BUSINESS PLAN

BUSINESS NAME : TAWAKAL BUTCHERY

PRESENTER :

INSTITUTION : THE MERU NATIONAL POLYTECHNIC

COURSE : DIPLOMA IN LAND SURVEY

COURSE CODE :

INDEX NUMBER :

EXAM SERIES : NOVEMBER 2024

SUPERVISOR : MADAM FRIDAH NAITO

DEPARTMENT : BUILDING AND CIVIL

PURPOSE :

BUSINESS PLAN SUBMITTED TO THE KENYA NATIONAL

EXAMINATION COUNCIL AS PARTIAL FULFILMENT FOR THE AWARD
OF CERTIFICATE IN LAND SURVEY
DECLARATION
I declare that this is my original work through the research done and guidance from my
supervisor. This work has not been presented to any examination body or institution.
Author :

Sign : …………………………………..
Date : …………………………………..

Supervisor : MADAM FRIDAH NAITO.

Sign :……………………………………
Date : ……………………………………

i
DEDICATION
I dedicate this work to my beloved teachers and my entire family, friends and classmates for
their support, moral and financial throughout my education. I thank them all and my lecturers for
the guidance throughout the course till now.

ii
ACKNOWLEDGEMENT
My sincere gratitude towards my supervisor madam Fridah Naito who supervised and guided me
during my business plan writing, I also appreciate my beloved family for the love they showed
during this time and financed me all that time. I thank also my classmates who were there when I
need their help.

iii
TABLE OF CONTENT

Cover page……………………………………………………….i
Declaration……………………………………………..………..ii
Dedication………………………………………………………iii
Acknowledgement……………………………………………....iv
Table of content………………………………………………….v
Executive summary……………………………………………..vi

CHAPTER ONE
1.0 Business description………………………………………………..1
1.0 Mission and vision statement………………………………………1
1.2 Business name location address and logo………………………….2
1.3 Form of business ownership………………………………………3
1.4 Type of business…………………………………………………..3
1.5 Products and services………………………………………………4
1.6 Justification of opportunity…………………………………..……..4
1.7Industry……………………………………………………………..5
1.8 Goals of business………………………………………………….5
1.9 Entry and growth strategy…………………………………………6

CHAPTER TWO
2.0 Marketing plan ……………………………………………………….7
2.1 Marketing plan objectives…………………………………………….7
2.2 Customer……………………………………………………………….8
2.3 Marketing shares……………………………………………………….8
2.4 Competition…………………………………………………………….9
2.5 Methods of promotion and advertisement……………………………..9
2.6 Pricing strategies……………………………………………………..10
2.7 Sales tactics …………………………………………………………11
2.8 Distribution strategies………………………………………………..12

CHAPTER THREE
3.0 Organization and marketing plan………………………………………13
3.1 Organization and management plan objective………………………….13
3.2 Business manager qualification duties and responsibilities……………..14
3.3 Personell numbers qualifications duties and responsibilities…………….14
3.4 Recruitment training and promotion……………………………………..15
3.5 Renumeration training and payment …………………………………….16
3.6 Licence , permit and by -laws …………………………………………17
3.7 Support services…………………………………………………………18

iv
 CHAPTER FOUR
4.0 Operational or production plan…………………………………….19
4.1 Operational and production plan objectives……………………….20
4.2 operational or production facilities and capacity………………………
4.3 Operational production strategies …………………………………………19
4.4 Operational production process …………………………………………20
4.5 Regulation affecting operation or production …………………………..21

CHAPTER FIVE
5.0 Financial plan……………………………………………………..22
5.1 Financial…………………………………………………………...23
5.2 pre- operational expenses ………………………………………..24
5.3 Estimation of working capital…………………………………….25
5.4 Preparation of cash flow projections……………………………..26
5.5 Preparation of profoma in come statement ……………………….27
5.6 preparation of statements of financial positions…………………28
5.7 Calculation of break even point ………………………………….29
5.8 Calculation of profitability …………………………………………3
5.9 Desired financing……………………………….…………………31
5.10 Proposed capitalization……………………………………………

EXECUTIVE SUMMARY
CHAPTER ONE ; BUSINESS DESCRIPTION
The will be a butchery. The business name TAWAKAL BUTCHERY. It will be located at
Meru makutano along meru maua highway .it will be a sole proprietorship and it will fall under
food industry.
CHAPTER TWO

v
 CHAPTER ONE
1.0 BUSINESS DESCRIPTION
The business name will be TAWAKAL BUTCHERY. It will be a sole proprietorship form of
business owned by Brian Mwenda It’s selling fresh Meats of camels, goat, cow and sheep to
the customers. The business objective is to maximize profit, lift the standard of living of people
in that area and to satisfy the interest of customers mostly in Meru county .

MISSION AND VISION STATEMENT

TAWAKAL BUTCHERY is committed to produce the best meat to the people within
makutano, at the best favorable price.

1.10 VISION OF THE BUSSINESS

To become the best leading butchery in Meru county in the matter of selling quality meat .

6
1.1 BUSINESS NAME
The business name is TAWAKAL BUTCHERY; most appropriate due to other butchery within
the owner chose TAWAKAL BUTCHERY to compete with other butcheries in this location.
The owner chose Tawakal Butchery due to Tawakal means trust so that to compete with other
butcheries in the location

1.2 BUSINESS LOCATION AND ADDRESS

The business is located at Meru opposite Neon lounge . The place is chosen because of high
demand and at that time there were no any butchery within that route and close to electricity and
communication facilities and most of all a ready market because of high population within town.

The business address is as follow:-

TAWAKAL BUTCHERY
PO BOX 1200-586
MERU

1.3 FORMS OF BUSINESS OWNERSHIP

The business deals with selling of Fresh Meats and distribution of the same to their customers.
Thus the business will be a service venture.

1.4 PRODUCTS AND SERVICES

The business deals with goods and services such fresh meat in an efficient and effective way.
This will lead to increase in profit and hence expansion of business.

7
1.5 JUSTIFICATION OF OPPORTUNITY
This was a modern day venture in MAKUTANO Town Business. There was little competition
from other similar already established firms. This is because it is offering products and services
of high quality in an economical and effective ways.

1.6 BENEFITS OF BUSINESS TO THE COMMUNITY

The business contributes the following benefits to the community:-
i. It provides quality goods and services to customers in an economical and efficient way.

1.7 INDUSTRY
The business venture is falling under service industry.

CHARACTERISTICS OF INDUSTRY
i. Kind of technology
The firm is mostly requiring labour intensive services due to the fact that many
operations are done by use of hands.

ii. Capital requirement

The firm requires moderate capital to pay the employee salary
iii. Size of the firm
The firm is medium size thus the number of workers are few. This further increase the
amount of profit by keeping cost of labour at minimum

1.8 BUSINESS GOALS AND OBJECTIVES

a). Short term goals
i. To simplify day today activities and automates workflows to increase productivity
ii. To raise turnover by 18% and profit by 10% in the first quarter
iii. To make sales and marketing a priority
iv. To listen to customers
v. To collaborate with all employees to brain storm new ideas.

8
 vi. To build and nurture customer relationships
vii. To attract and retain talented employees
b). Medium term goals
i. To refurnish the whole premises
ii. To be most hygiene business in MAKUTANO town.
iii. To rewards employees based on objective performance appraisal
iv. To observe diversity of workforce
v. To create and review existing policies to support operations.
b). Long term goals
i. To purchase van to help in distribution of Fresh Meats
ii. To focus on new market penetration strategies
iii. To expand into new opportunities
iv. To develop ties with strongly positioned strategic partners
v. To develop efficient corporate culture

1.9 ENTRY AND GROWTH STRATEGIES

a).ENTRY STRATEGY
Before the start-up of the business the owner he decided to create awareness to the community
by carrying out campaign to targeted customers through advertising, for instance, through use of
posters, notices, publicity and promotions. The venture will be in a position to penetrate and
gain acceptance in the market.
The owner currently is in a position to effectively cope with competition by providing quality
products in a convenient and efficient manner to target customers.

b).GROWTH STRATEGY
The owner has employed more skilled and qualified personnel who facilitate efficiency and
effectiveness, thus attracting more customers to the butchery
The business owner is ensuring daily a continuous improvising of quality of goods and services
provided hence enabling the business to effectively cope with its competitors. More so, the
business owner had used the ploughed back profits to expand the business.

9
 CHAPTER TWO
2.0 MARKETING PLAN

2.1 INTRODUCTION
The owner has already captured over 50% of the whole market population which is
approximately 200,000 customers since business started the market target achieved through
advertisement and promotion.
The owner does get profit of Ksh. 60,000 and annual profit of Ksh. 1,000,000

2.2 CUSTOMERS
The target customers of the business are individual buyers and institutions.

2.2.1 Individual Buyers

These are customers who will buy goods and services for consumption. They include residents of
Makutano town and its surroundings constitute the most of targeted customers.

2.2.2 Hotels And Restaurants

Businesses targeted include NEEON club, HAVARNA LOUNGE , and other cafes within and
outside makutano.

2.2.3 Institutional Customers

Institutions targeted include police canteen, MIBS COLLAGE ,KEMU UNIVERSITY and
MERU teachers college among others .

2.2.4 Purchasing Pattern Of Customers

Individual customers, retailers, wholesalers, and hotels are expected daily throughout the trading
period. The peak hours are morning and evening and institutional customers are common when
schools are open. This is mainly from January to March, May to July and September to
November.

2.2.5 Mode Of Payment

The business mainly deals with cash and credit payment for goods and services acquired.

10
2.3 MARKET SHARE
The butchery customers in the locality of the business are estimated to be 115,000 people. The
business will dominate the 20% market share of the potential customers and also intends to
capture120, 000 customer’s market share.

2.3.1 High And Low Sales

The business is enjoying high sales when there are any functions such as wedding or such and at
the end of the month but low sales at the middle of the month

2.4 COMPETITION
The business competitor are-
BEFF CUT BUTCHERY
MERU
Located along MAKUTANO KINORU road clean shave barbershop.
MARETE BUTCHERY

Located Opposite sifa D super market

BEST BEEF BUTCHERY

Located Next to shell petrol station 200 m from TAWAKAL butchery .

THE PERCENTAGE MARKET SHARE AS SHOWN BELOW:-

BEFF CUT BUTCHERY

(70,000 /300,000) X 100 = 15%

MARETE BUTCHERY

(20,000 / 300,000) X 100 = 25%

BEST BEEF BUTCHERY

11
 (30,000 / 300,000) X 100 = 20%

Pie-chart to illustrate market share

Chart Title

15.00% 2.5

40.00%

20.00%

25.00%

COMPETITORS STRENGHS AND WEAKNESSES

A).STRENGHS

2.5.1 Price
The competitors offer their products at fair prices which results to high competition in the
market.

2.5.2 Product Superiority

The competitor products are of high quality which encourages competition in the market,
however,

2.5.3 Customer Reputation

BUTCHERY is known to be friendly.
B).WEAKNESSES
All the competitors are not efficient and effective in product delivery and more so, they do offer
credit facilities. Additionally, they are not customer friendly.

COMPETITOR STRENGH AND WEAKNESSES

12
 COMPETITORS PERCENTAGE STRENGH WEAKNESS STRATEGY
MARKET TO COMPETE
SHARE
BEFF CUT 15% -customer -lack of
BUTCHERY friendly efficiency in
-high quality product delivery
products

MARETE 25% It’s a new -unstable prices

BUTCHERY business which keeps on
venture in the changing
market

BEST BEEF 20% Its located -risk of security

BUTCHERY close with -high labour
other shops turnover

2.6 METHODS OF PROMOTION AND ADVERTISEMENT

The business has to use the following promotional strategies
a). Offering discount
Though the business will take the market price the proprietor will offer discount to those who
will buy in large quantities. This type of discount is known as quantity discount.
More so the business will offer discount on timely payment so as to encourage prompt settlement
of debts.
b). Offering extra services
The distribution of Fresh Meats by the business will be up to the customer door step. These
customers include schools, bars hotels, retailers, individual customers, restaurants and hospitals.

2.6.1 Advertising
a). Posters
Posters will be placed in most strategic places within town for people to be informed. They will
be used in the first two months of the operation of the business.
13
 FOR BEST, AFFORDABLE, QUALITY
FOOD AND FRESH MEATS VISIT
TAWAKAL BUTCHERY

WE ARE OPEN EVERY DAY FOR 24 HOURS

REACH FOR QUALITY AND SATISFACTION

2.7 PRICING STRATEGY

The business has priced the products based on direct cost, fixed cost and overhead cost so as to
make a reasonable profit. The business has also considered the price of the competitors.

2.7.1 Factors To Consider When Pricing

i. Demand of product
The business has also considered the number of customers who are ready and willing to buy
the product continuously for a long period of time.

ii Competitors pricing
The pricing of the products that has been offered by TAWAKAL BUTCHERY will depend
on prices set by competitors
iii. Sales volume and profit
The sales volume and the profit made have been used to determine the price to be set for
various good and services.

14
2.8 SALES TACTICS
These are activities that were carried out by the business in order to reach its desired
objectives. They include:-
i. Sales policy
The business has offered the following: - quality products, discounts like quantity and
price discount and fixed prices for various Goods and services
ii. Sales team
The management has recruit well trained staff capable of marketing the business as
desired so as to attract more customers.
iii. Selling methods
The various methods were adopted by the business are direct selling at the counter and
through use of representatives.
iv. Maintaining and increasing sales
Frequents advertisements have been used to increase the sales of the business
organization, other methods to be used include the Following; use of raffles, offering
discounts and after sales service among others.

2.9 DISTRIBUTOIN STRATEGY

The goods and services have reach customers through direct selling at the counter to the
customers who visit the premises and also via representatives who will reach our target
customers in other institutions. That the business will also deliver goods to customers especially
those who purchase on large quantities

CHAPTER THREE
15
3.0 ORGANIZATION AND MANAGEMENT PLAN
The business being a sole proprietorship is been managed by BRIAN MWENDA Who is the
manager
The manager is responsible for a number functions such as those of carrying out managerial
functions like planning, organizing, staffing, directing, controlling and communication.
Other operative functions will include functions like marketing, purchasing, accounting and
finance among others.

3.1 ORGANIZATION STRUCTURE

MANAGER

WATCHMAN ATTENDANT

3.2 BUSINESS MANAGER

Being a sole proprietorship form of business, it is under management of BRIAN MWENDA
who is the owner of the business. On education qualifications the manager has A Diploma in
Land Survey. This has equipped the proprietor with skills, knowledge and abilities to start,
operate and manage the business in an efficient and effective way so as to ensure it succeed.

QUALIFICATIONS
i. A Diploma in Land Survey
ii. Knowledge in management and entrepreneur skills
iii. Aged 24 years
iv. Certificate in computer studies from Broadway College of secretarial studies

3.2.1 Duties of The Manager

i. Delegation of authority to workers
16
 ii. Making decisions
iii. Planning to establish goals and objectives which they will work to achieve.
iv. Supervising employees

RESPONSIBILITIES
i. To offer incentives to employees
ii. To ensure customer is served well

3.2.2 Salary And Benefits

The manager is getting profit of Ksh. 30,000 after he had paid the employee and paid the
electrical bill and rental house.

3.3 OTHER PERSONNEL

The business requires the following persons:-
i. Manager
The manager needed expected to have diploma in Human Nutrition and dietetics. This
ensures that the concerned has management and human skills to ensure that the
organization runs smoothly.
ii. Helper staff
A helper staff must have minimum certificate in customer relations so as to be able to
relate well with customers. This lead to improved customer satisfaction in butchery

17
SUMMARY OF PERSONNEL
PERSONNEL NUMBER QUALIFICATIONS DUTIES AND SALARIES
RESPONSIBILITIES
Manager 1 -Diploma in human -Decision making 30,000
resource -Delegating authority
management -Planning
2 Helper staff 2 -Knowledge of -Search for new 17,000 x 2
Include with KIMERU language markets and best
driver -Fluent in English customer care
and Kiswahili
-certificate in
customer relations
TOTAL 3 64,000

3.4 RECRUITMENT, TRAINING AND PROMOTIONS

i. Recruitment
The recruitment of employees was external and posters were used to advertise for vacant
positions so as to attract people with required qualifications. The preferred candidates
were shortlisted and called for an interview which was carried out by the manager. The
best candidates was selected after the interview and placed in their respective job
ii. Training
The manager will offer training to employees through seminars and workshops so as to
continuously improve their skills. More so, manager will embrace on-job training and off
the job training so as to impart workers with relevant knowledge, skills and abilities
leading to improved performance.
iii. Promotion
Promotion of the employees will mainly be based on their knowledge, skills, abilities,
qualifications and performance on the job. Workers will also be promoted based on their
loyalty and commitment to the organization.

18
3.5 REMUNERATION AND INCENTIVE
The employees are expected to work for eight hours on week days and five hours on weekends.
Any overtime is being paid one and half of the normal rate. Employees are also being paid in
time to avoid go-slow and confrontation. The manager do provide annual leaves, day off,
maternal and paternal leaves, sick leaves to workers in order to comply with the law and also to
motivate them. Other benefits include holding an annual party at the end of the year.

3.6 LEGAL REQUIREMENTS

The legal requirements for the business include:-
i. Taxation
The business is taxed directly by paying revenue to the county government of MERU,
through VAT at the rate of 10% P.A and via PAYE of the workers.
ii. Business registration
For the business to operate it requires to be registered as prescribed by county by-laws
especially from MERU County Government.
iii. Trading license
The business acquired a trading license from revenue MERU sub-county office which is
a requirement by a sole proprietor of the business.

3.6.1 Legal Requirements Summaries

REQUIREMENTS DESCRIPTIONS WHERE TO FEES REMARKS
BE RAYABLE
OBTAINED
Taxation VAT MERU 10% p.a of Per year
sub-county profit
Trading license Local authority MERU Ksh 15,000 Per year
sub-county
Business Operations MERU Ksh 10,000 At the start of
registration sub-county business

3.7 SUPPORT SERVICES

The business required the following support services for it to run efficiently and effectively;
19
3.7.1 Banking Services
The owner chose:
EQUITY BANK MERU BRACH
3.7.2 Insurance
The owner chose
JUBILEE INSURANCE COMPANY
P.O. BOX 9473
MERU
This will be at cost of Ksh 500 per month.
The business will be insured against theft and fire and their charges are low and affordable.

3.7.3 Telephone Services

The business uses a mobile phone for its operations.
The number 0100249955

3.7.4 Security Services

The security is provided by the police in the area since there is a police post near that is, MERU
police station.

20
 CHAPTER FOUR
4.0 OPERATION /PRODUCTION PLAN

4.1 PRODUCTION FACILITIES AND CAPACITIES

Before the business carry out its operations efficiently and effectively in offering quality services
to its customers, the owner of the business he acquired some assets. The owner therefore, intends
to acquire some of these assets before the start of the business so as to enable it to run smoothly.
The equipment is shown in the table below;

4.1.1Summary Of Production Facilities

ITEM DESCRIPTION MODE NAME USE COS QUANTIT TOTA
S L OF T Y L
MAKE SUPPLIE Ksh. Ksh.
R
Furniture Medium size Wooden Suleiman Staff and 4,000 4 16,000
furniture customer use
Utensils Panga, knife and Metal Kilimani Cutting meet 3000 16 48,000
axe group
Stationer Cash book, A4, Bukheri Recording 50 10 500
y receipts and Standar stationerie Sales
pens d pen s
LG TV Sonic sonic Dick entertainmen 1000 1 10000
studio t 0
Counter 40000
Total 114500

21
4.2 MATERIALS FOR PRODUCTION
4.2.1Summaries for Direct Materials

ITEM DESCRIPTION NAME QUANTITY COST PER TOTAL REMARKS

AND NEEDED UNIT (Ksh)
ADDRESS (Ksh)
OF
SUPPLIER
Meet TIMANGIR 500kg 120
I slaughter 60,000

4.2.2 Summaries for Indirect Materials

ITEM DESCRIPTION NAME QUANTITY COST TOTAL REMARKS
AND NEEDED PER COST
ADDRESS UNIT
OF
SUPPLIER
LG TV Sonic Dick studio 1 25,000 25,000
Utensils Alluminium Kilimani 16 500 8,000
group
Furniture Hard wood Sawa sawa 8 4,000 32,000
furniture
Stationery Standard Nick shop 12 83 1,000
material
TOTAL 66,400

22
4.3 PRODUCTION OR SERVICE STRATEGY
4.3.1 Production Control
The owner of the business has to employ measures in order to ensure that the business operates
smoothly. An inventory book will be maintained to ensure accountability of business assets. A
receipt book that shows goods and services offered to customers will be provided and must have
a signature of the sales man.

In future workers will be sponsored by the owner in pursuit of their further training. The
acquisition of additional skills will make them more competent and therefore able make business
more adaptable to its working environment. This leads to improved productivity and hence
maximum profit

4.3.2 Quality Control

The owner will transact only quality goods and services so as to improve the competitive edge of
the business. All this will be achieved by laying out measures to reduce wastages, enhance
hygiene and good customer relations.

4.3.3 Labour Control

The business will employ nine workers which include one manager, one accountant, one agent,
one distributor, four waitresses and one watchman.
Total labour =No. of direct labour X cost per hour * No. of hours worked per month for;

Manager
1 X 93.75 X 320 = KSH.30, 000
Helper staff

2 X 53.13 X 320 = KSH. 34,993.2

23
4.3.4Summary Of Labour Control

ACTIVITY SKILLS EDUCATION STAFF REMARRKS

NEEDED LEVEL ASSIGNED
Carrying out Managerial Degree in human Manager
functions of skills & Nutrition and
management Human skills dietetics
Receiving and Knowledge of CPA III Accountant
issuing receipts accounting &
Bookkeeping
Distribution and Marketing & Driving Distributor
selling Selling tactics certificate /
driving license
Staff helper Knowledge in Certificate in Agent
marketing public relation
Management
Security General security Form four watchman
skills certificate

24
4.4 PRODUCTION PROCESS
Since the organization is dealing with already made goods, therefore, it will follow the below
process
i. Producer
ii. Retailer
iii. Consumers
STAGE ONE
The owner will get materials directly from producers like KBL, Coca Cola and Farmers in case
of hard Fresh Meats, soft Fresh Meats cereals respectively.
STAGE TWO
This is the stage where the business lies as it will be involved in selling goods and services to
final consumers as well as acting as wholesaler by selling to small retailers who will later resell
to final consumers.
STAGE THREE
This stage is occupied by our consumer who will purchase our Fresh Meats, food and services
for either their own use or for resell.

4.5 REGULATION AFFECTING OPERATIONS

The following regulations are going to affect production process;

4.5.1 Health Regulations

The owner has to provide clean water and clean surroundings so to enhance improvement in
hygiene and health of workers and customers.

4.5.2 Safety Regulations

The owner has install fire extinguisher to cater for any fire out break and guarantee job security
of workers among others.

4.5.3 Business Ethics

The owner have observe business ethics by ensuring that goods and services meets the require
standards set out by law, association of manufacturers and service provides

4.5.4 Environmental Regulations

The owner have provide dustbin for dumping off any waste so as to reduce environmental
degrading...

25
4.5.5 Building Regulations
The owner have ensure adequate space and proper ventilations where customers will feel
comfortable, satisfied and at home.

4.6 EQUIPMENTS OR MATERIALS

As the owner of the business I will be required to have some equipment that will necessitate
the effectiveness, smooth running of the business and efficiency.
The following facilities will facilitate the smooth running of the business.
EQUIPMENT QUALITY COST TOTAL COST
Beef Animal 5 20,000 100,000
Animal Shade 3 400 1,200
Land 5 ha 100,000 100,000
Animal Feeds 4 500 2,000
Beef Feeding Trough 3 200 600
Cash Book 3 200 600
Water Tanks 1 950 950

26
 CHAPTER FIVE
5.0 FINANCIAL PLAN
The financial plan will ensure that the business resources are fully managed and utilized thus
enables the management of the business. It also shows that will be invested and the financial
operations on what is expected from the investment

5.1 PRE OPERATIONAL COST

This shows the amount that will require starting its operations. Example transport, labour and
maintenance
The table below shows the expenses that the business will incur before it commence
ITEMS AMOUNT (KSH)
Electricity 25,000
Transport 10,000
Insurance 7,500
Repair and maintenance 15,000
Advertisement 1,800
Labour 53,500
License 2,500
Water bill 10,000
TOTAL 125,300

5.2 WORKING CAPITAL

This is the amount of money that will be required by the owner during daily operations of the
business
Working capital = current assets – Liabilities
The table on the next page shows the working capital of JAMII Cash Mpesa services, basing on
the following assumptions;
i. My business will be interdependent in the future days
ii. The business will be growing and expanding rapidly
iii. The business will be keeping my funds at the bank
27
 iv. The business shall be offering credit facilities
v. The market demand will be steady or growing

ASSETS YEAR 1 YEAR 2 YEAR 3

CURRENT ASSETS
Debtor 40000 50000 30000
Cash in hand 100000 150000 100000
Cash at bank 250000 200000 300000
TOTAL 390000 400000 430000
CURRENT LIABILITIES
Creditors 90000 70000 100000
Accruals 60000 50000 80000
Bank loan 120000 150000 160000
TOTAL LIABILITIES (270000) (270000) (340000)
WORKING CAPITAL 120,000 130,000 90,000

28
 CASH FLOW FOR YEAR ONE
ITEM JAN FEB MARCH APRIL MAY JUNE JULY AUG SEPT OCT NOV DEC TOTAL

BAL BF - 13900 7000 20000 18000 9000 19400 21000 33700 29900 20000 25000 217900

CAPITAL 165700 - - - - - - - - - - - 165700

MACHIENRY 220700 - 1800 - - - 20000 - 6000 - - 4100 252600

SALES 120000 150000 141800 150000 160000 181000 156500 200000 160000 170000 200000 180000 1961300

DEBTORS 20000 21000 30000 30000 10700 20000 21000 - 30000 9400 9000 - 201100
5.3 CASH FLOW SYSTEM

TOTAL INFLOW 526400 184900 180600 200000 188700 210000 216900 221000 229700 209300 229000 209100 2805600

PURCHASE 307000 15600 - 13000 10000 20000 15000 18000 30000 20000 25000 10000 483600

29
RENT 30000 - - 10000 10000 10000 10000 10000 10000 10000 10000 100000 120000

ELECTRICITY 5000 3000 2000 1000 900 1200 1000 800 1300 900 1200 1000 19300

WATER 2500 2000 1000 500 1000 900 1200 700 800 900 1000 600 13100

INSURANCE 1000 1000 1000 10000 1000 1000 1000 1000 1000 1000 1000 1000 12000

WAGES 155000 155000 155000 155000 155000 155000 155000 155000 155000 155000 155000 155000 1860000

TRANSPORT 1000 800 1000 700 1200 1500 12000 1000 1200 800 10000 500 31700

LICENSE 10000 - - - - - - - - - - - 10000

TELEPHONE 1000 500 600 800 600 10000 700 800 500 700 800 1000 9000

TOTALOUTFLO 512500 177900 160600 182000 179700 190600 195900 187300 199800 189300 204000 179100 2558700
5.4 PROFOMA INCOME STATEMENT
The table below shows the profoma income statement for 2 years.
ITEM YEAR 1 YEAR 2
Sales 1,961,300 1,868,100
Less cost of sales 201,100 175,100
Opening stock 386,400 171,500
Add purchase 31,900 36,000
GROSS PROFIT 2,580,700 2,250,700
Expenses
Wages 1,860,000 1,850,00
Rent 120,000 120,000
Electricity 19,300 8,600
Insurance 12,000 12,000
Transport 31,700 8,400
Water 13,100 9,200
License 10,000
Telephone 9,000 6,500
Purchase 483,600 186,000
TOTAL EXPENSES 2,558,700 2,210,700
Net profit before tax 22,000 40,000
Net profit after tax 6,600 12,000

30
5.5 PROFOMA BALANCE SHEET
ITEM YEAR 1 YEAR 2
CURRENT ASSETS
Cash at hand 100,000 139,500
Debtors 201,100 175,100
Stock 307,000 20,000
TOTAL ASSETS 608,100 334,600
FIXED ASSETS
Machinery & Equipment 252,000 38,000
TOTAL ASSETS 252,00 38,000
CURRENT LIABILITIES
Creditors 100,000 100,000
Bank loan 300,000 39,500
TOTAL 400,000 139,500

31
5.6 CALCULATION OF BREAK-EVEN POINT
5.6.1 BREAK-EVEN POINT
Combination Margin = Sales – Variables
ITEM YEAR 1 YEAR 2
Sales 1,961,300 1,868,100
Variable cost
Purchases 483,600 186,000
Electricity 19,300 8,600
Water 13,100 9,200
Transport 31,700 8,400
Telephone 9,000 6,500
TOTAL 556,700 218,700
Contribution 1,961,300 – 556,700 1,868,100 – 218,700
= 1,404,600 =1,649,400

Contribution Margin Percentage = Contributions X 100

Sales

YEAR 1 YEAR 2
= 1,404,600 X 100 1,649,400 X 100
1,961,300 1,868,100
= 71.62% = 88.29%

32
5.6.2 BREAK EVEN POINT
Fixed Cost X 100
Contribution
ITEM YEAR 1 YEAR 2
Rent 120,000 120,000
Insurance 12,000 12,000
Wages 1,860,000 1,860,000
License 10,000 10,000
TOTAL 2,002,000 2,002,000
2,002,000 X 100 2,002,000 X 100
1,404,600 1,649,400
= 142.53% = 121.38%

5.6.3 Break Even Units

Contribution Margin
Total Fixed Cost
YEAR 1 YEAR 2

1,404,600 1,649,400
2,002,000 2,002,000
= 0.7% = 0.8%

5.7 PROFITABILITY RATIO

5.7.1 Gross Profit Ratios
Gross Profit Ratio = Gross Profit X 100
Sales

YEAR 1 YEAR 2
2,580,700 X 100 2,250,700 X 100
1,961,300 1,868,100
= 131.58% = 120.48%

33
5.7.2 Net Profit Ratio
Net Profit Ratio = Net Profit before tax X 100
Sales

YEAR 1 YEAR 2
22,000 X 100 40,000 X 100
1,961,300 1,868,100
= 1.12% = 2.14%

5.7.3 Return on Equity

Profit After Tax X 100

Capital

YEAR 1 YEAR 2
6,600 X 100 12,000 X 100
165,700 169,500
= 3.98% = 7.08%

5.7.4 Return on Investment

Return on Investment = Net Profit after tax X 100
Total Investment
Total Investment = Capital + Loan

YEAR 1 YEAR 2
Total Investment Total Investment
= 252,600 + 400,000 = 38,000 + 139,500
= 652,600 = 177,500

Return on Investment Return on investment

=6,600 X 100 = 12,000 X 100

652,600 177,500
= 1.01% = 6.76%

34
5.8 DESIRED FINANCING
ITEM AMOUNT
Pre-operational cost 270,200
Working capital 565,700
Miscellaneous 400,000
TOTAL 1,235,900

5.9 PROPOSED CAPITALIZATION

SOURCE AMOUNT
Personal savings 565,700
Friends contribution 100,000
Loan from Cooperative Bank 300,000
TOTAL CAPITAL 965,700

35
APPENDIX
STENGTH – An asset of special worth or utility
COMPETITORS – A business or organization or personnel offering similar competing products
or services
STRATEGIES – Plans/techniques put aside by somebody for the control of his/her business
PRODUCTS – These are the goods and services being produced
WEAKNESS – This are things or fields that a business can’t perform well

36