BUSINESSS PLAN

ABBY DAIRY PLANT

PRESENTER : MERCY CHEROTICH

INDEX NO : 5831020540

COURSE CODE : 1903/207

INSTITUTION : SOT TECHNICAL TRAINING INSTITUTE.

COURSE NAME : CERTIFICATE IN SECRETARIAL STUDIES

SUPERVISOR : MR.ROBERT BETT

PRESENTED TO: KENYA NATIONAL EXAMINATION COUNCIL IN PARTIAL

FULFILLMENT FOR THE AWARD OF CERTIFICATE IN FOOD PROCESSING AND

RESERVATION TECHNOLOGY.

SERIES: JULY 2023.

i
DECLARATION
I declare that this business plan is my original piece of work to be undertaken and therefore has
not been submitted in any other institution for the certificate program. You are welcome to use
this as a starting point to create your own, but you do not have permission to resell, reproduce,
publish, distribute or even copy this plan as it exists here
NAME: MERCY CHEROTICH
INDEX NO: 5831020540
DATE........................................................................
This business plan has been submitted with my approval as an institute supervisor
SUPERVISOR: MR.BETT ROBERT
SIGNATURE.........................................................................................
DATE......................................................................................................

ii
DEDICATION
This business plan is dedicated to my dear parents for their continuous financial support for me
to reach this part of completion.
Special dedication also goes to my dearest friends for their humble support not to forget all sot
technical training institute at all. May God bless you.
Also I dedicate this project to my neighbor for assisting me financially and the church for
praying for me in all the challenges that I encountered during the time I was going on in my
research.

iii
ACKNOWLEDGEMENT
I would like to give my warmest and total gratitude's to the following people who assisted me
both morally and finally during the preparation of the project. Our parents who gave me moral
and financial support. My supervisor for the important dedicated guidance throughout the writing
of this project report. Our friends and all my course mates for their contributions.
May Almighty GOD bless you all.

iv
EXERCUTIVE SUMMARY
1.0 BUSINESS DESCRIPTION
The business operates by purchasing milk from the suppliers, processing milk, distributing and
selling dairy products to buyers and consumers. The business also offer goods on credit facilities
where payment are made on the agreed period between the customers and sole proprietor who
owns the business. The products majorly deals by the business are mainly dairy products such as
yoghurts, ice cream, butter, ghee, powder milk and cream. The source of capital of the business
is obtained from personal savings, donation from friends and loan from the bank .The plan of the
business is to expand the business to an internationally distributor company through the world.
2.0 MARKETING PLAN
Abby's Dairy plant will be a service product oriented business particularly it will deal with sale
of dairy product. Goods and services will be distributed to customers through tenders and direct
buying. Also for the business to be successful, Abby will conduct market analysis on the
business through conducting a market survey.
3.0 ORGANISATIONAL PLAN
The business aim at recruiting employees who are well trained and experience so as to ensure
success of the business and development of competent staff through training as well as
maintaining high levels of motivation.
4.0 OPERATIONAL PLAN
The operational plan will give the description on the running of the business. This will facilitate
the strategies to facilitate the running of the business.
5.0 FINANCIAL PLAN
The firm will obtained its capital from various sources to use to commence the business. The
source of the capital will be from loan from friends, personal savings and loan from Kenya
Commercial Bank. The capital will be donated as follows,
Personal savings 300,000.
Loans from friends 200 000.
Loan from Bank 100,000.
The total capital will be ksh 600,000.

Contents
v
DECLARATION..............................................................................................................................................ii
DEDICATION................................................................................................................................................iii
ACKNOWLEDGEMENT.................................................................................................................................iv
EXERCUTIVE SUMMARY...............................................................................................................................v
CHAPTER ONE..............................................................................................................................................1
1.0 BUSINESS DESCRIPTION...................................................................................................................1
1.1 BUSINESS NAME................................................................................................................................1
1.2 BUSINESS LOCATION AND ADDRESS..................................................................................................1
1.3 FORMS AND TYPE OF OWNERSHIP....................................................................................................2
1.4 PRODUCTS AND SERVICES.....................................................................................................................3
1.5. JUSTIFICATION OF OPPORTUNITIES......................................................................................................3
1.5.2. Weakness...................................................................................................................................4
1.6 THE INDUSTRY.......................................................................................................................................4
1.7. GOALS OF THE BUSINESS......................................................................................................................5
1.7.1. Short term goals........................................................................................................................5
1.2.2. Long term goals.........................................................................................................................5
1.8. ENTRY AND GROWTH STRATEGY..........................................................................................................5
1.8.1 ENTRY STRAGIES.............................................................................................................................5
1.8.2. Growth strategies......................................................................................................................5
CHAPTER TWO.............................................................................................................................................6
2.0 MARKETING PLAN..............................................................................................................................6
2.1. CUSTOMERS......................................................................................................................................6
2.2. MARKET SHARE.....................................................................................................................................6
2.3. COMPETITION...................................................................................................................................7
2.4 METHODS OF PROMOTION AND ADVERTISESEMENT.......................................................................8
2.5. PRICING STRATEGY...............................................................................................................................9
2.6 Sale Tactics....................................................................................................................................9
2.7 DISTRIBUTION STRATEGY..................................................................................................................9
CHAPTER THREE........................................................................................................................................11
3.0 ORGANISATION PLAN......................................................................................................................11
3.1 ORGANIZATIONAL STRUCTURE........................................................................................................11

vi
 3.2. Managers and qualifications.......................................................................................................12
3.3. Personal numbers and duties.....................................................................................................12
3.4 Recruitment, training and promotion..........................................................................................13
3.4.1 Recruitment..............................................................................................................................13
3.4.2. Training....................................................................................................................................13
3.4.3. Promotion................................................................................................................................13
3.5. REMUNERATION AND INCENTIVES.....................................................................................................13
3.5.1. REMUNERATION..........................................................................................................................13
3.5.2. Incentives.................................................................................................................................14
3.6. License, permit and by laws............................................................................................................14
3.6.1. Licence.....................................................................................................................................14
3.6.2. Permits...............................................................................................................................14
3.6.3. By laws.....................................................................................................................................15
3.7. Support services.........................................................................................................................15
3.7.1 Security services.......................................................................................................................15
3.7.2 Banking services........................................................................................................................15
3.7.3. Communication services..........................................................................................................15
3.7.4. The emergency services...........................................................................................................15
CHAPTER FOUR..........................................................................................................................................16
4.0. OPERATIONAL PLAN.......................................................................................................................16
4.1 PRODUCT DESIGN AND DEVELOPMENT..........................................................................................16
4.2 PRODUCTION OR OPERATIONAL FACILITIES AND CAPACITY............................................................16
4.3. PRODUCTION OR SERVICE STRATEGY.............................................................................................17
4.4. PRODUCTION PROCESS...................................................................................................................18
4.4.1 EXTEFNAL FACTORS AFFECTING PRODUCTION PROCESS..........................................................18
4.4.2. INTERNAL FACTORS AFFECTING PRODUCTION PROCESS.........................................................18
4.5 REGULATION AFFECTING THE OPERATION......................................................................................19
CHAPTER FIVE............................................................................................................................................21
5.0 FINANCIAL PLANNING......................................................................................................................21
5.1 PRE OPERATIONAL COST..................................................................................................................21
5.2 Working Capital...........................................................................................................................22

vii
 5.3. Preparation of cash flow projections..........................................................................................23
5.3 PREPARATION OF CASH FLOW PROJECTION FOR YEAR ENDED 31ST DEC 2023..............................23
5.3.2 PREPARATION OF CASH FLOW PROJECTION FOR YEAR ENDED 31ST DEC 2024...........................24
5.3 PREPARATION OF CASH FLOW PROJECTION FOR YEAR 3 2025.......................................................25
5.4 Preparation of Proforma income statement and balance sheet......................................................26
5.4.1 Projected income statements...................................................................................................26
5.4.2 PROFOMA BALANCE SHEET......................................................................................................27
5.5 CALCULATIONS OF BREAK EVEN POINTS.........................................................................................28
5.5.1 Contribution margins....................................................................................................................29
5.6 PROFITABITY RATIOS.......................................................................................................................30
5.7 FINANCING PLAN.........................................................................................................................30
5.8 .ABBY CAPITALIZATION....................................................................................................................31

viii
CHAPTER ONE
1.0 BUSINESS DESCRIPTION.
The business operates by purchasing milk from the suppliers, processing milk, distributing and
selling dairy products to buyers and consumers. The business also offer goods on the credit
facilities where payment are made on the agreed period between the customer and sole proprietor
who owns the business.

The products majorly deals by the business are mainly dairy products such as yogurts, ice
cream, butter, ghee, powder milk and cream. The source of capital of the business is obtained
from personal savings, donation from friends and loan from the bank. The plan of the business is
to expand the business to an internationally distributer company through the world.

1.1 BUSINESS NAME.

The name of the proposed business will be Abby Dairy Plant. Abigael a 25 year old, second year
student at SOT TECHNICAL TRAINING INSTITUTE under the field of food scientist studies
will own the name. The business is to be started as from five months to come. Reason for
choosing the name ‘Abby', is that the name is easy to be pronounced by customers.

1.2 BUSINESS LOCATION AND ADDRESS.

The business will be located at Siongiroi town in Siongiroi ward, Kimaya location, Bomet
County. The name will be painted white as it fits the colour for dairy industries. The building of
the plant will be placed at the junction between Siongiroi town and Kimaya road.

There is existence of the market in the region where the business will be located because most
buyers who buy the products come to market and they are interested in milk products, as they are
rich numerous nutrients content. The business also will be located in that side near farmers who
produce milk in large quantity since the price for purchasing the milk will be at lower prices. The
following are some of the other reasons for designing the plant in that location;

 There is enough security since the police station is near.

 There is also availability of good infrastructure in the region.

1
The address of the firm include;

ABBY DAIRY PLANT,

P.O BOX 8080,

CHEBUNYO.

TELL: 0798003289.

EMAIL: abbydairyplant.gmail.com.

Location map;

Police Siongiroi
station
market

From Kapema Oleseroi

Abby Dairy
plant

Kimaya Kimaya day

secondary school

1.3 FORMS AND TYPE OF OWNERSHIP.

The business will be sole proprietorship form of a business unit owned and managed by a sole
proprietor i.e. Abby. The advantages of this form include;

1. The proprietor has the right to make any decision without consulting anyone.
2. The owner is the manager since is able to operate the task without any pressure.
3. There is also few legal requirement in the formation of business.
4. The proprietor also is able to keep the top secrets of the business.

2
The disadvantages of the business are as follows;

i. There is insufficient capital for expansion because of scarce resources and lack of access
to other sources.
ii. The proprietor is overworked and has no time for recreation. There is lack of continuity
in this form of business ownership that is the business will be affected by sickness or
death of the owner.
iii. The proprietor has unlimited liability meaning that if the assets available in the business
are not enough to pay all the business debts, Abby personal property such as house will
be sold to pay for such a debt.

1.4 PRODUCTS AND SERVICES.

Most of goods offered in the business are products such as selling milk, processing milk to get
products such as yogurts, ghee, butter and ice cream. Products will be offered at an affordable
and fairer prices compared with the nearest competitors.
The business will be producing foods made from milk, which include butter, cheese, ice cream,
yogurts, condensed, and dried milk and powder milk.

All these products are of good quality and will last for long time without being spoiled since
they have been preserved. The business also offers other sales services by transporting the goods
free to the customer final location.

1.5. JUSTIFICATION OF OPPORTUNITIES.

Due to increase in population in town, the business will grow rapidly and run well. Many
people will want to buy milk and the business will likely to grow and earn many profits. Another
reason for making the business successful is that the owner of the business has skills and
knowledge that are required in the business and has experience of five years for engaging in
different kind of business she know how to managed and control the business well.

Strength and weakness of the business are as follows,

3
Strength.

a) The owner has good

b) relationship to the customers
c) Making the business attract more customers.
d) Producing products of high quality.
e) Offering and selling goods at affordable prices.

1.5.2. Weakness.
i. Insufficient capital.
ii. Overworked of sole proprietor.

1.6 THE INDUSTRY.

The business will lies under production industry but its major work is to buy milk from the
suppliers, process dairy products such as yogurts and distribute and sell their products to the
buyers and customers .Due to increase in population around the region and need to expand the
growth of the nation there has emerged high demand for milk product which improved and boost
the health of the customers. The products are locally made from local raw materials, which are
there in plenty in the surrounding areas hence low cost of production leading to high profit.

The capital requirements that the business will use to start is ksh 600,000 which include the
owner of the business personal savings. The total capital include the following;

NO SOURCE OF FUNDS AMOUNT (KSH)

1 Personal savings 300,000

2 Loans from friends 200,000

3 Loan from Kcb bank 100,000

TOTAL 600,000

4
1.7. GOALS OF THE BUSINESS.
The goals of Abby business are categorized into two;

Short-term goals and long-term goals.

1.7.1. Short term goals.

To make sure that the business is popular and well known.

1.2.2. Long term goals.

a) To create employment for the people.

b) To open up more business and the branches in the town.
c) To create a competitive dairy company.
d) To educate the dairy farmers on proper use of milk to avoid waste.

1.8. ENTRY AND GROWTH STRATEGY.

1.8.1 ENTRY STRAGIES.
Abby's business will begin on 1st July 2023 after all the plans has been set. The opening
ceremony would be organized where several leaders will be invited to launch the business and
other important guests who are involved in processing industry will come to give their views
concerning the business.

1.8.2. Growth strategies.

The business has expand and have many branches within the country. The business also aims at
good terms and conditions which will attached more customers like, offering free transport
services.

The business will be an open company that would producing dairy products and can lower the
price of production making it to increase more customers.

5
CHAPTER TWO.
2.0 MARKETING PLAN.

Abby's Dairy Plant will be a service product oriented business particularly it will deal with sale
of dairy products. Goods and services will be distributed to customers through tenders and direct
buying. Also for the business to be successful, Abby Wil conduct market analysis of the business
though conducting a market survey.

2.1. CUSTOMERS.
The business of Abby's Dairy Plant is divided into three groups.
Individual customers.
The business will target consumers from within and the surrounding around Siongiroi market
and the neighboring village. The customers will desire the product and services since they are of
high quality, very nutritious and are affordable to all customers.
Institution customers.

There are many schools at the town and they are depending on Abby business supply especially
junior school where the government have introduce offering of milk to students. The Abby Dairy
Plant supply milk to these schools, which is great advantages to the business.

Commercial customers.

In the Siongiroi town where the business will be located, there is a population of approximately
5000 people most of them living in rental houses in the town where they depend much on the
dairy products from Abby's Dairy Plant.

2.2. MARKET SHARE.

Market share is the number of Abby Dairy Plant and the competitor will share in the market. The
owner of the business target the population of about 5000 people but the population will be
shared among other competitors. The competitors of the market are; Aziz Dairy Plant which is
the main competitor controlling 50% of the market share, Sofia Dairy Plant controlling 20% of
the market and the other is Maziwa Bora Dairy Plant controlling the remaining percentage that's
30%.The market share is as follows,

6
 SALES (%)

20%

AZIZ
MAZIWA BORA
SOFIA DAIRY
50%

30%

2.3. COMPETITION.
Competitors is a test of strength, weakness, skills and ability. The business has competitors who
sale almost the same product. The competitors include Aziz Dairy Plant, Sofia Dairy Company,
Maziwa Bora Dairy Company and Mbogo Dairy Plant.

The following is the content showing the strength and weakness. The table include,

The table below shows size of the business.

Name of the location Strength weakness

competitor

Aziz dairy plant Near police station  Large volume Produce their milk in small
 Technical competence scale
 Good product line
 Availability of security

Sofia dairy plant Near Phillip clinic Good product Single woman driving the
center business.

Home segment specialization.

7
Maziwa bora dairy Near Kimaya day  Strong brand name  Poor specialization.
plant secondary school  Ability to customize as  New in the market
per clients demand  High salary demand
 Well trained and
qualified personnel

2.4 METHODS OF PROMOTION AND ADVERTISESEMENT.

Basing on advertisement, the business will use following types of advertisement methods.

POSTERS. Will be printed and placed at every market place within the town and other towns
nearby.

FACEBOOK. The picture of packed yogurt will be posted at Facebook to create awareness of
the product.

RADIOS AND TV. Advertisement will also be done through radio stations and TV station. This
will be reliable since the people living around can assess information very fast

Charges for the advertisement are as follows.

MEDIA FREQUNTLY OF ADVITISEMENT COST PER MONTH

Posters After one month 600

Facebook After two month 800

Radios/Tvs After one month 1000

According to promotion of the business, Abby Dairy Plant will be offering discounts and raffles
as a way of promoting services. Discount will be given to potential customers whereas raffles
held at where prize will be won. The business again will give after sale service to the customers
who purchased the product in large quantities. In addition, offer transportation free.

8
2.5. PRICING STRATEGY
The business will use the following methods of pricing that will attract more customers.

Competitors pricing strategy.

The prices of the product will be slightly lower the competitor prices. This will help fetch more
buyers in the business.

Demand pricing.

 The pricing will be set depending on the demand of the products.

 Cost of products pricing methods.
 The prices will differ depending on the cost of production.

2.6 Sale Tactics.

The proprietor will employ methods of selling directly to the customers. The business will offer
discounts to the main customer, which will enhance in fetching more customers. The business
will sale goods on credits to the potential main customers, which will help in sustaining them.

The proprietor will use interrogative that will involve customer and will help in acquiring
feedbacks to boost the business and in meeting the customer needs.

2.7 DISTRIBUTION STRATEGY.

Because of sole proprietorship, the proprietor will have a direct contact with his or her customers
as shown below.

Abby dairy plant Wholesale Retailer Customer

Abby dairy plant Retailers

Customer

Abby dairy plant Customer

The products will be distributed to customers by any means of transport but majorly by road.
9
Distribution problems of the business.
Rains; during raining seasons there is difficulties in transporting the products to customers living
in rural areas.
Poor roads; some roads are damaged completely full of holes making distribution of products
difficult.
Solution to the problems.
The business will managed to sell its products during dry season to recover the loss during the
rainy season. The distribution of the products to be done before the onset of rain so that the
business maintain its customers.

10
CHAPTER THREE
3.0 ORGANISATION PLAN.
The business aims at recruiting employees who are well trained and have experience to ensure
the success of the business and development of competent staff through training as well
maintaining high level of motivation.

3.1 ORGANIZATIONAL STRUCTURE.

Organization below shows the organization chart for the business to be started.

General Manager

Production manager

Supervisor

Accountant

Sales man

Cleaners

Security

11
3.2. Managers and qualifications.
The manager is the owner of the business. The qualifications and duties are follows.

Staff personnel Qualifications of personnel Duties and responsibilities.

member

1 General A minimum of C+ in K.c.s.e Own the business

manager
Receives report from accountant

Ensure proper management

2 Production Have C plain in K.C.S.E Will be in charge of day-to day

manager running of the business.

3 supervisor Have a degree Ensure that the work is processing well

4 accountant Have diploma in accountancy Keep the business finances

5 salesman Should communicate in both Keep stock records

official languages

6 Security officer 30 yrs. of age Ensure that customers’ cars left in the
premise property secured from damage
and theft.

3.3. Personal numbers and duties.

Name /job title qualification Duties and responsibilities Salaries

Production manager Have good qualities of Answerable to all questions from the 18,000
leadership owner of the business
cleaner Have K.C.P.E certificate Ensure hygiene in the business 10,000

security Should be strong and Direct buyers to the point of their 8,000
dedicated needs
salesman Able to speak well in Serve the customers 5,000
both official languages

12
3.4 Recruitment, training and promotion.
3.4.1 Recruitment.
The manager of Abby's Dairy Plant will conduct recruitment of workers during interview. This is
done by selecting candidates with qualify qualifications which should must be there in the job.
There will be a certain sum of money that will be paid by any participant who will attend the
interview to be used to recover the advertisement costs done through local media and interview
expenses.
3.4.2. Training.
Training will be done to help the workers to be equipped with knowledge and skills for job. It
will have the rational training so that each individual will have more experience in all fields
required in the business. The business will ensure that business staff are trained more frequently.
This will enable them to gain more experience and become more motivated to conduct their
duties effectively.

3.4.3. Promotion.
This is done in order to increase the sale of the product or services or done to encourage people
to believe in the value of something. Promotion is very important to employees since it will
motivate them hence increase productivity in the business. The criteria that will be used to
promote workers will be according to;

1. Their experience.
2. Skills acquired with time.
3. Hardworking.

3.5. REMUNERATION AND INCENTIVES

3.5.1. REMUNERATION.
Recruitment would be done by selecting candidates qualify and qualifications in which they must
be in job and in business vision. This shows the salary and wages of the business and how the
workers will be paid.

Job category No of staff Monthly pay rate Other benefits Total

Manager 1 18000 Commission 36000

Accountant 1 10000 Commission 20000

13
 Sales man 1 8000 Commission 16000

Watchman 1 5000 Commission 10000

3.5.2. Incentives.
This state how employees of the business will be motivated. The business will provide the
following incentives to the employees;

1) House allowances not exceeding 10% of the monthly salary.

2) Job’s security.
3) Free tea breaks and lunch.
4) Medical cover this gives emergencies.
5) Free transport service every month.

3.6. License, permit and by laws.

3.6.1. Licence.
The type of license for the business will be trade license from town council of Siongiroi, which
will be charged ksh 1000 per year. The registration name of the business will be Abby's Dairy
Plant and the charges will be 1500 per year.

3.6.2. Permits
Permit Date required Source Cost

KRA 1ST Sept 2023 Kenya Revenue 2000

Authority

Licenses 3rd Sept County government 1000

Public health 10th Sept 2023 Ministry of health 400

Total 3000

3.6.3. By laws.
These are rules and policies from the government or ruling authority that must be adhered by the
business.

14
3.7. Support services.
These are professional services offered to the business by specialized parties from outside the
business which will helps Abby's dairy plant in the day-to-day running of the running activities
of the business. In addition, this include the following;

3.7.1 Security services

The CCTVS cameras will be provided to Abby's business and given watch guards by the security
officer.

3.7.2 Banking services.

The services that will be offered to the business will be, deposit of chaques, deposit of cash from
the business, borrowing of loans and overdraft from the selected banks. KCB and Equity banks
will also be provided, as they are most preferred because of their goods attractive terms and
conditions.

3.7.3. Communication services.

This service will be provided to help in communication networks by storing communication
devices and interconnection of internet on the business.

3.7.4. The emergency services.

The business will cooperate with other county government department in case of any accident.

15
CHAPTER FOUR.
4.0. OPERATIONAL PLAN.
The operational plan will give the description of the running of the business. This will facilitate
the strategies relevant to facilitate the running business.

4.1 PRODUCT DESIGN AND DEVELOPMENT.

The design of the business will depend on the present competition. The product of Abby's Dairy
Plant will be sold as they are from manufacturer. The product will pass through all the design
processes and branding to be done making the business to only deals with selling. The product
like yogurt will be packed in plastic containers. There will be some certain amount of money that
Abby's Dairy Plant will keep that will be use in case of change in technology.

4.2 PRODUCTION OR OPERATIONAL FACILITIES AND CAPACITY.

There are some of equipment and machinery to be used to ensure the success of Abby's plant.
The table below shows the estimate of the equipment.
SERIAL NO ITEM specifications Unit required Unit cost Total cost

001x Milk Whole milk 200 litres 50×200 10 000

002A Sugar Common 50kg 100×50 5000

sugar

003D Starch Natural 5 boxes 500×5 2500

starch

003y Flavors Strawberry 5 packet 5×50 250

002B Cultures Live cultures 3 boxes 3×80 240

17990

16
4.3. PRODUCTION OR SERVICE STRATEGY.
Abby's monthly material will mainly provide service such as weighing calculators shown in the
table below.

TYPES OF FREQUENCY SOURCE QUANTITY COSTS PER TOTAL

MATERIAL REQUIRED SUPPLY UNIT KSH COST

Sugar Daily Generick 50kg 50×100 5000

supermarket

Starch Daily Generick 5 boxes 500×5 2500

supermarket

Flavors Daily Generick 5 packets 5×50 250

supermarket

Milk Daily Farmers 200 litres 50×200 10 000

Labour 17 750

Unskilled Daily Cleaners 2 people 5000×2 10 000

labour

Skill labour Daily Cleaners 2 people 9000×2 18 000

17
4.4. PRODUCTION PROCESS.
The business will involve in the production of product directly. The flow chart below is the steps
of the yogurt products.

Reception of the milk

Homogenization

High pasteurization

Cool to 400

Cool to 400

Incubator

Packaging

4.4.1 EXTEFNAL FACTORS AFFECTING PRODUCTION PROCESS.

1. Presence of competitors emerging from time to time.
2. High taxation.
3. Selling products at a cheaper price.

4.4.2. INTERNAL FACTORS AFFECTING PRODUCTION PROCESS.

1. Internal capital to run the business.

2. Insufficient raw materials.

3. Inadequate source of labour.

18
Table.

Internal Factors How to overcome the factor.

Inadequate labour Increased the number of workers

Insufficient raw materials Purchased more raw materials

Inadequate capital Borrowed loans

4.5 REGULATION AFFECTING THE OPERATION.

It is government regulation that intends to eliminate illegal operation in the country. Examples of
such regulations include the following;

i. Income law.it is proper to insure business against risks such as fire and theft.
ii. Employment regulation. Business to ensure that all individual labour laws are followed in
terms of employee’s remuneration of its employees.
iii. Safety regulations. Wholesalers shop enterprise will work under safety regulation where
it will ensure against some safety regulation this is done through provision of fire
extinguishers.
iv. Business license or permit. These are essential documents issued by the government
authority. They act as proof that the business follows certain laws and ordinances.

Examples of the permits include the following;

General business license.

i. Sellers permit.
ii. Health permits.

19
Table.

License or permit required Source Cost

General business license County government 2000 per year

Sellers permit County government of Bomet 1500 per year

Health permit Ministry of health 1000 per year

Insurance Insurance firm 1000 per year

Total Ksh 6500

20
CHAPTER FIVE.
5.0 FINANCIAL PLANNING.
The firm will obtained its capital from various sources to use to commence its business. The
source of the capital will be from; loan from friends, personal savings and loan from Kenya
Commercial Bank. The capital will be donated as follows;

i. Personal savings 300,000.

ii. Loans from friends 100,000.
iii. Loan from Bank 200,000.

The total capital will be ksh 600 000.

5.1 PRE OPERATIONAL COST

This shows the amount of money incurred before the opening of the business. In addition,
include the following;

i. Business regulation costs.

ii. Business plan costs.
iii. Awareness costs.

Items Amounts

Business trade license 10000

Water installation 15000

Equipments 70000

Transportation 5000

Advertisement and promotion 20000

Business registration 10000

Electricity installation 40000

21
5.2 Working Capital.
This is the money required by the business to run successfully. The working capital is calculated,
as at year 2023, 2024, 2025.The working capital is the differences between total current assets
and total current liabilities.

particulars Year 1 2023 Year 2 2024 Year 2 2025

Current assets

Stock 50000 30000 60000

Cash at hand 20000 40000 50000

Debtors 600000 80000 9000

Cash in bank 60000 70000 80000

Total current assets 190000 220000 280000

Current liabilities

Loans 20000 30000 40000

Creditors 50000 60000 70000

Bank overdraft 60000 70000 80000

Expenses 40000 50000 60000

Total current 170000 210000 250000

liabilities

Working Capital 20000 10000 30000

22
 5.3. Preparation of cash flow projections.
Cash flow is the movement funds in and out of the business.

5.3 PREPARATION OF CASH FLOW PROJECTION FOR YEAR ENDED 31ST DEC 2023
CASH inflow JAN FEB MARCH APR MAY JUNE JULY AUG SEP OCT NOV DEC

Opening cash 30000 40000 50000 60000 70000 80000 90000 100000 100000 100000 100000 100000

Cash sales 10000 15000 20000 25000 30000 35000 40000 50000 60000 70000 80000 90000

Cash in hand 6000 7000 8000 9000 10000 11000 12000 13000 14000 15000 16000 17000

Cash at bank 5000 6000 7000 8000 9000 9000 8000 10000 11000 12000 13000 14000

Total 51000 68000 85000 102000 119000 135000 150000 173000 185000 197000 149000 221000

Cash outflows

Creditors 3000 4000 5000 6000 7000 8000 9000 10000 11000 12000 13000 14000

Salaries 3500 4000 4200 4500 5000 5200 5500 6000 6500 7000 72000 7500

Loan repayment 2500 3000 3200 35000 4000 4200 4500 5000 5200 5500 6000 6200

Electricity 50 60 70 80 90 100 110 120 130 140 150 160

Transport 400 600 800 900 1000 1100 1200 1300 1400 1500 1600 1700

Net cash brought 30000 40000 50000 60000 70000 80000 90000 100000 100000 100000 100000 100000

23
 5.3.2 PREPARATION OF CASH FLOW PROJECTION FOR YEAR ENDED 31ST DEC 2024
CASH JAN FEB MARCH APR MAY JUNE JULY AUG SEP OCT NOV DEC
FLOW

Opening cash 5000 6000 7000 8000 9000 10000 11000 12000 13000 14000 15000 16000

Cash sales 6000 6500 7000 7500 8000 8500 9000 9200 9500 10000 11000 12000

Cash in hand 2000 2200 2500 3000 3200 3500 4000 4200 4300 4500 5000 5000

Cash at bank 3000 3200 3500 4000 4500 5000 5500 6000 6200 6500 7000 7500

Total 16000 125000 20000 22500 24700 27000 29500 31200 33000 36000 38000 30500

Cash outflows

Creditors 8000 7000 6000 5000 5500 6500 8000 7500 8000 5000 6000 9000

Salaries 9000 5000 6000 5500 6000 5000 6000 5500 6000 5000 9000 8000

Loan repayment 7000 7500 6000 5000 4000 6000 7000 6000 5000 800 6000 7000

Electricity 100 200 300 400 600 200 100 200 300 200 100 300

Transport 500 700 600 500 600 800 700 600 500 400 600 700

Net cash 5000 6000 7000 8000 9000 10000 11000 12000 13000 14000 15000 16000
brought
down

24
 5.3 PREPARATION OF CASH FLOW PROJECTION FOR YEAR 3 2025
PARTICULARS JAN FEB MARCH APR MAY JUNE JULY AUG SEP OCT NOV DEC

Cash inflows

Opening cash 20000 30000 40000 50000 60000 50000 60000 70000 80000 60000 50000 60000

Cash sales 5000 6000 7000 6000 8000 7000 6000 5000 6000 7000 8000 9000

Cash at hand 3000 4000 5000 3000 2000 3000 4000 5000 6000 7000 6000 7000

Cash at bank 5000 6000 7000 8000 6000 6000 5000 6000 5000 9000 6000 7000

Total 33000 46000 59000 67000 76000 66000 75000 86000 97000 83000 70000 83000

Cash outflows

Creditors 6000 8000 7000 5000 8000 7000 5000 6000 6000 5000 9000

Salaries 3500 4000 5000 6000 5500 7500 7000 8000 9000 6000 8000 9500

Loan repayment 8000 8500 6500 7500 7000 8000 8500 9000 9500 5000 6000 8000

Electricity 2000 300 500 600 300 200 300 400 200 300 200 100

Transport 500 1000 800 600 500 600 800 100 500 700 800 900

Net cash brought 20000 30000 40000 50000 60000 50000 60000 70000 80000 60000 50000 60000
down

25
5.4 Preparation of Proforma income statement and balance sheet.
5.4.1 Projected income statements
Year 1 ksh Year 2 ksh Year 3 ksh

sales 60000 80000 90000

Less cost of goods sold 40000 20000 30000

Gross profit 20000 60000 60000

Less expenses 10000 40000 30000

Total 10000 20000 30000

Selling and distribution 80000 60000 50000

General administration 20000 20000 30000

Salaries and wages 20000 30000 35000

Telephone 10000 15000 18000

Water bill 5000 4000 3000

Electricity 2000 3000 4000

Stationery 10000 20000 30000

Interest on loan 10000 30000 50000

Maintenance 20000 40000 60000

Trading profit 60000 80000 100000

Less taxation 40000 50000 50000

VAT_16% 20000 30000 50000

3200 4800 8000

Net profit after taxation 23200 3400 58000

26
5.4.2 PROFOMA BALANCE SHEET.
DETAILS 2023 2024 2025

Current assets

Stock 60000 65000 40000

Debtors 40000 40000 60000

Cash at hand 60000 40000 80000

Cash at Bank 40000 50000 20000

TOTAL CURRENT ASSETS 200000 195000 200000

FIXED ASSETS

Machinery 6000 8000 6000

Furniture 4500 3000 1500

Vehicle costs 2000 4000 3000

TOTAL FIXED ASSETS 12500 15000 10500

TOTAL ASSETS 212500 210000 210500

CURRENT LIABILITIES

Bank overdraft 8000 8000 8000

Creditors 20000 30000 20000

TOTAL CURRENT LIABILITIES 28000 38000 28000

LONG TERM LIABILITIES

Bank loan 80000 80000 80000

Bank from KIE 60000 60000 60000

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 TOTAL LONG TERM 14000 140000 140000
LIABILITIES

TOTAL LIABILITIES 168000 178000 22000

5.5 CALCULATIONS OF BREAK EVEN POINTS

Fixed cost 2023 2024 2025

Salaries 520000 740000 820000

Loan interest 6000 8000 6500

License 5000 6000 8000

Insurance 8000 8000 5000

TOTAL FIXED COST 539000 754000 834500

Variables

Rent 20000 21000 25000

Repair and maintenance 36500 40000 37900

Transport 20000 18700 23400

Electricity 18000 16000 15500

Advertisement 124000 118000 9500

Water bill 9600 6300 6700

TOTAL VARIABLES 116500 113800 118000

Sales 3644000 3994000 4506000

5.5.1 Contribution margins

Break point =Fixed cost/contribution margin

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 Contribution margin=Sales-variable cost

Contribution margin for the year 2023

3644000-116500

=3527500

Contribution margin for the 2024

39994000-113800

= 3 880 200

Contribution margin for the year 2025

4506000-118000

=4 388 000

5.6 PROFITABITY RATIOS

PARTICULARS 2023 2024 2025

Gross profit 20000 60000 60000

29
 Net profit 232000 48000 8000

Return on capital 30000 40000 60000

Return on investment 15000 18000 20000

5.7 FINANCING PLAN

Total amount of money required for the business

PARTICULARS AMOUNT

Fixed Assets 38000

Working Capital 316000

Pre operational costs 450000

total 804,000

5.8 .ABBY CAPITALIZATION

PARTICULARS AMOUNT

Bank loan 100000

Friends contribution 200000

Owners Equity 300000

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TOTAL 600000

31