................................................2
PRODUCTS AND SERVICES..........................................................................................................................3
JUSTIFICATION OF OPPORTUNITY.........................................................................................................3
INDUSTRY..........................................................................................................................................................3
GOALS OF THE BUSINESS............................................................................................................................4
Long term goals:.................................................................................................................................................4
ENTRY AND GROWTH STRATEGY............................................................................................................5
Entry strategy......................................................................................................................................................5
Growth strategy...................................................................................................................................................5
CHAPTER TWO................................................................................................................................................7
MARKETING PLAN..........................................................................................................................................7
CUSTOMERS......................................................................................................................................................7
Commercial customers........................................................................................................................................7
Institutional customers.......................................................................................................................................7
MARKET SHARE..............................................................................................................................................8
COMPETITION.................................................................................................................................................8
Strategies to overcome competitions.................................................................................................................9

iv
METHODS OF ADVERTISEMENT AND PROMOTION........................................................................10
Methods of Promotion.....................................................................................................................................10
Methods of advertisement...............................................................................................................................10
PRICING STRATEGY.....................................................................................................................................11
Methods of pricing.............................................................................................................................................12
Demand oriented pricing strategy..................................................................................................................12
Cost oriented pricing strategy.........................................................................................................................12
SALES TACTICS..............................................................................................................................................12
DISTRIBUTION STRATEGY........................................................................................................................12
Mode of transport.............................................................................................................................................13
CHAPTER THREE..........................................................................................................................................13
ORGANIZATION AND MANAGEMENT PLAN.......................................................................................13
BUSINESS MANAGER AND QUALIFICATIONS.....................................................................................13
OTHER PERSONNEL, THEIR DUTIES AND QUALIFICATIONS.......................................................14
RECRUITMENT, TRAINING AND PROMOTION...................................................................................15
Training..............................................................................................................................................................16
Promotion...........................................................................................................................................................16
3.4. REMUNERATION AND INCENTIVES................................................................................................17
Licenses, Permits and By-laws.........................................................................................................................17
SUPPORT SERVICES......................................................................................................................................18
Bank....................................................................................................................................................................18
Insurance............................................................................................................................................................18
Telecommunications..........................................................................................................................................19
CHAPTER FOUR............................................................................................................................................20
OPERATIONAL/PRODUCTION PLAN.......................................................................................................20
4.0 OPERATIONAL/PRODUCTION..........................................................................................................21
OPERATION AND PRODUCTION STRATEGY.......................................................................................22
PRODUCTION/OPERATIONAL PROCESS...............................................................................................24
GOVERNMENT REGULATIONS AFFECTING OPERATIONS............................................................25
CHAPTER FIVE..............................................................................................................................................26
FINANCIAL PLAN..........................................................................................................................................26
PRE-OPERATIONAL COSTS........................................................................................................................26
WORKING CAPITAL ESTIMATIONS........................................................................................................26
PROJECTED CASH FLOW STATEMENTS..............................................................................................27
PRO-FORMA INCOME STATEMENT...........................................................................................................32
PRO-FORMA STATEMENTS OF FINANCIAL POSITIONS....................................................................33

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BREAK-EVEN POINT CALCULATION......................................................................................................34
PROFITABILITY RATIO..............................................................................................................................35
DESIRED FINANCING...................................................................................................................................37
PROPOSED CAPITALIZATION...................................................................................................................37

EXECUTIVE SUMMARY
1.1 Business Description

The name of the business will be DEVINE DESIGN ENTERPRISE

.This business will be owned and managed by Purity .It will be offering high quality food and
beverages. It will be a sole proprietorship type of business located at Nairobi Town.

2.0 Marketing Plan

The proposed business intends to use billboard, posters and banners to advertise its products. It
is also expected to capture 40% of the total market share in Nairobi town. Good strategies will
be used to ensure maximization of sales of best quality products and expansion of the business.
The business will cater for the different categories at customers who will include individual
customers, commercial customers and institutional customers.

3.0 Organization and Management Plan

The general manager will be at the top of hierarchical structure followed by others as will
be seen in the organizations structure. Recruitment of staff will be done by the owner who is
the general manager after a vigorous interview has been conducted.

On the job training will be used on trainees to familiarize with business. The promotion will be
based on good conducts, years of service discipline sales volume and education background
and will be purely on merit

Licenses and permit will be acquired in order to commence business. The by-laws will also be
vi
 strictly adhered to.

4.0 Operational Plan

The business shall be based on building with spacious rooms to accommodate all the activities
that shall be conducted. In order to have proper delivery of goods and services the business will
allocate duties to every employee to enhance good productivity. The business will be opened
from 8.00 am to 5.00 pm from Monday to Friday and on Saturday from 8.30 am to 4.00pm.

5.0 Financial Plan

The business requires a capital of Ksh. 500,000. The amount will be obtained from personal
savings, friends, family contribution and borrowing from reliable sources. The business will
carry out all the calculations to determine whether it’s running at a profit or loss. There will be
pre-operational costs which will be incurred before the start of the business operational. A
proforma income statement and a balance sheet will be prepared to determine net profit and
capital respectively.

vii
CHAPTER ONE

BUSINESS DESCRIPTION

BUSINESS NAME

The business will take a unique name, Devine Design Enterprise , and
is therefore correct and accepted to be abbreviated as DDE.

BUSINESS LOCATION/ADDRESS

Devine Design Enterprise will be located at Nairobi CBD area, Bazaar

Plaza, on the junction of Moi Avenue and Biashara Street.

Email address: puritymakungu698@gmail.com

This location is appropriate because of the following reasons:

 Fully developed infrastructure which does not hinder with the

operations of the business that are infrastructural dependent, such
as transportation.

 Availability of customers in form of institutions, organizations,

businesses, urgencies, government offices, unions and individuals
that offer ready market to the business.

 Availability of enough space for use during future need in terms

of changes and growth of the business.

FORM OF BUSINESS OWNERSHIP

Devine Design Enterprise (DDE), will be a solely owned business by

Purity and therefore takes the form, sole proprietorship form of
business.
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 A sole proprietorship type of business is considerably the best form
due to the following major reasons, as far as DDE is concerned:

 It requires a limited/small capital to start operating

 It will be under full control of one person, and thereby easy to
identify and solve the problems that may affects the operation of
the business.
 It takes simple accounting records than limited liability
companies and partnership typed businesses.
 Sole proprietorship enjoys a better knowledge of the market by the owner.
 The presence of full training acquired by the owner gives the
business to enjoy a full experience of the owner and thereby
growth.

The business will have a starting capital raised as follows:

a. Bank Loan 300,000

b. Owners equity 300,000
c. Contribution by willing friends and family 400,000

d. TOTAL STARTING CAPITAL 1,000,000

TYPE OF BUSINESS
The business will be a purely in civil engineering skills with computer
oriented type. Designing will therefore be the core objective of the
business.

This includes products and services such as: interior decorations like out
lifting houses spaces , furniture , wall- coverings .

The status of the business is at start up level, and will start to operate in January 2024.

The major reason as to why I would like to start the operations of the
business in January 2024, is to ensure that between now and 2024, all
other arrangements which includes raw materials, capital and the venue
of the business are readily prepared.

1.4.0 Major activities in the business

 House decorations

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  Walls decoration
 Furniture designs
 etc

Minor activities in the business

Set The Tone at The Front Door. ...

Let The Sun Shine In Your Kitchen. ...
Hang at Least One Mirror in Every Room. ...
Scale Artwork to Your Wall

PRODUCTS AND SERVICES

The table below gives the details of all the products and services that
DDE will operate in. it shows, product forms, product types, products
lines and targeted markets.
Paints & Varnishes. Sanitary ware. Doors & Windows.Flooring.Ceramic & Tiles.
Outdoor.
Interior Wall Coatings. Roofs & Ceilings.

JUSTIFICATION OF OPPORTUNITY

There are several social and economic developments in the area that
have readily expressed a need for this particular business.

The following are the major developments within the area that have
expressed a need for the start up of this business:

 Need to market the products and services offered in many

upcoming enterprises in town, and this will need designed
publications prepared by DDE to let the public be aware.
 With the growth of many organizations, and now that it's good
that the public locate them easily, DDE realizes that it is
important to design and develop websites for easy location and
directory to these upcoming enterprises.

INDUSTRY

3
 The industry to which this business belongs to is termed to be
Information and Communication Technology and building industry
( BT).

Kenya provides investment opportunities in the sector targeting both

local and export markets. As a regional hub and a financial capital of the
East and Central Africa region, Kenya's Competitive advantage as an
investment destination is supported by various investor friendly factors
that include:
 Availability of a well-trained labor force
 Diversified experience
 Access to the region market
 Investor friendly arrangements
 Investment insurance
 Strategic location

GOALS OF THE BUSINESS

Devine Design Enterprise has the following goals that are required to
be achieved as from the start of the business.

1.8.1. Short term goals:

 To market the business to all companies, institutions and organizations in town
 To attend to an average of fifty clients in every single day
 To market the business to other regions out of Nairobi
 To have a website of the business which will refer the
customers to the business and give them a list of products and
services offered in the business.

Long term goals:

 To expand the business and have a branch or two in selected locations
 To employ at least seven staff for easy operations and running of the
organization
 To be the most recognized designing business in the country by show of clients
 To diverse products and services from physical to online
selling of products and services

4
ENTRY AND GROWTH STRATEGY

Entry strategy
Devine Design Enterprise will seek to attract the public awareness on
its existence in the market.

A thorough promotion of the business is necessary to ensure that the

business picks its desired direction quickly and on the correct time.

The following methods that will be adopted as an entry strategy of

the business into the market:

 Public address systems, such as in churches, meetings and

seminars. This will tell the public the name of the business
name, type of the business, the physical location and products and
services offered.
 Advertisement strategy will also be essential and it will be done
through various advertisement Medias such as local radio
stations, adopting posters to strategic areas in town, such as
recreational areas and schools as well as streets, using and giving
out of fliers, giving free T-shirts ant capes containing a print of
the business details.
 Penetration pricing strategy where the business will start with
a low cost strategy to attract customers in the business.
 Free products and services strategy where applicable to ensure
that customers are happy and can easily refer back or come with
their friends.
 Music strategy will be adopted to attract people, especially the
youth into the business.

Growth strategy

The following are the major areas that Devine Design Enterprise will
strategize to ensure that there is growth in the business:

 Branches strategy - Opening several branches to capture more

customers, after one the business intends to open a new branch
in Moi Avenue of Nairobi.

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 Market development strategy – the business shall be loaning its
products and services to its customers to ensure that they keep in
touch with the business and thereby growth.
 Diversification strategy – the business will diversify to sell
wall hangings wall arts designs,

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 CHAPTER TWO

MARKETING PLAN

CUSTOMERS
Devine Design Enterprise realize that the business will be serving three main categories
of it's in the market, and therefore a possibility to adjust incase of the change of every
other category of the users.

2.1.0. Individual customers

The category, individual customers, will in this business exist to buy products and
services for individual use.

Products such as event cards, business cards, staff cards and invitation cards will
therefore see individual category acquiring them.

This category of customers includes:

 event holders needing event cards and invitation cards

 Directors, managers, accountants, doctors, teachers, waitress and all other
staff in every organization and institution who may need staff cards and
business cards.
 Musicians, choirs, singers and actors who want their video and audio to be
edited and synchronized.

Commercial customers

There should exist commercial customers who will be aiming to make profits through
buying and selling of products and services from Devine Design Enterprise

This takes into account the buying of publications, magazines general news letters
designed books and photography and artworks.

Institutional customers

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 This particular category of customers will only be acquiring products and services from
Devine Design Enterprise for use by institutions.

MARKET SHARE

Every category of each consumer is required to give a market to Devine Design

Enterprise .

Table 2.2.0 below summarizes the market share of each category of consumers
(individual consumers, commercial consumers and institutional consumers).

Table 2 Business market share

No. Segment Total Total Computation Market Share

Populatio
n Target
Population
1. Individua 1,000,000 15,000 (15,000/1,000,000)*100 1.5%
l (Kenya-
customer Advisor.com
s )
2. Commercial 25,000 1,000 (1,000/25,000)*100 4%
customers (Kenya-
Advisor.com
)

3. Institutiona 9,000 500 (500/9,000)*100 5.5%

l customers (Kenya-
Advisor.com
)

COMPETITION

Within the location, there are many established competitors under the field of computer
designs. The following are the major competitors in the location:

a. Xpressive Design
Xpressive Design is a solely owned business located in Avenue House, 4th floor, Kenyatta
Avenue, Nairobi, Kenya. They mainly specialize with graphics designs and website
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 development.

b. Weledi Arts Ltd

Weledi Arts is a company that specializes with website designs and graphics designs. It is
located in Utumishi House, Nairobi, Kenya
c. Sokoletu Creative Limited

This company is located in 4th Avenue Market, 4th Avenue / Magadi Road,
OngataRongai, Kenya; it mainly specializes with both graphics and website designs.

d. Onpoint IT Solutions International

It is located in Ragati Rd, NHIF Building 1st Flr, and Nairobi, Kenya and specializes in
wesite creation and graphics designs.

Table 3 below gives the analysis of the major competitors in the location where KenTech
Computer Deigns will be located.

Table 3 Competitor analysis

Competitor Location Strength Weakness

Xpressive Design Avenue House, 4th Strategic location Small number of staff
floor, Kenyatta Avenue, Well advertised Lacks modern
Nairobi, Kenya technology

Weledi Arts Utumishi House, Has been in Low profits due its
Ltd Nairobi, Kenya the field for nature (company)
long time
Sokoletu Creative 4th Avenue Market, 4th Good location and Personnel are not
Limited Avenue / Magadi Road, well competen
OngataRongai, Kenya marketed/promoted t

Onpoint IT Solutions Ragati Rd, NHIF Well Location not well planned
International Building Flr, marketed
1st Diversified
Nairobi, Kenya activities

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Strategies to overcome competitions

Devine Design Enterprise will employ the following techniques to cope and overcome
the competition by other related businesses.

 Opening branches in other locations to capture more customers

 Using of modern technology
 Extending closing hours
 Employing highly skilled staff
 Strategic location where all customers can access the business services
 Offering mobile services to customers

METHODS OF ADVERTISEMENT AND PROMOTION

The business being new in the market, there is a need of applying much of advertising
strategies, as well as promoting the name of the business to be famous in the market.

Methods of Promotion

Devine Design Enterprise will perform several methods in order to ensure that the
business is fully promoted and the population is aware of the existence of the business.

The major promotion technique that the business will concentrate on is promotion through
advertisement, because currently advertisement is the major method that reaches a large
number of people in the market.

The following reasons explain why promotion should be given priority in Devine
Design Enterprise :

 To increase and maintain demand for products and services offered in DDE
 To increase and maintain the market share of DDE products and services
 ‘To make noise' and raise the awareness of DDE products and services
 To create or enhance a brand image

Methods of advertisement

This will be the most common method of promoting the business as well as the products
10
and services offered.

The following are the major techniques and methods that will be taken into account while
undertaking advertisement of Devine Design Enterprise and its activities:

I. Media advertisement – Devine Design Enterprise will use the most common radio
stations like citizen radio and KBC idhaayataifa to make adverts to the public on its
existence. Television advertisement will also come in as an advertisement
strategy. The TV stations will include KTN and NTV.

II. Print Media – Devine Design Enterprise will be distributing printed media
containing details such as, the name of the business, the location of the business,
the products and services offered in the business and the contact details of the
business.

The print media that the business will use are posters, brochures, flyers, magazines,
newspapers, newsletter, placement on the yellow pages and bulletins.

III. Electronic media – DDE will also concentrate on posting adverts and
communicating via electronic media. The business will use the following to market
the products and services: phone calls and short messages services, telemarketing,
e-mail conversations, social media such as face book and twitter and online chat
groups.

PRICING STRATEGY

The following are the major factors that will highly affects pricing in Devine Design
Enterprise :

a) The government policies – if the government policies such as taxation policies and
registration cost are high, then this clearly tells that the prices of the products and
services must be high than normal to bring back reasonable profits to the business.

b) Demands– when the population of the area demands more than the business can
supply, then it simply means that the business can adjust to get more profits by
taking the advantage of the higher demand in the market.
c) The supply of materials – when there is a lot of surplus products in stock, then the
business may be forced to decrease the prices of the products so that the respective
customers can turn up in large numbers.
11
 d) Cost of production – when the cost of production of the products and services
offered in Devine Design Enterprise is high, the prices should also be increased to
make reasonable profits in the business.

e) Consumer characteristics – the behavioral aspect in many consumers may be

brought by many aspects such as geographical placement in the area and lifestyle of
different groups of consumers, therefore the business will try as much as
possible to set its prices according to the characteristics of the different classes of
the users that are available in the area.
DDE also understands that consumer characteristic vary from category to another,
e.g. the behavior of institutional consumers is different with that of commercial
consumers as well as that of individual consumers and thereby this makes
prices to vary from category to category.

Methods of pricing

Given the above factors that will directly affects pricing in DDE, the business has come up
with several methods of pricing. They include the following:

Demand oriented pricing strategy

Prices will vary from product to product according to the demand. When the demand of a
product is high, then the business will adjust its price in the market to take advantage over
the demand, but when the demand is low, then the business will drop the prices to
encourage consumers to buy more.
Cost oriented pricing strategy

The business will record all the costs and the expenses that a product has incurred from the
stage of raw material to a finished product and then getting the value, the profit needed
will be added. These expenses include transport used, bills and cost of raw materials such
as papers.

SALES TACTICS

Devine Design Enterprise realizes that there is a need to increase sales in the business
time by time.

Following are the major tactics that will help to increase the sales in the business as well as
attracting more customers to buy and use more products and services that are offered in the
12
business.

DISTRIBUTION STRATEGY

DDE distribution strategy will a zero level distribution having in mind that all the major
products and services comes from the business and are directly produced by the business.

DDE being a designing business, simply means that every customer goes direct to the
business location, seeks a product or a service according to his/her preference and then the
product is delivered direct to that customer according to how it was agreed.

Mode of transport

Devine Design Enterprise will facilitate transportation of the products, taking them to
where they are easily accessed by the customers.

The mode of transport that is reliable around the business location is “bodaboda” and at
times the Taxi mode of transportation.

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CHAPTER THREE

ORGANIZATION AND MANAGEMENT PLAN

BUSINESS MANAGER AND QUALIFICATIONS

The business will be headed by the manager entitled, Operations Manager who is the sole
proprietor of this business currently holding a diploma in civil Engineering by the name
Purity

Responsibilities of the operations manager:

The manager will be in charge of the following:

 Offering supervisory responsibility to all other staff

 Acting as a link between the business and other related businesses of the same
type in the area.
 Approving decisions proposed by other members
 Ensuring quality service is rendered to all customers as well as the staff.

OTHER PERSONNEL, THEIR DUTIES AND QUALIFICATIONS

3.2.0 Accountant (1)

Duties of an

accountant

 Generating and carrying out monthly financial reports of the business

 Organizing financial plans in the business
 Keeping and managing of accounts for every product, asset, liability or service in
the business.

Qualifications of an accountant

 Any CPA certification

 Proficiency in computer operations

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  KCSE certificate with an average of C+
 Certificate of good conduct

3.2.1 Cashier (1)

Duties and responsibilities of a cashier

 Organizing for payments of all other staffs and personnel in the business
 Issuing receipts and receiving cash and cheques upon any transaction made in
the business.
 Organizing and paying bills and the rent of the business
 Keeping records of each transaction made in the business in a database.
 Reporting financial procedures to the accountant for bookings.
 Sales records and sales managing

Qualifications of a cashier

 Business management certification

 Have a knowledge in accounting
 Computer proficiency
 KCSE certificate
 Certificate of good conduct

3.2.2 Support staff (1)

Duties and responsibility of support staff

 Carrying out messengerial duties in the business

 Cleaning and organizing the office
 Organizing breakfast for the rest of the staff

Qualification of support staff

 KCSE certificate of a mean grade of D

 Certificate of good conduct

RECRUITMENT, TRAINING AND PROMOTION

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 3.3.0 Recruitment

Devine Design Enterprise w i l l recruit the staff and the personnel of the business
through the following methods:

 The job title will be advertised in the newspaper

 The selection of the candidates who will proceed for interviews will then take
place after the application duration is over.
 The shortlisted candidates will be call for interviews
 Succeeding candidates in the interviews will be appointed in the business.

Training

After an appointment letter has been issued, the business will organize for training for
the appointed candidates.

Devine Design Enterprise will consider the following methods in order to make the
staff be competent and be able to handle issues in the real practical scenario.

 Workshops – staff will be offered a three day workshop immediately on

reporting to the business. This workshop will be targeting to improve the
communication skills, performance and relationships between themselves.
 Seminars – a one week seminar will be planned to improve the skills of duty
operations of the employees. The seminar will also seek to improve the
understanding of the staff towards the job as well as how and where their
departmental boundaries should not exceed.
 Coaching – The business will undertake coaching in terms of supervision to the
staff to ensure that they are doing the right thing and what will be offered to the
customers will the best product. This will also seek to make them be efficient in
their departments.
 Counseling – this will be done to ensure that the relationship and the
communication between the staff and the customers keeps growing to enhance the
understanding of the objectives set and goals required to be meet by the business.

Promotion

It is known that promotion must be done at some point in the business which is
intended to increase employee performance and the output of the business.

16
 Devine Design Enterprise will thereby carry out promotions in all other departments of
the business.

To motivate the staff, the following techniques and methods of promotion will be
observed when the business picks the momentum.

 Title – at some point during the operation of the business, one or some of the
staff will be give senior titles to encourage and enhance their performance. Due to
the fact that the staffs in the business are limited, at the growth of the business
DDE will seek to add and recruit more staff into the business and this will see the
title of the existing staff being promoted to supervisors and senior supervisor.
 Credit – DDE will also increase the salary and wages of the staff to motivate
them and thereby increasing their performance in the job.

3.4. REMUNERATION AND INCENTIVES

All the staff in the business will be under a permanent basis, and will therefore paid by
means of monthly salaries.

For the first six months as the business waits to pick the momentum, the remuneration
guideline will take the form as indicated in the table below, and this will be increased by
50% when the business gain the momentum:

Table 5. Remuneration and incentives

Job Title Basic salary House allowance Transport allowance Total

Manager 7,000 2,000 1,000 10,000
accountant 6,000 2,000 1,000 9,000
Cashier 5,000 2,000 1,000 8,000
Designers 4,000 2,000 1,000 7,000
Support staff 3,000 2,000 1,000 6,000

The table above gives the remuneration guidelines for business.

In a period of six months the business will increment the salaries of all the staff by
50% of the normal.

17
Licenses, Permits and By-laws
For this business to start operating, it must be registered and acquire licenses and
permits from the respective departments of the government.

The table below summarizes the licensing, permits and by-laws that Devine Design
Enterprise will be required to undertake.

Table 6.Licenses, Permits and By-laws

License source cost status

Business Name Search Registrar of companies, Sheria 900 Not renewable

house
Business permit City council 7,000 Renewable, annualy

KRA registration Kenya Revenue Authority 3,200 Not renewable

SUPPORT SERVICES

Devine Design Enterprise will seek to rely services from other organizations to enhance
its services and operations.

The following ere the service providers and the nature of the services that they will be
providing to Devine Design Enterprise :

Bank

DDE will be relying with banks to bank cash, cheques, forward cash to other
accounts if need arises, payment of salaries and goods via banks and saving cash for
future developments.

18
 Insurance

Insurances companies will be issuing assurance to the business in case of accidents and
other emergencies.

However, National Hospital Insurance Funds will also be crucial to cover the staff in case
of any illness. This means that when all members are registered by NHIF, their
medical bills will be assured in case of emergence.

Telecommunications

Telecommunications companies will come upon to the business premise to give

communication services to enhance the communication from one department to another.

DDE will seek this service from communication service providers.

3.6.2 The Kenya Power and Lightening Company (KPLC)

KPLC will be responsible for provision of power for machines and light in the offices.
Depending on the consumption of power in a month, there should be a monthly
electricity bill. This is the most important of all services, as the business is technological
oriented, therefore powering of machines is a necessity to the business.

19
 CHAPTER FOUR

OPERATIONAL/PRODUCTION PLAN
Devine Design Enterprise will need to acquire several items which will assist in the
running, operation and production process in the business.

In the below table, all the facilities that are of vital important in the operation of the
business, have been summarized together with their cost and the suppliers as identified by
this plan.

20
 4.0 OPERATIONAL/PRODUCTION

FACILITIES Table 7.facilities

FACILITY CAPACITY QUANTITY COST/UNIT TOTAL SOURCE/SUPPLIER

(level of output) COST
Machines
1 Horizontal band 4.1 channel 4 16,000 64,000 Conrad Kenya Services
saw)
2 Printers 550-sheet 2 12,000 24,000 Copier Force (K) Ltd
3 Fire 1 9,500 9,500 Khetias Force (K) Ltd
extinguisher

4 Binding Machine 700 sheets 1 11,800 11,800 Conrad Kenya Services

5 Drilling 2 1 7,000 28,000 Conrad Kenya Services
machine

SUB-TOTAL 137,300

Tools/Equipme
nts
1 Paper cutter A4/A3 1 4,000 4,000 Conrad Kenya Services
2 Software Win 10 3,000 30,000 Conrad Kenya Services
vista/xp/win7
3 UPS 500VA 4 6,000 24,000 Conrad Kenya Services
8 Calculator Scientific 1 1,000 1,000 Office Max
9 clear ruler 30cm 1 100 100 Office Max
10 phone line Telcom enabled 5 3,000 15,000 Conrad Kenya Services
SUB-TOTAL 104,100

Furniture and
fittings
1 Computer desk 3m*4m 5 6,000 30,000 CopyriteFurnitures Ltd
2 File Cabinets and 5m 3 5,000 15,000 CopyriteFurnitures Ltd
Carts
3 Office chairs 1 seater 6 3,000 18,000 V oria Furniture Ltd
4 Office sofa set 6m, leather 1 9,000 9,000 V oria Furniture Ltd
5 Carpet 7m*8m 2 1,500 3,000 PVC Carpet Stall
SUB-TOTAL 75,000

GRAND 316,400
TOTAL

21
 OPERATION AND PRODUCTION STRATEGY

The following are the measures required to be adopted in the business to ensure efficient
supervision, minimum cost and maximum output as per the objectives of this particular
business:
 The business will encourage alternative option of acquiring materials and will as
well scan the suppliers of raw materials to make a conclusion on the best and the
least expensive materials that are required in the business thus minimizing the total
and current expenses in the long run at the business.
 Devine Design Enterprise will concentrate in database creation and maintenance
which will alert the officers and in particular the accountant in the business when
materials are limited in the business so that an action can be taken in terms of
acquiring stock.

Stated below are the operational cost in the business, i.e. monthly cost of raw materials,
monthly cost of labor and monthly overheads costs.

a. Monthly cost of raw materials

The table (table 8) below summarizes the monthly cost of raw materials in the business.

Table 8. Monthly cost of raw materials

Item Amount (Kshs)

Pens 2,000
printing papers (all sizes) 12,000
Pencils 1,200
File folders 11,000
Envelopes 7,000
Fountain pens 3,000
Laminating porches 8,000
Paper glue 1,000
TOTAL COST OF MATERIALS 61,200

22
The above table gives the total cost of raw materials in one month which has been
reflected as Kshs. 61,200.

b. Monthly cost of labor

Labor is also an expense in the business. The labor cost in one month in the business
has been summarized in the below table (table 9).

Table 9. Monthly cost of labor

Job Title Total Monthly Salary

(Kshs)
Manager 10,000
Accountant 9,000
Cashier 8,000
Designer (website) 7,000
Designer (graphics) 7,000
Support staff 6,000
TOTAL COST OF LABOR 47,000

The above table gives a summary of the total labor cost of the staff in the business as
quoted earlier in chapter four of this plan, (3.4 Remuneration and incentives),which is
47,000.

c. Monthly overheads costs

It is noted that, there are indirect expenses which are required to operate and run the
business and at the same time facilitate production and operation.

The table (table 10) below gives a summary of all these overheads expenses.

Table 10. Monthly overheads costs

Item Amount (Kshs)

Rent 25,000
Electricity 2,000
Water 2,000
Telephone 2,000
Mail 1,000
Transport 3,000
Advertisement 10,000
23
Insurance 3,000
Loan payment 20,000
Interest on loan 5,000
Taxes 6,000
TOTAL OVERHEAD COSTS 79,000

Monthly overhead costs as presented in the above table is Kshs. 29,000 in maximum, but
this is usually not fixed as electricity and water normally fluctuate according to the
consumption.

d. Total cost of production per month

The below table, (table 11) gives the total operation and production expenses shown in
table 8, 9 and 10 above.

Table 11. Total costs of production per month

Item Amount (Kshs)

Cost of materials 61,200
Cost of labor 47,000
Overheads costs 79,000
Total cost of production/operation 187,200

PRODUCTION/OPERATIONAL PROCESS

4.3.0 Website development process

Designing a web site is a process consisting of six phases:

1. Project Definition
2. Site Structure
3. Visual Design
4. Site Development
5. Testing
6. Launch Plus

24
 GOVERNMENT REGULATIONS AFFECTING OPERATIONS

Operations in Devine Design Enterprise can be affected in two major ways, either
economic policy or legal changes.

Economic policy

Taxation policy affects business costs. For example, a rise in corporation tax (on business
profits) has the same effect as an increase in costs. Businesses can pass some of this tax on
to consumers in higher prices, but it will also affect the bottom line. Other business taxes
are environmental taxes (e.g. landfill tax), and VAT (value added tax). VAT is actually
passed down the line to the final consumer but the administration of the VAT system is a
cost for business.

Another area of economic policy relates to interest rates. In this country the level of
interest rates is determined by a government appointed group - the Monetary Policy
Committee which meets every month. A rise in interest rates raises the costs to business of
borrowing money, and also causes consumers to reduce expenditure (leading to a fall in
business sales). Government spending policy also affects business.

Legal changes

The government of the day regularly changes laws in line with its political policies. As a
result the business continually has to respond to changes in the legal framework.

Examples of legal changes include:

a. The creation of a National Minimum Wage which has recently been extended to under-18.

b. The requirement for businesses to cater for disabled people, by building ramps into
offices, shops etc.

c. Providing increasingly tighter protection for consumers to protect them

against unscrupulous business practice.

d. Creating tighter rules on what constitutes fair competition between businesses.

Today British business is increasingly affected by European Union (EU) regulations and
directives as well as national laws and requirements

25
 CHAPTER FIVE
FINANCIAL PLAN

PRE-OPERATIONAL COSTS

While preparing to start the actual activities in the business, there are cost which must be
incured in the business.

The pre-operational costs that are mandatory to the operation of the business are
summarized in the table below (table 12):

Table 12. Pre-operational costs

ITEM AMOUNT (Kshs)

Labor 47,000
3-month Rent 75,000
Machines 137,300
Tools and equipments 104,000
Funiture and fittings 75,000
Licenses, Permits and By-Laws 11,100

TOTAL PRE-OPERATIONAL COSTS 449,400

The above table signifies the total cost that the business will incur in preparation to start
the operations in the business.

WORKING CAPITAL ESTIMATIONS

Devine Design Enterprise will require some amount of cash in the normal
circumstances of operations. Working capital is the different between the sum total of the
current assets less the sum total of the current liabilities;

Working Capital = Current assets – Current liabilities

Table 13 below shows a summary of working capital estimations in the company for three
years from 2014 to 2016:

Table 13: Working Capital for the first three years

26
Item Year 2014 Year 2015 Year 2016

Amount (Kshs) Amount (Kshs) Amount (Kshs)

Current assets
Cash at bank 600,000 620,000 650,000
Cash in hand 80,000 50,000 60,000
Stock 20,000 100,000 120,000
Debtors
Total current assets 700,000 770,000 830,000

Fixed Assets
Machines 137,000 110,000 100,000
Tools and equipments 104,000 35,000 20,000
Funitures and fittings 316,000 50,000 15,000

Total fixed assets 557,000 195,000 135,000

Total assets 1,257,000 965,000 965,000

Liabilities
creditors 50,000 75,000 90,000
Bank loan 400,000 100,000 100,000
Friends contribution 200,000 100,000 100,000
Owners equity 300,000 100,000 100,000
Total liabilities 950,000 375,000 390,000

The assumption made is that all friends were willing and able to give their contribution
in raising the working capital of the business as well as all assets are not prone to
challenges such as theft and destruction.

The working capital for the first three years have been estimated as follows:

 Year 2014: 700,000 – 650,000 = 50,000

 Year 2015: 770,000 - 275,000 = 495,000
 Year 2016: 830,000 - 290,000 = 540,000

PROJECTED CASH FLOW STATEMENTS

Earlier in this document, it stated that acquiring a loan is one of the methods of raising
capital to start this business, with regard to this loan, the payment will be done monthly.

27
i.e. 20,000 every month for the first 15 months of operation.

There will be also a loan interest of 1.67% of the total amount every month, which is
equivalent to 5,000 each month for 15 months.

Projected cash flow statements for Devine Design Enterprise for the first theree years of
operation:

Table 14. Projected cash flow statements for the year 2024

the below table shows the projected cash flow statement for the year 2024, at which
loan repayment and interest on loan is proceeding and will take 15 months up to the
tear 2025 March.

28
Paticulars Jan Feb Mar April May Jun Jul Aug Sep Oct Nov Dec Total
Cash in Flow
Opening balance or 96,400 84,200 144,800 102,400 65,500 20,600 122,200 284,400 238,900 130,000 104,100 1,394,000
balance b/f
Owners equity 300,000 300,000 300,000 300,000 300,000 300,000 300,000 300,000 300,000 300,000 300,000 300,000 3,600,000
Bank loan 300,000 - - - - - - - - - - - 300,000
Cash sales 160,000 250,000 289,000 188,000 199,000 201,000 300,000 380,000 250,000 203,000 200,000 198,000 2,818,000
Debtors 3,000 35,000 51,000 50,000 60,000 45,000 88,000 85,000 50,000 70,000 65,000 80,000 682,000

Total cash in flow 763,000 681,400 724,200 682,800 661,400 611,500 708,600 887,200 884,800 811,900 695,500 682,100 8,794,400
Cash out flow
Pre-oprational cost 449,400 449,400 449,400 449,400 449,400 449,400 449,400 449,400 449,400 449,400 449,400 449,400 5,392,800
Purchases 61,200 20,000 10,000 11,000 21,000 15,000 13,000 20,000 35,000 45,000 10,000 15,000 276,200
Payment to creditors 30,000 10,000 3,000 1,000 5,000 10,000 9,000 10,000 30,000 46,000 11,000 17,000 182,000
Salaries and wages 47,000 47,000 47,000 47,000 47,000 47,000 47,000 47,000 47,000 47,000 47,000 47,000 564,000
Rent 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 300,000
Electricity 2,000 1,500 1,000 2,000 2,000 1,500 1,000 2,000 2,000 2,000 1,000 2,000 20,000
Water 2,000 1,000 1,000 1,000 1,500 2,000 2,000 2,000 2,000 2,000 1,000 1,000 18,500
Telephone 3,000 2,300 1,000 1,000 2,000 1,000 2,000 1,000 2,500 3,000 1,000 2,000 21,800
Transport 3,000 2,000 2,000 4,000 2,000 2,000 1,000 2,000 4,000 3,000 2,000 3,000 30,000
Advertising 10,000 5,000 6,000 5,000 7,000 4,000 3,000 10,000 15,000 25,000 10,000 13,000 113,000
Insurance 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 36,000
Loan payment 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 240,000
Interest on loan 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 60,000
Taxes 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 72,000

Total cash out 666,600 597,200 579,000 580,400 595,900 590,900 586,400 602,400 645,900 681,400 591,400 608,400 7,326,300

Net cash for the 96,400 84,200 144,800 102,400 65,000 20,600 122,200 284,400 238,900 130,500 104,100 73,700 1,468,100
month
Paticulars Jan Feb Mar April May June July Aug Sep Oct Nov Dec Total
Cash in Flow
Opening balance 1,468,10 1,423,10 1,231,90 1,254,90 1,172,90 1,136,90 1,268,90 1,618,90 2,059,90 2,454,90 2,743,90 3,060,70 20,895,00
or 0 0 0 0 0 0 0 0 0 0 0 0 0
balance b/f
Cash sales 80,000 76,000 90,000 30,000 100,000 200,000 400,000 450,000 400,000 500,000 512,800 410,100 3,248,800
Debtors 20,000 30,000 35,000 10,000 19,000 50,000 100,000 150,000 100,000 10,000 15,000 25,000 564,000

Total cash in 1,768,,10 1,549,10 1,556,90 1,494,90 1,491,90 1,586,90 1,968,90 2,418,90 2,759,90 3,164,90 3,471,70 3,695,70 27,107,80
flow 0 0 0 0 0 0 0 0 0 0 0 0 0

Cash out flow

Pre-operational 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 1,800,000
cost
Purchases 60,000 38,200 20,000 70,000 80,000 55,000 60,000 65,000 40,000 120,000 100,000 90,000 798,200
Payment to 20,000 17,000 15,000 10,000 35,000 25,000 50,000 55,000 25,000 60,000 70,000 80,000 462,000
creditors
Salaries and 47,000 47,000 47,000 47,000 47,000 47,000 47,000 47,000 47,000 47,000 47,000 47,000 564,000
wages
Rent 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 300,000
Electricity 2,000 1,000 2,000 2,000 2,000 2,000 2,000 2,000 1,000 2,000 2,000 2,000 22,000
Water 2,000 2,000 2,000 2,000 2,000 1,000 1,000 2,000 2,000 2,000 2,000 1,000 21,000
Telephone 2,000 1,000 3,000 2,000 2,000 1,000 2,000 1,000 2,000 1,000 2,000 3,000 22,000
Transport 3,000 2,000 4,000 5,000 3,000 3,000 4,000 3,000 4,000 5,000 4,000 5,000 45,000
Insurance 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 36,000
Loan payment 20,000 20,000 20,000 60,000
Interest on loan 5,000 5,000 5,000 15,000
Taxes 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 72,000

Total cash out 345,000 317,200 302,000 322,000 355,000 318,000 350,000 395,000 305,000 421,000 411,000 412,000 4,217,200
flow

Net cash for the 1,423,10 1,231,90 1,254,90 1,172,90 1,136,90 1,268,90 1,618,90 2,059,90 2,454,90 2,743,90 3,060,70 3,283,70 22,890,60
month 0 0 0 0 0 0 0 0 0 0 0 0 0
Paticulars Jan Feb Mar April May Jun Jul Aug Sep Oct Nov Dec total
Cash in flow
Opening 22,890,60 22,340,60 21,723,60 21,070,60 20,422,60 19,773,60 19,136,60 18,540,60 17,963,60 17,384,60 16,813,60 16,061,60 211,231,6
balannce or 0 0 0 0 0 0 0 0 0 0 0 0 00
balance b/f
Owners equity 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 600,000
Cash sales 45,000 60,000 100,000 115,000 121,000 135,000 180,000 208,000 220,000 230,000 261,000 270,000 615,000
Debtors 10,000 20,000 50,000 55,000 60,000 68,000 70,000 71,000 75,000 78,000 79,000 79,000 615,000

Total cash in 22,995,60 22,470,60 21,923,60 21,290,60 20,653,60 20,026,60 19,436,60 18,869,60 18,308,60 17,742,60 17,203,60 16,460,60 214,391,6
flow 0 0 0 0 0 0 0 0 0 0 0 0 00
Cash out flow
Pre-operational 300,3000 350,000 360,000 365,000 367,000 375,000 377,000 385,000 388,000 390,000 391,000 396,000 4,414,000
cost
Purchases 100,000 120,000 180,000 183,000 186,000 186,000 187,000 187,000 189,000 189,000 295,000 395,000 2,399,000
Payment to 150,000 160,000 190,000 192,000 193,000 197,000 198,000 201,000 203,000 205,000 309,000 310,000 2,508,000
creditors
Salaries and 47,000 47,000 47,000 47,000 47,000 47,000 47,000 47,000 47,000 47,000 47,000 47,000 564,000
wages
Rent 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 300,000
Electricity 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 24,000
Water 2,000 1,000 2,000 2,000 2,000 2,000 1,000 1,000 1,000 1,000 2,000 2,000 19,000
Telephone 3,000 2,000 3,000 3,000 3,000 2,000 3,000 2,000 2,000 2,000 2,000 3,000 30,000
Transport 5,000 4,000 3,000 3,000 4,000 3,000 5,000 5,000 5,000 5,000 3,000 3,000 48,000
Advertisement 10,000 25,000 39,000 35,000 40,000 40,000 40,000 40,000 51,000 52,000 55,000 57,000 475,000
Insurance 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 36,000
Taxes 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 72,000

Total cash out 655,000 747,000 853,000 868,000 880,000 890,000 896,000 906,000 924,000 929,000 1,142,000 1,253,000 10,467,00
0

Net cash for the 22,340,60 21,723,60 21,070,60 20,422,60 19,773,60 19,136,60 18,540,60 17,963,60 17,384,60 16,813,60 16,061,60 15,207,60 203,924,6
month 0 0 0 0 0 0 0 0 0 0 0 0 00
PRO-FORMA INCOME STATEMENT

Devine Design Enterprise is not an existing business, it a proposed business, therefore

the income statement is pro-forma and not a real profit and loss account.

Pro-forma income statements for Devine Design Enterprise for the years ending 30th
Dec 2024, 30th Dec 2025 and 30th Dec 2026:

Table 17. Pro-forma income statements

paticulars 30th Dec 2024 30th Dec 2025 30th Dec 2026
Sales 8,794,400 27,107,800 214,391,600
Less cost of sales 5,326,300 4,217,200 10,467,000
Gross profit 3,468,100 22,890,600 203,924,600

Expenses
Purchases 276,200 798,200 2,399,000
Payment to creditors 182,000
Salaries and wages 564,000 564,000 564,000
Rent 300,000 300,000 300,000
Electricity 20,000 22,000 48,000
Water 18,500 21,000 19,000
Telephone 21,800 22,000 30,000
Transport 30,000 45,000 48,000
Advertising 113,000 - 475,000
Insurance 36,000 36,000 36,000
Loan repayment 240,000 60,000 -
Interest on loan 60,000 15,000 -
Taxes 72,000 72,000 72,000

Total expenses 1,932,200 1,955,200 3,991,000

Net profit before tax 1,532,900 20,935,400 199,933,600
Tax (30% of income) 459,870 6,280,620 59,980,080
Net profit after tax 1,073,030 14,654,780 139,935,520

The assumptions made is that the taxation rate is at 30% of the total income, the loan
repayment is 20,000 each month for 15 months and the interest on loan is 1.67% of the
 total amount, equivalent to 5,000 every month for 15 months.

PRO-FORMA STATEMENTS OF FINANCIAL POSITIONS

Devine Design Enterprise is not an existing business, and therefore the balancce sheet is
termed as a pro-forma.

Table 18. Statement of financial position as at the begining of year 1 to the end of year 2:

Assets Start End of year 1 End of year 2

Current assets
Cash in bank 300,000 1,468,100 22,890,600
Cash at hand 300,000 50,000 40,000
Stock 61,200 60,000 120,000
Debtors 3,000 10,000 20,000

Total current assets 664,200 1, 588,100 23,070,600

Fixed assets
Machines 137,000 110,000 100,000
Machine depreciation (20%) 27,400 22,000 20,000
Tools and equipments 104,000 35,000 20,000
Tools/equipments depreciation (10%) 10,400 3,500 2,000
Funiture and fittings 316,000 50,000 15,000
Funiture/fittings depreciation (20%) 63,200 10,000 3,000

Total fixed assets 656,600 210,500 160,000

Total assets 1,320,800 1,798,600 23,230,600

Liabilities
Current liabilities
Creditors 50,000 75,000 90,000
Friends contribution 200,000 100,000 100,000

Total current liabilities 250,000 175,000 190,000

Long-term liabilities
Owner’s equity 300,000 350,000 400,000
Bank loan 240,000 60,000 0
Retained earnings 60,000 15,000 0

Total long-term liabilities 600,000 425,000 400,000

 Total liabilities and equity 850,000 600,000 590,000

Assumptions made is that the depreciation rate of machines is 20%, for tools and
equipments is 10% and that of funiture and fittings is 20%.

BREAK-EVEN POINT CALCULATION

Break-even point is a point where total costs (expenses) and total sales (revenue) are
equal. Break-even point can be described as a point where there is no net profit or loss.

Break-even point, BED = contribution margin%

Fixed costs CM

% = Contribution Margin / Sales x 100

Table 19. Variable Costs

Item Amount
Pre-operational costs 11,636,800
Purchases 3,473,400
Payment to creditors 3,152,000
Electricity 66,000
Water 58,500
Telephone 73,800
Transport 123,000
Advertisement 588,000
Interest on loan 75,000
Loan repayment 300,000

Total variable costs 19,546,000

Item Amount
Salaries/Wages 1,692,000
Rent 900,000
Insurance 108,000
Taxes 216,000

Total fixed costs 2,916,000

CM = 4,961,000 – 19,546,000

= - 14,585,000
 CM% = -14,585,000 / 4,961,000 x 100

-294%

BEP = CM / Fixed Costs

= -294 / 2,916,000

= + - 0.01%

This break-even point tells that the business will sustain with profit margin of 0.01% of
the total sales and will also survive with loss not exceeding 0.01%.

PROFITABILITY RATIO

Having the net profit, gross profit, return on investment and return on equity, their ratio
has been expressed in Devine Design Enterprise :

a. Gross profit ratio

GP ratio = Gross profit/sales x 100

Year 2014: GP = 3,468,100 / 8,794,400 x100

GP = 39.4%
Year 2015: GP = 22,890,600 / 27,107,800 x 100

GP =84.4%
Year 2016: GP = 203,924,600 / 214,391,600 x 100

GP = 95.1%

b. Net Profit ratio

NP ratio = Net Profit before Tax / sales x 100

Year 2014: NP = 1,532,900 / 8,794,400 x 100

NP = 17.4%
Year 2015 = 20,935,400 / 27,107,800 x 100

NP = 77.2%
Year 2016: 199,933,600 / 214,391,600 x 100
 NP = 93.2%
c. Return on Equity

Return on equity = Net Profit after Tax / Owners equity x 100

Year 2014: Return on Equity = 1,073,030 / 300,000 x 100
= 375.7%
Year 2015: Return on equity = 14,654,780 / 3,600,000 x 100

= 407.1%
Year 2016: Return on equity = 139,935,520 / 14,654,780 x 100

= 954.9%

d. Return on Investment

Return on Investment = Net Profit after tax + Interest / Total investment

Year 2014: Return on Investment = 1, 073,030 + 60,000 / 1,000,000

= 1.1%

Year 2015: Return on Investment = 14,654,780 = 15,000 / 1,000,000

= 14.7%

Year 2016: Return on Investment = 139,935,520 = 0 / 1,000,000

= 139.9%

DESIRED FINANCING
Desired financing shows the amount that the business should possess for investing, if
everything worked as planned.
 Table 21. Desired finances

Item Amount (Kshs)

Pre-operatonal costs 11,606,800

Working capital 1,085,000

Contigengency funds 1,000,000

Total Desired Financing 13,691,800

PROPOSED CAPITALIZATION

Proposed capitalization shows the total amount invested in the business as of the start of
operations.

Table. 22 Proposed capitalization

Source Amount (Kshs)

Owners equity 300,000

Bank loan 300,000

Friends contribution 400,000

Total Investment 1,000,000