BUSINESS PLAN

BETTY’S KIDS HAIR SALOON

PRISENTED BY : BETTY CHEROP

REG NO : KSS/056/23C

INDEX NUMBER: 5031130043

COURSE : CERTIFICATE IN SECRETARIAL STUDIES

PAPER CODE: 1901

CENTER NAME : CAMBRIDGE UNIVERSAL COLLEGE

PRESENTED TO; KENYA NATIONAL EXAMINATION

COUNCILIN PARTIAL FULLFILMENT FOR AWARD OF

CERTIFICATE IN SECRETARIAL STUDIES

SUPERVISOR : KELVIN SHILULI

EXAMINATION SERIES: JULY 2024

i
 DECLARATION

This business plan is my original work. It has never been produced and presented or
presented to any examination body for marking.

NAME: BETTY CHEROP

SIGNATURE ……………………………………

DATE ……………………………..

This business plan is approved by the supervisor and presented to the Kenya national
examination

SUPERVISOR: MR. KELVIN SHILULI

SIGNATURE …………………………….

DATE …………………………..

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DEDICATION

I dedicate this work to my family members and more to my supervisor

iii
 ACKNOWLEDGEMENT
I would like to express my gratitude to the Almighty God for enabling me to come up

with this document. Special regards to my lecturer. For her conscience support all

through and approval and this business plan and my parents for supporting me financially

and all friends for encouragement.

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 TABLE OF CONTENT
DECLARATION..................................................................................................................i
DEDICATION...................................................................................................................iii
ACKNOWLEDGEMENT..................................................................................................iv
CHAPTER ONE..................................................................................................................1
1.0 EXECUTIVE SUMMARY.....................................................................................1
1.1 BUSINESS DESCRIPTION...................................................................................1
1.2 MARKETING PLAN..............................................................................................1
1.3 ORGANISATION PLAN........................................................................................1
1.4 OPERATION PLAN...............................................................................................1
1.5 FINANCIAL PLAN.................................................................................................2
CHAPTER TWO.................................................................................................................3
2.0 BUSINESS DESCRIPTION...................................................................................3
2.1 BUSINESS NAME...................................................................................................3
2.2 PHYSICAL LOCATION........................................................................................3
2.3 FORM OF OWNERSHIP.......................................................................................4
2.4 TYPE OF OWNWRSHIP.......................................................................................4
2.5 SERVICES OFFERED...........................................................................................4
2.6 JUSTIFICATION OF THE BUSINESS................................................................4
2.7 BRIEF HISTORY OF THE BUSINESS...............................................................4
2.8 GOALS OF THE BUSINESS.................................................................................4
2.9 ENTRY AND GROWTH STRATEGY.................................................................5
CHAPTER THREE.............................................................................................................6
3.0 MARKETING PLAN..............................................................................................6
3.1 POTENTIAL CUSTOMERS.................................................................................6
3.2 COMPETITORS.....................................................................................................6
3.3 PRICING STRATEGY...........................................................................................7
3.4 ADVERTISING AND PROMOTION STRATEGY............................................7
3.5 MARKET SHARE...................................................................................................8
3.6 SALE TACTICS......................................................................................................8
3.7 DISTRIBUTION STRATEGY...............................................................................8
CHAPTER FOUR...............................................................................................................9
4.0 ORGANISATION PLAN........................................................................................9
4.1 ORGANISATION STRUCTURE..........................................................................9
4.2 MANAGEMENT TEAM........................................................................................9
4.3 REMUNERATION AND INCENTIVES............................................................11
4.3.1 REMUNERATION.............................................................................................11
4.4 JOB DESCRIPTION AND INDUCTION...........................................................11
4.5 LICENSES, PERMITS AND BY-LAWS............................................................11
4.6 ORGANISATIONAL RULES..............................................................................12
4.7 SUPPORTIVE SERVICES...................................................................................12
CHAPTER FIVE...............................................................................................................13
5.0 OPERATION PLAN.............................................................................................13
5.1 PRODUCTION FACILITIES..............................................................................13
5.2 ATTAINABLE CAPACITY.................................................................................13

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 5.3 PRODUCTION DESIGN AND DEVELOPMENT............................................13
5.4 PRODUCTION STRATEGY...............................................................................13
5.5 DESIRED PRODUCTION CAPACITY.............................................................13
5.6 PRODUCTION PROCESS...................................................................................13
CHAPTER SIX..................................................................................................................14
6.0 FINANCIAL PLAN...............................................................................................14
6.1 ASSUMPTIONS....................................................................................................14
6.2 PREOPERATIONAL PLAN................................................................................14
6.3 ESTIMATION OF WORKING CAPITAL........................................................15
6.4 PROJECTED CASH FLOW STATEMENT........................................................1
6.5 AHMED 'S SALON PROFORMA INCOME STATEMENT............................2
6.6 AHMED'S SALON STATEMENT OF AFFAIRS AS AT THE BEGINNING
OF THE YEAR..............................................................................................................2
6.7 AHMED BALANCE SHEET FOR THE THREE YEARS.................................3
6.10 DESIRED FINANCING.......................................................................................6
6.11 PROPOSED CAPITALIZATION.......................................................................7

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 EXECUTIVE SUMMARY

1.1 BUSINESS DESCRIPTION

The business shall operate under the name Betty’s Kids hair saloon situated in Tarama
town. The business shall be a sole proprietorship and shall be dealing with plaiting hair
and selling of plaiting materials, hair bands, clips and nail varnishe for kids. It shall be
regulated by the ministry of trade and industry. Its aim is to improve people’s living
standard by providing jobs and maximizing profits.

1.2 MARKETING PLAN

The targeted customers will mainly be kids around the area but we shall also extend our
services to students, travelers, business persons and workers from various sectors in the
town. The competitors are just around the business e.g Vision and Blessing saloon. The
pricing charges will be fixed to all classes of kids and the media and posters. The
services will be determined by production cost.

1.3 ORGANISATION PLAN

The business will have a team of eight workers where the manager acts as the boss and
intends to employ the following persons; supervisor, cashier, guards and workers. To
improve the labour of employees, they should undergo training in beauty and hair
Design College and also attend seminars. The business should also offer short leaves and
rest during special occasions, compensated for an accident when n duty and their salaries
will be paid according to performance and increment will be offered to those
hardworking.

1.4 OPERATION PLAN

The business involves offering of services to clients e.g. in hairdressing i.e. the different
hairstyles required by the customer, it also involves selling of different plaiting
materials, nail varnishes, hand bands and clips. The maximum production capacity will
depend on the design required by different customers. The plaiting materials will be
purchased from wholesalers and their offer the service direct to the customer. The
business also opens from 7.00am-6.00pm from Monday to Saturday and opened from
2.00pm to 6.00pm on Sundays.

1.5 FINANCIAL PLAN

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The business will be financed by a capital of Ksh 300,000 and the business shall be
expanded through ploughing back of profits. The following shows the source of capital

SOURCE AMOUNT (KSH)

Own savings 70,000
Contribution from parent 130,000
Loan from bank 100,000
Total 300,000

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 CHAPTER ONE

1.0 BUSINESS DESCRIPTION

The reason for venturing in this kind of business is because it has offered job
opportunities to many people who are unemployed thus making this country to develop
economically and hence needs to be developed.

1.1 BUSINESS NAME

The business name will be

BETTY’S KIDS HAIR SALOON

P.O BOX 242,
Tarama
The reason why I chose this name of the business is because the letter it stands for
hygienic. Thus, the business is the cleanest saloon in the town.

1.2 PHYSICAL LOCATION

The business will be located in Machakos town in Machakos County, central province
700m from Machakos road. These location was chosen because its at strategic place and
its on the highway thus can easily be seen and easily accessed.

1.3 FORM OF OWNERSHIP

The business will be a sole proprietorship where the manager will supervise the business,
maximize profits, make decisions and employ workers to run the day-to-day activities.

1.4 TYPE OF OWNWRSHIP

The business shall be a start up because it has not been running before, it will be
managed by the owner and other hired qualified employees so as to run its operations
and accumulate profit.

1.5 PRODUCT AND SERVICES OFFERED

The services offered to kids who will be our main customers include;
Curl kit
Blow dry and setting
Perm
Blow-out
Plaiting
Hair dressing
Hair dying
Nail varnish

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1.6 JUSTIFICATION OF THE BUSINESS
The business is located in an ideal position that has a good infrastructure and a growing
population thus customers get access to it easily. The premise also gets plenty of water
from municipal council and from Tarama thus has improved standards of cleanliness
compared to the other premises.

1.7 BRIEF HISTORY OF THE BUSINESS

1.7.1 The business is regulated by the ministry of trade and industry

1.7.2 Significance of the business to the national development

 The importance of the business to the national development
 To create employment hence improving the standards of living
 The business will strive to pay all legal taxes
 It offers quick services to the people around hence saving their time

1.7.3 Demand and supply

The demand of the service is too high and hence need of steady supply.

1.8 GOALS OF THE BUSINESS

1.8.1 MISSION STATEMENT

To satisfy the needs of the customers in the whole of Machakos region and its
environment.

1.8.2 LONG TERM GOAL

This includes;
 Profit – the business will aim at achieving maximum profits, which will be used
to buy more goods and services; further more o expands the business so as to
meet market and competition within the region.
 Employment- there is a high rate of unemployment within our country worsened
by the retrenchment system. Thus, as the business grows gradually and strongly it
will offer more employment to people so that they rise their living standards.
 As the business expands it will intend to open up a college of beauty and hair
design.

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1.8.3 SHORT TERM GOALS
This includes;
 To maximize profits.
 To avoid time wastage by offering quickest services.
 To offer better quality services.

1.9 ENTRY AND GROWTH STRATEGY

1.9.1 ENTRY STRATEGY

The business shall start with low prices which will gradually increases as the business
grows. This is also done after establishing potential customers.

1.9.2 GROWTH STRATEGY

 Start with low price then raise it slowly.
 The business will grow and expand through ploughing back of profits.
 The manager having enough managerial skills.

After penetrating the market, the owner will save some money for expansion of the
business and buy more machines. In connection to that, the manager can employ more
workers to reduce workload in the saloon and also mobile charging and airtime sold to
customer who come to the saloon.

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 CHAPTER TWO

2.0 MARKETING PLAN

The business provides services to the customers which are in direct contact with the
management.

2.1 POTENTIAL CUSTOMERS

The business offers services to different types of customer’s e.g.

I. KIDS
Our main target customers will be kids around the town, we focused on kids
because our competitors have no space for kids thus making them our target they
will be lured to come to our business with their parents.

II. STUDENTS
Students from East Africa institute of certified studies, Thika Technical training
institute and Machakos secondary are expected to form the customer base and most
of them come to the premise during the weekends. Also during opening days
secondary school girls come to the premise either for plaiting or blow-out.

III. TRAVELLERS
Travelers waiting to board buses or Nissans are also targeted in the premise.

2.2 COMPETITORS
The competitors surrounding the premise are;
IV. Lydia Pedicure.
V. Caro Manicure and Pedicure.

BETTY’S KIDS HAIR SALOON

STRENGTH
-Has be established for a long period of time and hence a wide market knowledge.
-It offers credit facilities

WEAKNESS
-Opens at unfavorable time i.e. late in the day.
-Their workers are not qualified

BETTY’S KIDS HAIR SALOON

STRENGTHS

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-Advertise their services.
-Have employed many workers.

WEAKNESSES
-Have unskilled workers.
-Have poor managerial skills.
-Their workers are lazy and lack courtesy.
-They don’t offer credit facilities.

2.2.1 CAPITALIZATION ON THEIR WEAKNESSES

The business should be opened early in the morning and be closed late in the evening.
Also be opened during the weekends when most people are off duty and there are many
travelers.

2.3 PRICING STRATEGY

The price shall be based on cost production and competitor’s price. After considering
this will be set as follows
SERVICE OFFERED PRICE (KSH)
Curl kit 500
Perm 350
Blow-out and setting 80
Plaiting-hot water 500
-Pony tail 400
-Pony braid 300
-Weave 300
-Plain lines 100
-Twist 1000
Hair washing 50
Treatment 150
Nail varnishing 50

2.4 ADVERTISING AND PROMOTION STRATEGY

The premise will use the following methods to advertise the business to be able to
attract, persuade and make customers recognize the premise.

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2.4.1 POSTERS
The poster which will be used by the business is as below

COME ONE COME ALL

SIMARY OFFERS
BETTER AND QUALITY
SERVICES

2.4.2 FREE SAMPLES

Within the first two weeks of the starting of the business free samples will be offered e.g
combs, hair bands and clips.

2.4.3 NEWS PAPER AND RADIO

Adverts on periodical basis will be put i.e. after three months so as to remind customers
of the business product.

2.5 MARKET SHARE

The business aims at attaining 50% of the market share in the first two months. The
business will increase its market share through advertisement and offering of discounts.

2.6 SALE TACTICS

The following tactics are employed in the premise to attract more customers;
 The premise has to have a television placed in a strategic point where customers
will be entertained while they are being offered the services to avoid boredom.
 Opening the premise early and closing late including weekends.
 Ensuring good relationship with the customers.

2.7 DISTRIBUTION STRATEGY

The business will be buying the plaiting materials in bulk from the wholesalers. The
business will then do bulk breaking.

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 Wholesalers Retailer Customer

CHAPTER THREE

3.0 ORGANISATION PLAN

3.1 ORGANISATION STRUCTURE

The structure of the organizational chart is illustrated below

MANAGER

SUPERVISOR

CASHIER BEAUTICIANs (2) WORKERS (3)

3.2 MANAGEMENT TEAM

3.2.1 MANAGER

DUTIES
 Recruit and train workers
 Assign duties to workers
 Settle conflicts arising between employees
 Pay employees their salaries
QUALIFICATION
 A higher Certificate in beauty and therapy from a recognized institution
 At least 2 years experience in saloon industry
 Above 24 years
 Should be physically fit

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3.2.2 SUPERVISOR

DUTIES
 supervise workers when the manager is absent
 assign duties to newly recruited workers
 make periodical reports
QUALIFICATION
 Certificate in business management/administration.
 Should be above 24 years.
 Should be physically fit

3.2.3 CASHIER

DUTIES
 Issue a receipt following service offered and their cost
 Receiving and making payment
 Required to portray good human and public relation skills to the business and
public at large to create a good human image

QUALIFICATION
 Should have CPA I
 Should have worked for at least 2 years
 Should be computer literate

3.2.4 WORKERS

DUTIES
 Attend and offer quick service to customers
 To market the saloon using attractive language
 To be punctual at work

QUALIFICATION

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  Should have worked for at least 1 year in a busy saloon
 Have a certificate in hair dressing from reputable institute

3.2.5 SECURITY GUARDS

DUTIES
 Guard the premise against theft

QUALIFICATION
 Be physically fit
 Should be aged 30 years and above
 Have worked as a security guard for at least years in the same field

3.3 REMUNERATION AND INCENTIVES

3.3.1 REMUNERATION
The table below shows the remuneration schedule

JOB TITLE BASIC NO. OF ALLOWANCES TOTAL

SALARY EMPLOYEES (kshs)
Manager 10000 1 3000 13000
Cashier 8000 1 2000 10000
Supervisor 6000 1 1000 7000
Security guard 1800 2 1000 4600
Workers 4000 3 1000 15000

3.3.2 INCENTIVES
The manager will pay the workers in advance e.g. mid month and may decide to give out
increment depending on the production of the business. They will also be compensated in
cases of accidents during operation.

3.4 JOB DESCRIPTION AND INDUCTION

3.4.1 RECRUITMENT
The vacancies will be advertised through print media. The interested person will apply
for the job through writing application letter. The management team will look the
application and shortlist candidate who will be interviewed later. They will then be
contacted through cell phone about the job.

xvii
3.4.2 TRAINING
The will be done by allowing the staff to attend seminars and workshops concerning the
business in order to increase knowledge on the business.

3.4.3 PROMOTION
The manager will promote the workers according to qualification and experience

3.5 LICENSES, PERMITS AND BY-LAWS

3.5 .1 LICENSING
The business before commencement of its operation will acquires a trading license from
the district commissioner office and this will be renewed annually.

3.5.2 PERMITS
The permit is required by the business because the business will be required to make
announcements within the public places/ functions further more making stickers within
the town, which is obtain from the municipal council.

3.5.3 BY-LAWS
The by-laws laid by the municipal council will be strictly adhered to by the saloon;
for instances:
a) All employees will be registered under the national security act.
b) The employment act cap 226 will be government code for regulating the terms and
conditions of the work.

3.6 ORGANISATIONAL RULES

The business rules and regulations include the following;
 The business will be opening at 7.00 Am and closing at 6.30 Pm
 The business will be opened from Monday to Sunday
 Every worker is entitled to one day off weekly which will be alternated in shifts
 Any employee who will be found stealing or being dishonest will be dismissal
from work.

3.7 SUPPORTIVE SERVICES

The business requires supportive services in order to obtain its obligations/goals. The
services include; insurance, banking and other legal services.

3.7.1 BANKING
The banking account shall be opened at Kenya commercial bank, KCB branch that will
be a current account. The banks address is
Kenya commercial bank

xviii
 Po box 242

3.7.2 WATER SUPPLY

The premise will get plenty of water from municipal council and Machakos River.

3.7.3 ELECTRICITY
It will be sought from Kenya power and lighting company.

3.7.4 SECURITY
Security services will be provided by kali security to prevent theft.

CHAPTER FOUR

4.0 PRODUCTION AND OPERATION PLAN

INTRODUCTION
This chapter consists of:
Product facilities and equipment
Production strategy
Product design and development
Production process
Regulation affecting operation.

4.1 PRODUCT FACILITIES AND EQUIPMENT

The business will purchase equipments required on cash basis.
Item Quantity Unit price TOTAL
Chair 8 400 3200
Computer 1 500 500
Therapy machine 1 600 600
Broad dry 3 1500 4500
Tables 4 1000 4000

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 Drier 2 3000 6000
Telephone 1 1000 1000
Totals 19800

4.2 PRODUCTION STRATEGY

The owner of the business will be ordering her stock maximum twice per month. The
order will be done to various companies that offer the product they require. This will
enable them enjoy free delivery hence avoiding transport cost.

She will also employ 5 employees, three majoring on service provision while the two sell
the beauty products. The management will ensure that they employ qualified personnel
for efficient w

They will also learn other expenses including

Monthly production expenses

Labour 8000 310000

Rent 20000 50000

Water 10000 24000

Electricity 15000 40000

Totals 144000

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4.3 PRODUCT DESIGN AND DEVELOPMENT
The owners business will be challenged in using latest technology due to a lot of research
so as to have modern means of offering services and coming up with more hairstyles and
weaving designs.

4.4 PRODUCTION PROCESS

The following steps will be taken to ensure that effective services are offered to clients

STEP 1

Client is warmly welcomed

STEP 2

Client is kindly asked the services she needs

STEP 3

After services client should pay at the counter area

STEP 4

Thank the client for coming and ask her to come next time.

xxi
4.5 REGULATION AFFECTING OPERATION
The owner’s business will need to make applications to several necessary licenses
legislation and permit providers. This will enable efficient operation. The service
providers must adhere to legislation and regulation governing the industry.
Also will adhere to all compliance required where applicable under the laws of
government of Kenya and respective county government.

CHAPTER FIVE

5.0 FINANCIAL PLAN

56.1 ASSUMPTIONS
1. Salome salon will run from January 2016 to December 2020.
2. Sales are expected to increase by 25% in the second year and 30%in the third
year.
3. Expenses are expected to increase by 15% in second year and 20%in the third
year.
4. depreciation rate are as follows:
Equipment and furniture will depreciate by 3% and the premise will depreciate by
2%.
5. Loan repayment will be 7.5% monthly.
6. Fixed costs and variable costs are expected to decrease by 4% and 5% in second
and third year respectively.

5.2 PREOPERATIONAL PLAN

FIXED EXPENSES AMOUNT (kshs)

Fittings 30000
Equipment 50000

xxii
License 2000
Insurance 3000
Aprons 2000
Furniture 3000
Total 90000

VARIABLE COSTS AMOUNT (kshs)

Premise (rent) 5000
Water bill 500
Electricity 2000
Stationary 5000
Salaries 80000
Advertisement 1000
Plaiting materials 3000
Telephone bill 500
Total 97000

5.3 ESTIMATION OF WORKING CAPITAL

Working capital= current assets-current liabilities

CURRENT ASSETS YEAR 1 YEAR 2 YEAR 3

Debtors - 120000 140000
Stock 500000 150000 180000
Cash at bank 480000 100000 150000
Cash at hand 200000 70000 25000
TOTAL CURRENT ASSETS 1180000 440000 495000
Less current liabilities
Bank overdraft - 20000 40000
Creditors - 20000 30000
TOTAL CURRENT LIABILITIES - 40000 70000

WORKING CAPITAL 1180000 400000 425000

xxiii
 5.4 PROJECTED CASH FLOW STATEMENT

5.4.1 MONTHLY PROJECTED CASH FLOW STATEMENT FOR THE YEAR 1

MONTHS JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC TOTAL
Bal b/f - 421000 492000 628800 789000 960100 109000 1270300 143640 161640 18044 2001700 1262950
0 0 00 0
Bank loan 400000 400000
Sales 250000 300000 370000 390000 400000 380000 390000 400000 410000 420000 43000 440000 5580000
0
Total cash 650000 721000 862400 1018800 1189000 1340100 1494000 1670300 184640 303640 22344 2441700 960000
0 0 00
Less cash
payment
Salaries 80000 80000 800000 80000 80000 80000 80000 80000 80000 80000 80000 80000 960000
Electricity 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 24000
Telephone bill 3000 2500 2400 2800 2500 3000 2500 2900 2700 2600 2500 3000 31900
Advertisement 1000 1000 1000 1000 1000 1000 1000 10001 1000 1000 1000 1000 12000
Rent 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 60000
Stationary 20000 20000 20000 20000 20000 20000 20000 20000 20000 2000 20000 20000 240000
Plaiting materials 30000 3100 3200 3000 3400 3100 3200 3000 3300 3400 3200 3500 48400
Loan repayment 30000 30000 30000 30000 30000 30000 30000 30000 30000 30000 30000 30000 360000
Water bill 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 60000
Incentives 40000 40000 40000 40000 40000 40000 40000 40000 40000 40000 40000 40000 480000
Purchases 40000 40000 45000 41000 40000 42000 40000 45000 41000 43000 44000 45000 506000
Less payment 229000 228600 233600 229800 228900 231100 228700 233900 230000 232000 23270 234500
0
Bal c/f 421000 49200 628800 789000 960100 1109000 1270300 1436400 1616400 1804400 2001700 2207200

1
5.4.2 YEAR 2 PROJECTED CASH FLOW

MONTH JAN-MAR APR-JUN JUL-SEP OCT-DEC

B/f - 628800 1109000 1616400
Bank loan 400000 - - -
Cash sales 920000 1170000 1200000 1290000
Total cash 1320000 1798800 2309000 2906400
Salaries 240000 240000 240000 240000
Electricity 6000 6000 6000 6000
Telephone bill 7900 8300 8100 8100
Advertisement 3000 3000 3000 3000
Rent 15000 15000 15000 15000
Stationary 60000 60000 60000 60000
Plaiting 9300 9500 9500 10000
material
Loan 90000 90000 90000 90000
repayment
Water bill 15000 15000 15000 15000
Incentives 120000 120000 120000 120000
Purchases 125000 123000 126000 132000
Total expenses 691200 689800 692600 699200
Total net cash 628800 1109000 1616400 2207200
flow

1
 5.5 BETTY’S KIDS HAIR SALOON PROFORMA INCOME STATEMENT

DETAILS YEAR 1 YEAR 2 YEAR 3

Sales (i) 5580000 6975000 9067500
Less purchase (ii) 506000 506200 506400
Gross profit 5074000 6468800 8561100
( i)-(ii)=(iii)
Less expenses
Salaries 60000 1104000 1324000
Electricity 24000 27600 33120
Telephone bill 3900 4485 5382
Advertisement 12000 13800 1656
Rent 60000 58800 57624
Stationary 240000 27600 33120
Plaiting materials 48400 55660 66792
Loan repayment 360000 40000 -
Water bill 60000 69000 82800
Incentives 480000 552000 662000
Equipment 50000 48500 47045
Total expenses (iv) 23263000 2001445 2313539
Net profit (iii)- (iv) 2747700 4467355 6247561

5.6 BETTY’S KIDS HAIR SALOON STATEMENT OF AFFAIRS AS AT THE

BEGINNING OF THE YEAR 1

FIXED ASSETS
Equipment 59000
Fittings 30000
Furniture 3000
Total fixed assets 83000

CURRENT ASSETS
Debtors 500000
Stock -
Cash at bank 480000
Cash at hand 20000
Total current assets 1180000

TOTAL ASSETS 1263000

LESS CURRENT LIABILITIES

Bank loan 400000
Creditors -

2
Total current liabilities 400000

NET ASSETS 863000

Financed by
Capital 863000

5.7 Betty Kids Hair saloon BALANCE SHEET FOR THE THREE YEARS

YEAR 1 YEAR 2 YEAR 3

FIXED ASSETS
Equipment 80000 770600 75272
Less depreciation 2400 2328 2258

NET COST 77600 75272 73014

Buildings 60000 58800 57624
Less depreciation 1200 1176 1152

NET COST 58800 57624 56472

TOTAL FIXED ASSETS 136400 132896 129486

CURRENT ASSETS
Debtors 120000 40000 30000
Stock 150000 180000 200000
Cash at bank 100000 150000 250000
Cash at hand 70000 25000 80000

TOTAL CURRENT ASSETS 340000 395000 56000

TOTAL ASSETS 476400 527896 689486

LESS CURRENT LIABILITIES
Bank loan 400000
Bank overdraft 20000 40000 50000
Creditors 20000 30000 40000

TOTAL CURRENT LIABILITIES 440000 70000 90000

TOTAL NET ASSETS 36400 457896 599486
Financed by
Capital 863000 863000 863000
Add N. Profit 2747700 4467355 6247561
3610700 5330355 7110561
LESS DRAWINGS 2747700 4872459 6511075
NET CAPITAL 36400 457896 599486
6.8 BREAK EVEN ANALYSIS

3
Break-even point refers to the point at which the business will able to meet its cost by
making no profit or loss.

Break-even point= Fixed cost X Sales

Contribution

YEAR 1 YEAR 2 YEAR 3

Given sales 5580000 6975000 9067500

Variable cost 97000 93120 88464
Fixed cost 90000 86400 82088

YEAR 1

Contribution = sales – variables

5580000 – 97000 = 5483000

900000 X 5580000 = 91592.20

5483000

= 91592.20

YEAR 2

Contribution = sales – variables

6975000- 93120=6881880

86400 X 6975000 = 87569.09

6881880
= 87569.09

YEAR 3

Contribution = sales – variables

90675000- 88464= 8979036

4
82088 X 9067500 = 82896.75
8979036

= 82896.75

6.9 FINANCIAL RATIOS

a) GROSS PROFIT RATIO

Gross profit ratio=Gross profit x 100

Sales

YEAR 1 YEAR 2 YEAR 3

5,074,000 X100 6,468,800 X100 8,561,000 X100

5,580,000 6,975,000 9,067,500

= 91% = 93% = 94%

b) NET PROFIT RATIO

Net profit ratio= Net profit x100

Sales

YEAR 1 YEAR 2 YEAR 3

2,747,700 X 100 4,467,355 X 100 6,247,561 X 100

5,580,000 6,975,000 9,067,500

= 49% = 64% = 69%

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c) CURRENT RATIO

Current ratio = Current assets

Current liabilities

YEAR 1 YEAR 2 YEAR 3

440,000 495,000 660,000

40,000 70,000 90,000

= 1:11 = 1:71 = 1:73

d) QUICK ACID TEST RATIO

Current ratio = Current assets - Stock

Current liabilities
YEAR 1 YEAR 2 YEAR 3

440,000 – 150,000 495,000 – 180,000 660,000 – 200,000

40,000 70,000 90,000

= 1:7.25 = 1:4.5 = 1:5.1

5.10 DESIRED FINANCING

BETTY’S KIDS HAIR saloon will require the following amount to start the business;

Kshs

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Pre occupation cost 90,000
Working capital 1,180,000
FIXED ASSETS
Machinery and equipment 50,000
Furniture and fittings 30,000
Total 1,350,000

5.11 PROPOSED CAPITALIZATION

The capital acquisition of the business is intended to be as follows;

SOURCE AMOUNT
Kshs
Savings 300,000
Bank loan 400,000
Donations from friends 163,000
Total amount 863,000

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 MACHAKOS
UNIVERSITY

APPENDIX MACHAKOS
TTC
BUSINESS LOCATION INSTITUTE
MASII
TO

LYDIA PETROL
MACHAKOS
SALOON STATION
BOYS SEC SCHL
SUN RISE
SALOON

CARO
SALOON MACHAKOS
TO KITUI

MARKET
BETTY’S
KIDS HAIR
SALOON

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9