ACROSS THE ROAD HOTEL

P.O BOX 50

WEBUYE

TEL 025-55751,0714473165

PRESENTED BY: WANGORO N. LORNA

INDEX NO: 503202088

COURSE CODE: 2806/307B

PRESENTED TO: A BUSINESS PLAN PROJECT

SUBMITTED TO THE KENYA NATIONAL

EXAMINATION COUNCIL IN PARTIAL FULFILLMENT

FOR THE AWARD OF A DIPLOMA IN BUSINESS

ADMINISTRATION

DATE OF PRESENTATION: NOVEMBER 2009

TABLE CONTENTS PAGES

ACKNOWLEDGEMENT

DEDICATION

DECLARATION

EXECUTIVE SUMMARY

1.0 BUSINESS DESCRIPTION

1.1 BUSINESS NAME

1.2 BUSINESS OWNERSHIP

1.3 BUSINESS OWNERSHIP

1.4 TYPE OF BUSINESS

1.5 JUSTIFICATION

1.6 GOALS OF BUSINESS

1.7 ENTRY AND GROWTH STRATEGY

1.8 MARKETING PLAN

1.9 POTENTIAL CUSTOMERS

CHAPTER TWO

2.0 MARKET SHARE

2.1 COMPETITION

2.2 COMPETITIVE ANALYSIS TABLE

2.3 PRICING STRATEGY

2.4 SALES TACTICS

2.5 METHODS OF ADVERTISEMENT AND PROMOTION

2.6 DISTRIBUTION STRATEGY

2.7 ORGANIZATION AND MANAGEMENT

2.8 KEY MANAGEMENT

2.9 OTHER PERSONNEL

CHAPTER THREE

3.0 RECRUITMENT

3.1 TRAINING AND PROMOTION

3.2 TRAINING

3.3 PROMOTION

3.4 ORGANIZATION CHART

3.5 RENUMERATION AND INCENTIVES

3.6 SUPPORT AND ADVISORY SERVICE

3.7 LICENSES AND PERMITS

3.8 PRODUCTION AND OPERATION PLAN 3.9 PRODUCTION FACILITIES AND

CAPACITY UTILIZATION

4.0 REPAIR AND MAINTENANCE

4.1.1 BUSINESS PREMISES

4.1.2 PRODUCTION STRATEGY

4.1.3 RAW MATERIAL

4.1.4 RAW MATERIAL

4.2 RAW MATERIAL REQUIREMENT

4.2.2 COST OF PRODUCTION

4.3 PRODUCTION PROCESS

4.3.1 MANDAZI
4.3.2 MEAT STEW

4.4 FINANCIAL PLAN

CHAPTER FIVE

5.0 PRE 0OPERATIONAL CAPITAL

5.1 WORKING CAPITAL

5.2 CASH FLOW PROJECTION

5.3 PRO – FORMA INCOME STATEMENT

5.4 PRO – FORMA BALANCE SHEET

5.5 BREAK – EVEN – LEVEL

5.6 DESIRED FINANCE

5.7 PROPOSED CAPITALIZATION

5.8 PROFITABILITY RATIO

APPENDIX
ACKNOWLEDGEMENTS

I Would like to take this opportunity to thank my lord for enabling me write this business plan. I

also take this chance to thank my family and my friends for their moral support and piece

advices in writing this project. I have special thanks to Mr. Maloba and Mr. Ruto of entrepreneur

department, being my tutors for their close suspension and guidance on this project work. Finally

I give my heartfelt thanks to Mr. Jasper who took time and effort by assisting me in typing this

project.
DEDICATION

This project is dedicated to my beloved brother Bernard Gilbert and Boaz. My deskmate Alex

Wafula and my friend Prisila Wanalo not forgetting my beloved Mum Judith.
DECLARATION

I declare that this project is my own original work and produced through my own initiative. This

project is to the best of my knowledge and understanding as an entrepreneurship student and has

never been produced by any person in any school, college, university or any institution

Candidates Signature

Candidates Name

Supervisors signature

EXECUTIVE SUMMARY
CHAPTER ONE

Lorna Wangoro is a successful business woman. The business will be a service oriented business

carried at satisfying customers tastes and attires

The proprietor argues that the hotel management services is highly needed in Misikhu town,

which is a density populated area with over 30,000 people per squire Kilometer. The residents

are high income earners with almost possessing modern homes and who need hotel services.

CHAPTER TWO

The target markets are individual (domestic) customers, institutional customers and commercial

customers / initially Umoja quick service Hotel will relay on mainly processing of raw materials

to produce products that will be marketed directly to customers. The proprietor expects a market

share of 40 %. The most competitive advantage will be the location of the business and others of

the like, located in an open place to be easily noticed and the relations with the entire population,

promotions and advertisement, sales tactics and etc.

CHAPTER THREE

The organization structure shall constitute of a minimum number of personnel’s being headed by

the proprietor, w shall occupy the managerial. Reat. The other personal shall include the

salesman, copy typist, chief chef, cooks, waters and a watchman. Recruitment of personnel’s

shall be done through postal and only suitable candidates shall be selected in terms of academic

qualifications supportive documents shall also an added advantaged promotions and

remunerations shall be on merits and experience attained through training etc.

The proprietor shall seek supportive and advisory services from different consultant films and

layers insurance companies etc.

The entrepreneur shall be compelled to obtain a trading licence permit from the local authority

clerk e.g. county council of Musikhu or Webuye, health certificate from the health office.

CHAPTER FOUR

The proprietor shall rent a building for 6,300 /= per month and be compiled to buy operative

equipments and machines, furniture and fixtures and all other items worthy 400,000 A preventive

type of cost Kshs. 10,000 per annum for production measures, the proprietor shall buy new

materials worth 370,000/=

CHAPTER FIVE

Finances are needed for the purchase of equipments and machines installations and

commissioning payment of salaries and wages, licenses and other expenses. Family savings of

kshs. 832,000 will be invested and other funds will be borrowed l.e from money landing

institutions I. bank L.CP.C etc. the proprietor has projected a net income of kshs.671,781.the

recovery of funds invested will be within the fist year of operation..

CHAPTER ONE

1.0 BUSINESS DESCRIPTION

1.1 BUSINESS NAME

 The name of the business will be across the road hotel, the name is easy to be pronounced

and to be remembered. Its only business hotel that is found along the road, and it easily

sported by customers due to being exposed on the way

1.2 BUSINESS LOCATION AND ADDRESS

The business will be located in town of Misikhu junction between Lugulu road and

Webuye road at a building where boda boda waits their passengers and lug gages for

transportation. The big building is called upendo supermarket ,near caltex Misighu total

1.3 THE ENTREPRENEUR CHOSE THE PLACE DUE TO THE FOLLOWING

1. 1.easy transportation and communication since its along the road

2. near to customers e.g. the boda boda businessmen and passengers

3. 3.the manpower is available

4. near to petrol station

5. availability of security

6. availability of water and electricity

7. availability of water and electricity

8. availability of technological skills and e.g. computer due to power

The business building is easily identified by the customers and easy

To reach than any other business for instance ,boda boda can easily reach the hotel after

having done their job of transportation . Customer coming to purchase goods from

upendo supermarkets can easily sport the hotel, customers coming to purchase kerosene

and petrol from total can also enjoy their meals in the hotel

1.4 BUSINESS OWNERSHIP

The business will be sole proprietorship kind of business to be administered by myself as

manager .this will help me to make decisions easily, that leads to high productivity

I will however employ the following employees with the following qualifications

(a) Two watchmen should be form four leavers with plan

(b) Gate men not more than 3 a lot of experience ranging from 3-5 years

(c) Cateress with a diploma in hotel management and a chief

(d) Five waiters and they should have the minimum knowledge of fourth form

(e) An accountant should be certificate holder or diploma holder with C.P.A and above

(f) Cleanness three of them and the lowest with standard eight certificate and above and

highly performed

(g) Three cooks of with knowledge in food and beverages

1.5 TYPE OF BUSINESS

This type of business will offer goods such as chipsy, ugali, rice, chapati, sausages, boiled

bananas and yams. Beverages such as soda, novida, tea, cocoa, milo and chocolate, fruits

like, pineapple, ripen bananas, mangoes, water melon and oranges, vegetables offered

will be sukuma wiki, roasted meat and boiled meat, fried chicken, fried fish with stew,

fried liver and cabbages.

1.6 JUSTIFICATION OF OPPORTUNITY

Webuye being the developing city in terms of infrastructure, telecommunication,

marketing e.t.c has attracted many investors from within and without the city to invest in

different business.

The climate of the town is good and conducive for business. Other reasons include clean

water, good roads, housing, medical care, security and available food staffs.

Transportation to the customers is easily accessible due to good road within and without

the city, hence is less breakage in the vehicle involved. The ready made market provided

by builders who provide money to materials has also promoted the business, for goods

and paid together with the price of goods purchased

1.7 GOALS OF THE BUSINESS

To give the best food and place resting for customers to enjoy the services of the hotel

To have few workers at first but as the business continues to or grow I will increase the

number of personnel and the number of vehicles.

1.8 ENTRY GROWTH AND STRATEGY

Before the start of the business, good advertisement will properly introduce the

entrepreneur to the potential customers with the placement of posters and sign post

reading;

COMING TO YOU SOON: ACROSS THE ROAD HOTEL ON JUNCTION

OF LUGULU MISIKHU, WEBUYE ROAD AT AROUND UPENDO

SUPERMARKET WELCOME
 CHAPTER TWO

2.0 MARKETING PLAN

2.1 POTENTIAL CUSTOMERS

There are two types of customers. There are visitors or travelers from outside the area and

those who are staying within the area of the business

When those people from far places come to town the bus and matatu take a break at the

bus station which is near to the business, so that the passengers could quench their hunger

in one of the available hotels within the locality where very type of food is found

For the ones who terminate their journey in the place especially at night would come to

the business, feed there and also get accommodation facilities if there is need. The

business welcomes all visitors regardless of age sex and race

Also there are customers who are staying within the area of business. These customers

include traders, hawkers, farmers and employees both public and civil servants. Due to

high growth rate of the area traders are also increasing tremendously in number each day.

Currently the demand for ready made food by the traders, especially market days is

exceeding the facilities available for the same

2.2 MARKET SHARE

Total population in misighu town is about 100,000 where by1/4 are high class and

remaining ½ are low class. Across the road hotel intends to serve approximately 50,00

people

The market share will therefore be share will therefore be.

50,000 x 100

100,000
 =50%

2.3 COMPETITION

Competition will be by mainly from other hotels around and other individuals carrying

out the business at a minimal level, potential competitors include

1. line moja hotel

2. Bidii hotel

3. Umoja ni nguvu hotel

Most of the competitors suffer from poor management hence their business are not stable

and successful. The result have is that products offered are not able to fully satisfy the

demand and are poor in quality. Another shortfall is that, the competitors lack

specialization, and then they make many other kind of good quality to meet the customer

demand

Lastly since most of the competitors are not well established, many potential customers

often find it difficult to identify them, since no advertisement policies have been adopted

to create awareness to customers. This short falls have resulted to customers demand not

been met and it gives busy foods and a better chance of succeeding.

COMPETITIVE ANALYSIS TABLE

BUSINESS NAME PRODUCT PRICE PROMOTION SKILLS TOTAL

 QUALITY

Line moja hotel 5 4 3 5 17

Bidii hotel 4 3 4 4 15

Umoja ni nguvu hotel 6 4 5 4 19

Strategies that along the way hotel intends to employ to cope with competition include

1. efficient management for effectiveness of the business hence improved productivity

2. improving the quality of the products

3. adopting good advertisement policies to create awareness to all potential customers

To all potential customers

The above and other strategies is well adopted will place along the way hotel at a better

position of succeeding and hence meeting the demand of producers of the business in

Misikhu

2.4 PRICING STRATEGY

The proprietor shall use competitive pricing such that if competitor A and B sell the same

commodity at kshs 40 and kshs 45 respectively then the proprietor as the newly proposed

business shall sell his commodity at Kshs 35. The customer will certainly go for the

cheaper alternative and other these hotels stops gaining

Items which cannot be manufactured locally within the enterprise will compel the

enterprise to call in the cost – plus pricing methods where the products are brought and

several mark ups added which comprise of cost for handling the goods ,spreads of

overhead, profit and price of the commodity fixed

Credit privileged will be given to those people who work within of an organization

provided their leaders sign a document that employees be accorded the credit and money

will be4 deducted from their salaries and send it straight to the enterprise management.

Credit privileges will also be given to customers who call in frequent for service and also

well known by the managed i.e. proprietor

MENU PRICE PER UNIT

Tea small cup 10
Tea big cup 15
Coffee 15
Cocoa 15
Buttered bread toast 8
Mandazi 5
 Queen cake 15
Chapatti 10
Bankika 10
Dur 7
Mashamari 8
Fried egg 8
Boiled eggs 10
Ugali with fried chicken 8
Ugali with fried meat 120
Roasted meat 90
Wali 50
Pilau 35
Acrostic juice 40
Fish fried 15
Fish boiled 30
Ugali na matumbo 35
30

2.5 SALES TACTICS

Selling will be done directly to me customers. The business will ensure that the sales are

strictly cash except for the few of customers who will come regular to me business. All

foods opening on the menu ,must be available and ready at any time of working hours ,so

that incase of need ,they will be available for customers. Employees also will be the one

who will attract customers. Employees also will be the one who will attract customers by

from being clean during customers so as to maintain them and create good relationship

with them

2.6 METHODS OF ADVERTISEMENT AND PROMOTION

 Sign posts and potters will be the most appropriate methods for advertising the products

of business. The sign posts and posters will be placed at strategic places where they can

capture the attention of the people hence creating awareness to many people.

Newspaper and magazines will be adopted as a means of advertisement when the

business has expended. This is to increase the number of customers of the business,

resulting to maximization of profit since a adverse section of customers will be able to be

needed by thus two means advertisement will be done at a frequency of there times and

will cost kshs 3,500 per year

PROMOTION

The following ways will be adopted to promote the products

1. Offering free samples

2. Party where people are made aware of the product in the business d

3. Other alternative methods like sponsorship of activities like sports and competition

will be opted at a later stage

2.7 DISTRIBUTION STRATEGY

Across the road hotel will not offer transport services in the initial stages hence

distribution cost will be less. Distribution will; be producer –customer

Growth of business and need to offer better services to customers will prompt the use of

roads transport to deliver the customers to the business. The chain of distribution will be

Producer-customer

The distribution cost per year is expected to kshs 24,000

 CHAPTER THREE

3.0 ORGANIZATION AND MANAGEMENT

The overall planning and co-coordinating of the business accounts of the across the road

hotel lies entirely on time hands of the manager who must work in close co-operation

with other personnel. This is to ensure smooth running of the business and hence the

achievements of goals

3.1 KEY MANAGEMENT TEAM

The key management team comprise of the following people

 1. The manager

2. Cashier/accounts clerk

The table below shows the details on, duties and qualification in relation to the post

mentioned above

POST DUTIES QUALIFICATIONS AND

EXPERIENCE

Manager  Planning and co-coordinating  Should have a certificate

all business activities in management of

 Planning and acquisition of raw business

materials and personnel  Must be over 22 years

 Managing business finance  Must have one year

 Promoting good relationship to experience in any

between employees business firm

 Solving any matter in the

business which is difficult

Cashier  Preparation of all statement of

/accounts clerk finance

 Keeping and maintaining

financial records in good order

 Carrying out any other

manager

3.3 OTHER PERSONNEL

 Other personnel will be comprised of people namely

1. Two waiters

2. Two cooks

3. Three watchmen

POST DUTIES QUALIFICATIONS AND

EXPERIENCE

Waiters  Arranging and cleaning the room  Must be a person with at least

before customers come in 1 year experience in this field

 Serving customers  Must be 25 year old

 Washing utensils after use

Cooks  Preparation of all types of mails  Must have a craft certificate in

needed in the business food beverages

 Cleaning the kitchen  Must be between 25-28 years

of age

 Must have well recognized

places like hotels, institutions

Watchman  Safeguarding the business  Must be literate

property and assets to ensure that  Should have at least 3 years

they are safe experience on a similar job

3.4 RECRUITMENT

3.4.1 RECRUITMENT, TRAINING AND PROMOTION

Recruitment of new personnel will be done by the manager following the steps,

highlighted below

1. Advertisement

This will be done through posters and those interested will apply to the manager of along

the way hotel

2. Screening and short listing

Application received are then scrutinized and candidates who qualify are listed down and

notified of the date of the interview

3. Interview

The manager interviews the candidates to secure maximum information

4. Selection

These who pass the interview successfully will then be approved by the manager for the

jobs and employment

5. Orientation

The new employees is familiarized with the business and its operation to make them

aware of the business as a whole

3.4.2 TRAINING

Growth of the business and the challenges which come as a result will necessitate the

running of employees to enable them to face thus challenges, changes in technology and

the need for efficient management equally require a well trained personnel. Along the
 ways hotel will undertake training activities of its personnel by adopting different

methods of training

The key management team will be sponsored for part-time courses to widen the scope of

their knowledge in areas of specialization on job training techniques, will be adopted for

instance employing the services of an expert specialized in the area given to offer

expertise advice which will improve the skills of employees, production workers will be

trained by a precentiship or orientation which is done on the job basis

3.4.3 PROMOTION

Promotion will be done from within where workers are promoted to higher position

basing on their productivity. The manager will determine when to carry; the business will

provide special uniforms for example dust coats to all employees and gun boots so they

can wear during rainy seasons

And in me side of hospital the employees of the business will take care of that in order to

motivate the employees to have the morale

3.5 ORGANIZATION CHART

MANAGER

CASHIER

COOKS WATCHMAN WAITERS

3.6 RENUMERATION AND INCENTIVES

POST NO OF WORKERS SALARY INCENTIVES

Manager 1 10,500 Sponsorship to part courses

Cashier 1 7,000 10.00 o’clock tea and lunch for

Waiters 2 5,000 all workers on the business

Cooks 2 4,000

Watchman 1 3,500-

Total 39,000

The employees will be paid their salary every month without failure and as the business

continue, their salaries will increase for 20% of their previous one

3.7 SUPPORT/ADVISORY SERVICE

The manager will be depositing the money which is received after sales and the money

will be taken to national. Bank of Kenya in Misikhu town and thus is for safety purposes.

The insurance services will be offered by the APOLOKO insurance Co.Misikhu branch.

It will ensure the business incase of loss through theft or fire. The employees will also be

required to ensure their lives to the insurance co.

3.7.1 LICENSES AND PERMITS

The business will acquire trade license from the Musikhu municipal council at kshs 1,500

per annum
The medical certificate given by the office of the district commissioner at Kshs will also

be obtained for the business.

 CHAPTER FOUR

4.0 PRODUCTION AND OPERATIONAL PLAN

4.1 PRODUCTION FACILITIES AND CAPACITY FACILITIES

DESCRIPTION QUANTITY COST PER TOTAL COST SUPPLIER

UNIT
Kettles 4 120 480 Upendo super market
Glasses 2 400 800 Upndo super market
Forks 4 180 700
Spoons 4 210 840
Sufurias 5 450 2,250
Gas cooker 1 6,000 6,000 Webuye supermarket
Gas cylinder 1 3,000 3,000
Tables 7 610 4,270 Mwananchi supermarket
chairs 28 350 9,800
Brooms 6 350 440
Receipt books 2 120 240 Kitiyo bookshop
Invoice books 1 95 95 Elijah’s shop
Shelves 4 470 1,800 Khadijas suppliers
Locks d 2 150 300
W- machine 1 6,000 6,000 Muita furniture
Filters 3 450 135 Kiberenge shop
Deep freezer 1 50 300 Khamala shop
Bags 6 50 300 Upndo supermarket
Cups 4 6,000 2,400 Webuye supermarket
Display unit 1 4,000 4,000 Khamala shop
Water mugs 1 240 240 Mapema supplier
sacks 10 90 900
Total 53,590
4.1.2 REPAIR AND MAINTENANCE

Where there is need to repair the tools or equipments the service of the jua kali sector will be

employed, tools or equipments that need to be repaired will be submitted to the craftsmen who

repair them. The tools or equipment will need to be maintained in a good order throughout

carefully and proper handling by those who use them

There will be also good storage facilities to make sure that the equipment are kept

properly. Other maintenance practice will be carried by the users. The costs of repair and

maintenance per year is estimated to be kshs 8,000

4.1.3 BUSINESS PREMISES

The building to be used by across the road hotel will be rented at a cost of kshs 2,500 per

month

KITCHEN

WASHING CAN BASIN

MAIN DOOR
4.2.0 PRODUCTION STRATEGY

4.2.1 PRODUCTION DESIGN AND DEVELOPMENT

The products are going to be in many sizes and volumes but of course they will be to the

standard. The design will not be different from those offered by other competitors

except some techniques will be applied on the business in order to attract more customers

to the business

The designing and development costs i.e. improving design costs are going to vary as the

business expands

incase of any new design of the product in one market and if the business will have not

established enough to cater for the costs then the operational capital will take care of that

in most of one production in the business, modern technology will be applied i.e.

preparing products by use of deep flying in cooking oil without using water

Rendering services to the customer will also be designed in such a way that it will be

appreciated by the customer. The technology although modern will not be complicated

but will be simple and easily adopted as per consideration is the best suited for the

business

Adoption of new technology will depend on its suitability and also on the state of the

business; if it is costly and will not be affordable then it can be objected. The technology

proved to be very necessary after deep study on it. as the business expand or rather

grows it will gradually adopt some simple technology to ensure efficiency of work in the

business

4.2.2 RAW MATERIAL

 RAW MATERIAL REQUIREMENT

RAW MATERIAL MONTHLY COST YEARLY COST

Unga ngano 8,400 100,800

Milk 24,000 288,000

Sugar 12,000 144,000

Tea leaves 900 10,800

Cooking fat 21,000 252,000

Cooking flour 7,200 86,000

Total 149,100 882,000

RAW MATERIAL QUANTITY QUANTITY PER YEAR

Unga ngano 240 kg 2,880

Milk 1,200 litres 14,400 kg

Sugar 300 kg 3,600 kg

Tea leaves 71/2 kg 90 kg

Cooking fat 510 kg 61,120 kg

Cooking flour 30 tin 360 tins

All the above raw material will be transported by road where transport services will be

hired and reach the materials to the business

4.2.3 COST OF PRODUCTION

 The production section will have their employees where others will be full time workers

while others will be part-time workers while others will be part time workers. The waiters

will be full time workers and the cooks will be also full time workers. The part time

workers i.e. two in number will train them and give them workers who will train them

and give them construction .the waiter will earning 5,000 cooks coil earn kshs 4,00 and

part time workers will earn kshs 2,500 each per month

MONTHLY SALARY

Waiters 2 5,000

Cooks 2 4,00

Part time workers 2,550

Totals 11,550

Materials 149,100

Direct labour cost 11,550

Overheads 6,000

Totals 166,000

4.3.0 PRODUCTION PROCESS

In the production of the products for sale will take several dimensions depending on the

product itself . This will be done accordingly in order to maintaining high quality

products for example mandazi

4.3.1 MANDAZI

STEP ONE

Weighing – the cook will take a packet of unga ngano and weigh the amount necessary

weigh an amount equivalent to the unga water, sugar, salt baking powder and some spices

to colour the Mandazi

STEP TWO

Tough mixing –the cook will prove all their ingredients to the tough mixing sufuria and

then start mixing until the content turn into the needed tough for making mandazi

STEP THREE

Cutting –the cook will put the tough on the table and will cut it into the required size and

then count them before frying

STEP FOUR

After frying ,all mandazi will be put into the shelves and then covered by a nylon paper

ready for sale

STEP SIX

Sales – as the customer comes in the waiter welcomes them as they make orders the

waiters will take them an bring the orders to the customers

STEP SEVEN

Payment – the waiter supply the customer with the receipts after eating and then the

customers pay to the cashier

4.3.2 MEAT STEW

STEP ONE
The cooks will prepare the meat by cutting it into small pieces

STEP 2

Cutting into small pieces, they will peel the carrots and potatoes .they will act into small

pieces, thin skin the potatoes and act them finely

STEP 3

Heat the cooking fat and fry the onions until they turn into brown colour

STEP 4

Add the meat and fry it into brown. Then add tomatoes and continue to cook it by

covering with other sufuria

STEP 5

After they will add potatoes, carrots salt, cutting powder and then stir gently with a

wooden spoon or steel spoon

STEP 6

The cooks will then add enough water to cover ground of the sufuria, they will cover the

sufuria and let it boil. The heat will then be lowered and the meat cooked it is soft.

STEP 7

The meat is stored in a sufuria covered with another sufuria lid and it is ready to be serves

with rice or ugali for the customer

STEP 8

As the customer comes on the waiter welcomes him and then takes the list of order and

then serves them after the customer is issued a receipt and pays money to the cashier
 CHAPTER FIVE

5.0 FINANCIAL PLAN

5.1 PRE-OPERATIONAL CAPITAL

ITEMS AMOUNT

License 1,500

Rent deposit 2,000 per month 6,000

Equipments 23,145

Furniture and fittings 20,610

Total 51,255

5.2 WORKING CAPITAL

DESCRIPTION YEAR 1 YEAR 2 YEAR 3

Stock of raw materials 882,000 878,000 900,054

Stock of work in progress 147,269 135,575 219,187

Stock of finished products 89,519 76,482` 103,623

- 15,475 20,475

Total 1,118,788 1,105,535 1,243,339

ITEMS JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC TOTAL
Cash Inflows
Cash flows 124,00 116,00 139,47 98,767 170,805 147,87 154,89 147,87 137,67 168,00 183,470 201,000 1,8214,46
0 0 3 7 0 7 4 0 1
Collection - - - - 24,325 16977 23,000 19,845 17,653 21,651 15,000 20,024 158,475
from debtors
Total cash 124,00 116,00 139,47 98,767 203,825 187,78 170,87 174,73 155,32 189,65 198,470 221,029 19,799,93
inflows 0 0 3 2 7 5 7 1 6
Cash
outflows
Purchases 7,800 8,547 7,347 9,900 1,0015 7,465 6,548 11,323 6,392 5,459 8,763 10,341 100,000
Salaries 39,000 39,000 39,000 39,000 39,000 39,000 39,000 39,000 39,000 39,000 39,000 39,000 468,000
Rent 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
Electricity 4,500 5,500 3,500 4,800 4,200 6,000 3,000 4,500 4,500 5,000 4,000 4,500 54,000
Telephone 558 458 655 433 460 400 371 432 312 640 671 610 6,000
and postages
Advertisemen 1,000 - - - 885 - - - 115 - - - 3,000
t
Loan - - - 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 90,000
repayments
Bank - - - 500 500 500 500 500 500 5090 500 500 4,500
interests
Total outflow 54,858 55,505 52,502 66,633 67,060 65,365 61,419 67,755 63,919 62,599 64,934 66,951 739,500

Net cash for 69,142 60,495 86,971 32,134 136,765 122,41 109,45 106,98 91,408 127,05 133,536 154,078 1,230,436
the months 7 8 0 2
Accumulated 69,142 129,63 216,60 248,74 3855,50 507,92 617,38 724,36 815,77 942,82 1,076,35 1,230,43
cash flow 7 8 2 7 4 2 2 0 2 8 6
5.3 CASH FLOW STATEMENT
5.4 PROFORMA INCOME STATEMENT

ITEM YEAR 1 DYEAR2 YEAR 3

Income sales 1,821.461 1,899,497 2,001,343

Less cost of sales 107,365.65 133,674.75 157,821.90

Gross profit 1,928,826.65 2,033,171.75 2,159,164.90

Expenses

Salary 39,000 46,800 46,800

Rent 24,000 24,000 24,000

Electricity and water 54,000 56,700 56,700

Telephone $ postage 6,000 6,060 6,060

Transport 20,300 24,396 24,396

Advertisement 300 3,000 3,000

Total expenses 146,300 160,956 161,973

Net profit before tax 1,782,496.65 1,872,215.75 1,997,191.90

Provision for tax 534,749 56,664.73 599,157.57

Net profit after tax 1,247,747.65 1,310,551.02 1,398,034.33

ASSUMPTIONS

1. Salary will increase by 20% during the second year and third year

2. expenses on rent and advertisement remain constant through three years

3. expenses on transport will increase by 20% during 2nd year and 25% during 3rd year
ASSETS

FIXED ASSETS

Equipments 23,145 23,145 23,145

Accumulated dep - (20,830.50) ( 18,7747.45)

furniture $ fittings 20,610 20,610 20,610

Accumulative depreciation 10% - (18,549) (16,694.1)

TOTAL FIXED ASSETS 43,755 83,134.50 79,196.55

Current assets

Stock of raw materials 882,000 878,000 900.054

Stock of work in progress 147,269 135,575 219,187

Stock of finished products 89,519 76,482 103,623

Debtors - 15,475 20,475

Cash in hand 100,000 120,000 140,000

Total current assets 1,218,788 1,225,532 1,383,339

Total assets 1,262,543 1,308,666.50 1,462,533.55

Liabilities

Short term

Creditors - 27,845.50 341,457.30

Long-term - - -

Bank loans 784,570 869,924 1,033,154

Owner’s equity 477,973 410,897 394,594.25

Totals 1,262,543 1,308,66.50 1,462,535.55

5.5 PRO – FORMA BALANCE SHEET

5.6 BREAK EVEN LEVEL

VARIABLE COST AMOUNT

Electricity and water 54,000

Transport 20,00

Postage and telephone 6,000

Repair and maintenance 6,000

Total variable cost 86,330

Contribution Margin = Total Sales – Total Variable Cost

=1,821,461 -86,330

= Kshs 1,735,131

Contribution margin percentage

= Contribution Margin x 100

Total sales

= 1,735,131 x 100
1,821,461

= 95.26%
 Total fixed

Fixed cost Amount

Salaries and wages 39,000

Rent 24,000

License 1,500

Insurance 8,100

Loan interest 4,500

Depression 39,379.50

Total fixed 116,479.50

Break even level = Fixed cost x100

Contribution margin percentage

= 116,479.50 x100
95

= Kshs 122,610

5.7 DESIRED FINANCE

Desired finance = pre-operational cost + working capital

Pre operational cost 51,255

Working capital 1,118,788

Totals
5.8 PROPOSED CAPITALIZATION

Owner’s equity 477,973

Bank loan 784,570

Totals 1,262,543

5.9 PROFITABILITY RATIO

Gross Profit Ratio = Gross Profit x 100

Sales

= 1,928,826.65 x 100
1,821,461

= 105.8%

=106%

5.9.1 RETURN ON EQUITY

Net Profit After x 100

Owner’s Equity

Net Profit After Tax = 1, 247, 7747.65 x 100

477,973

=261%

Return on Investment

= Net Profit after Tax x 100

Total Investment

= 1,247,747.65 x 100
1,170,043

=107%
RELEVANT GOVERNMENT REGULATIONS

The business will on the process obtain a license for operating the business from the

municipal council

The cost of one license will be kshs 1,500 per year

The health officer will satisfy their requirement. This will cost 5,000. When the above

mentioned documents are ready, the business will be ready to operate

 APPENDIX

POLICE STATION
CROSS ROAD HOTEL
TO WEBUYE

UMOJA POSHO MKE

SHOP

UMOJA HOTEL

STAGE
MAKUTI BAR

MISIKU MARKET
ST CECILIA HIGH SCHOOL

FROM KITALE TOWN

MISIKHU DISPENSARY CENTER

SWAMP AREA SWAMP AREA