BUSINESS PLAN

BUSINESS NAME: BEST LADY TAILORING SHOP

ADDRESS: P.O. BOX 63, KAKAMEGA

TELEPHONE: 0796439500

PRESENTED BY: ADISI CAREN IYAITE

ADMISSION NO: KU/00454

PRESENTED TO: KENYA NATIONAL EXAMINATION COUNCIL

(KNEC) IN PARTIAL FULFILLMENT FOR THE
AWARD OF DIPLOMA IN BUSINESS
MANAGEMENT

SUPERVISOR: MR. DANSTONE A. LUSAMBILI

INDEX NO: 376161030446

COURSE: BUSINESS MANAGEMENT

SERIES: NOVEMBER 2018

 DECLARATION

I hereby declare that this Business plan is my original work and not a duplication of similarly
published work of any scholar for academic purpose and it has not been submitted in any other
Institution of higher learning for the award of Diploma in Business Management

STUDENTS NAME: ADISI CARE IYAITE

SIGNATURE: …………………………… DATE …………………

SUPERVISOR NAME: MR. DANSTONE

SIGNATURE: ……………………………. DATE ………………….

i
 DEDICATION

I dedicate my gratitude to my lord and savior Jesus Christ who gave me good health and parents,
brother, sister and constant encourage who had full humor, honesty and strength for me. God
bless you all.

ii
 ACKNOWLEDGEMENT

Special thanks also goes to my supervisor Mr. Danstone not forgetting my parents, brothers and
sisters for their love and financial support they gave me during the period I have been carrying
out this business plan project.

Also my thanks goes to my dear friends for their great support they gave me during my writing
by encouraging me and giving directions.

iii
 EXECUTIVE SUMMARY

BUSINESS DESCRIPTION

The owner of the business will be Adisi Caren Iyaite. She pursued Diploma in Business name
will be BEST LADY TAILORING SHOP. It will be located in Kakamega town along
Bungoma Mumias road at the main stage. The business is stated to start in the year 2022 selling
of ready made clothes is it main activity.

JUSTIFICATION OF THE BUSINESS

The business management will propel the business to higher standard by improving service
delivery to suit all the customers and also quality of goods sold in the shelves and this will result
into the expansion of the outlet into a wholesale.

After expansion in few years the business is set to have branches all over the country so as to
reach its customers from different places thus resulting to a steady and fast growth of the
business

MARKETING PLAN

The business has its potential customers

DOMESTIC CUSTOMERS: This consists of daily customers who buy from the supplier.

INSTITUTIONS: They include nearby schools & colleges.

This promotes the business in that large profit will be made by supplying the institutions with
uniforms

iv
MANAGEMENT TEAM

The business will have a team to ensure it achieves its goal by the end of the day. The team will
be made up of qualified personnel made up of the following;

 General Management
 Cashier
 Distributor
 Cleaner
 Watchman

OPERATIONAL PLAN

The following equipment are required by the business. Machines, Fabric, Disks, Thread and
fitting of the business premise with CCTV Cameras

FINANCIAL PLAN

The projected initial capital will be Sh 400,000. The money will be from family, relatives and
personal savings. The major term of expenditures of the business include.

 Installation of electronic gadgets in fridges, CCTV

 Repair and maintenance of the electronic gadgets and mechanical i.e. machines for
sewing

The breaking point of the business will be 74.89% and net profit ratio will be 50:10%

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 TABLE OF CONTENT

DECLARATION………………………………………………………………………… i

DEDICATION…………………………………………………………………………… ii

ACKNOWLEDGEMENT……………………………………………………………… .iii

EXECUTIVE SUMMARY……………………………………………………………. iv

BUSINESS DESCRIPTION…………………………………………………………… iv

JUSTIFICATION OF THE BUSINESS……………………………………………….. iv

MARKETING PLAN…………………………………………………………………… iv

MANAGEMENT TEAM………………………………………………………………… v

OPERATIONAL PLAN………………………………………………………………….. v

FINANCIAL PLAN………………………………………………………………………. v

TABLE OF CONTENT…………………………………………………………………... vi

CHAPTER ONE………………………………………………………………………… 1

1.0 BUSINESS DESCRIPTION………………………………………………………… 1

1.1 THE BUSINESS NAME……………………………………………………………… 1

1.2 FORMS OF BUSINESS OWNERSHIP……………………………………………… 1

1.3 LOCATION AND ADDRESS………………………………………………………… 2

1.4 TYPE OF THE BUSINESS…………………………………………………………… 2

1.5 GOALS AND OBJECTIVES………………………………………………………… 3

1.6 PRODUCTS AND SERVICES……………………………………………………… 3

1.7 INDUSTRY…………………………………………………………………………… 3

1.8 JUSTIFICATION……………………………………………………………………… 4

1.9 ENTRY AND GROWTH STRATEGY……………………………………………… 4

vi
CHAPTER TWO…………………………………………………………………………. 5

2.0 MARKETING PLAN…………………………………………………………………. 5

2.1.1 CUSTOMERS IDENTIFICATION…………………………………………………. 5

2.1.2 INSTITUTIONAL CUSTOMERS………………………………………………… 6

2.1.3 RETAIL CUSTOMERS…………………………………………………………….. 6

2.1.4 FOREIGN CUSTOMERS………………………………………………………….. 6

2.1.5 END USER…………………………………………………………………………. 6

2.2 MARKET SHARE……………………………………………………………………. 6

2.3 COMPETITION………………………………………………………………………. 7

2.4 PRICING STRATEGY………………………………………………………………. 8

2.5 SALES TACTICS………………………………………………………………………9

2.6 ADVERTISEMENTS AND PROMOTIONS…………………………………………. 9

2.7 DISTRIBUTION STRATEGY…………………………………………………………11

CHAPTER THREE……………………………………………………………………… 12

3.0 ORGANIZATION & MANAGEMENT PLAN……………………………………… 12

3.1 ORGANIZATIONAL STRUCTURE………………………………………………… 12

3.2 STAFFING AND THEIR QUALIFICATION……………………………………… 14

3.3 RENUMERATION, SALARIES & ALLOWANCES…………………………… 14

3.4 TRAINING AND PROMOTION………………………………………………………15

3.5 LICENCE PERMITS AND LEGAL REQUIREMENT……………………………… 15

CHAPTER FOUR…………………………………………………………………………16

4.1 OPERATIONAL PLAN……………………………………………………………… 16

4.2 PRODUCT DESIGN & DEVELOPMENT…………………………………………. 16

4.3 PRODUCTION FACILITY AND CAPACITY………………………………………. 16

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4.4 PRODUCTION STRATEGY………………………………………………………… 17

4.5 PRODUCTION PROCESS CAPACITY…………………………………………… 19

4.6 GOVERNMENT REGULATION AFFECTING THE BUSINESS…………………. 19

CHAPTER FIVE………………………………………………………………………… 20

5.0 FINANCIAL PLAN ………………………………………………………………… 20

5.1 PRE-OPERATIONAL COSTS ……………………………………………………… 21

5.2 WORKING CAPITAL ……………………………………………………………… 21

5.3 PROJECTED CASH FLOW ………………………………………………………… 22

5.3.1 PROJECTED CASH FLOW FOR THE YEAR 2022……………………………… 23

5.3.2 PROJECTED CASH FLOW FOR THE YEAR 2023……………………………… 23

5.3.3 PROJECTED CASH FLOW FOR THE YEAR 2024……………………………… 24

5.4 PROFOMA INCOME STATEMENT……………………………………………….. 25

5.5 THE PROFOMA BALANCE SHEET FOR THREE YEARS……………………… 26

5.6 EXPECTED PROFITABILITY RATIO……………………………………………… 26

5.6.1 GROSS PROFIT RATIO…………………………………………………………… 26

5.6 NET PROFIT ………………………………………………………………………… 27

5.7 BREAK EVEN POINT ……………………………………………………………… 28

5.8 DESIRED FINANCE………………………………………………………………… 29

5.9 PROPOSED CAPITALIZATION …………………………………………………… 29

viii
 CHAPTER ONE

1.0 BUSINESS DESCRIPTION

The owner of the business will be ADISI CAREN IYAITE, who is 200 years old, from Busia
County, Teso North District, Ang’urai Division, Changara location, Akobwait Sub-location,
Ateukut village. She went to Changara Primary School from the year two thousand and four
(2004) and sat for the Kenya Certificate of Primary Education (KCPE) in the year two thousand
and twelve (2012) and Sat for the Kenya Certificate of Secondary Education (KCSE) in the year
two thousand and sixteen (2016). She is currently taking Diploma in Business Management
(DBM1) at The Sigalagala National Polytechnic (TSNP)

The owner o the business was motivated by the following factors

i) The business is highly demanded

ii) It is easy to operate
iii) The owner will have total control over the business
iv) The owner will enjoy the profit alone

1.1 THE BUSINESS NAME

The owner of the business chose BEST LADY TAILORING SHOP as the name of the
business of the following reasons;

i) Easy to be read by the customer

ii) The name is unique
iii) Services will be the best and thus the name BEST LADY TAILORING SHOP

1.2 FORMS OF BUSINESS OWNERSHIP

The owner of the business will operate as a sole proprietor

The owner chose to operate under this form of ownership because;

i) It requires small amount of capital to start

ii) The owner will be the manager of the business
iii) The owner will enjoy the profit alone

1
The owner of the business require Ksh400,000/= as her start up capital for the proposed business.

The owner will obtain her capital from the following sources

i) A contribution from friends and relatives Ksh 200,000

ii) Personal savings Sh.200,000

1.3 LOCATION AND ADDRESS

The proposed business will be located in Kakamega town along Bungoma Mumias road at the
main stage

The owner of the proposed business chose the location of her proposed business of the following
reasons

i) The place is highly populated

ii) The place is easily accessible
iii) There is security
iv) There is good infrastructure

The address of the proposed business is

BEST LADY TAILORING SHOP

P.O. BOX 63

KAKAMEGA

TEL NO: 0796439500

1.4 TYPE OF THE BUSINESS

The business will be start-up kind of business because of the following reasons;

i) The owner has the necessary skill to run the business

ii) The owner has small capital to start the business

2
1.5 GOALS AND OBJECTIVES

The owner of the business intends to achieves the followings goals

i) To create employment for the unemployment

ii) To get money
iii) To Create good relationship with the customers
iv) Expanding the business by coming up with other branches

1.6 PRODUCTS AND SERVICES

a) PRODUCTS

The business will be providing the following products;

i) Ready made clothes

ii) Uniforms.

b) SERVICES

The business will be providing the following services

i) Repair of clothes
ii) Distribution of uniforms to institutions

1.7 INDUSTRY

The business will fall under the clothing and textile industry.

The owner of the business will employ some measures to cope with the changing technology.

i) CCTV to monitor the entry and exit of customers

ii) Fridges to put drinks for the customers

3
1.8 JUSTIFICATION

The proposed business will be viable because;

i) Presence of Kakamega Patrol based police station which will be for the security
purposes
ii) Increasing population in town
iii) Many institution like schools, colleges and Universities

1.9 ENTRY AND GROWTH STRATEGY

a) ENTRY STRATEGY

The proposed business will be started on 1st Jun 2022 because of the following reasons

i) The owner will have gained enough capital to start proposed business
ii) The owner will have gained enough skills to start and run the business
iii) The owner will have finished the course study

The owner will use the following methods to introduce the proposed business to the customers;

i) Word of mouth
ii) Posters
iii) Advertisement of Radio
iv) Banners

b) MATURITY STAGE

The following will indicate that the business will be matured

i) Many customers
ii) Increased profit
iii) Recognition by many people.

c) GROWTH STRATEGY

The following will indicate that the business has grown

i) Introduction of new services

ii) Employment of Many people
iii) Opening of New branches

4
 CHAPTER TWO

2.0 MARKETING PLAN

The research carried out by the owner help in coming up with strategic plan for marketing the
goods and the need to determine the customers.

It also a helped the owner analyze the competitors.

The business potential customers will be institutional customers like Masinde Muliro University,
Sigalagala National Polytechnic and even students , those from the outskirts of the other areas
also included

2.1.1 CUSTOMERS IDENTIFICATION

The business will target all people from different place; this is because is defined by a number of
customers and how much the owner gets in a day.

Classification of Customers

I) Potential Customers

This customer buys regardless of their religion background or social class in the geographical
area.

These will include Workers, students and teachers of Masinde Muliro, Sigalagala National
Polytechnic or any other institution around.

II) Actual customers

These include institution such as schools and colleges around. The most actual customer is
Msinde Muliro University.

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2.1.2 INSTITUTIONAL CUSTOMERS

These will include Masinde Muliro N on-teaching staff, students, teachers, others from nearby
colleges, primary and secondary schools. They are targeted to buy goods and services at large
quantity and any mode of payment will be allowed eg cheques and even cash via M-pesa or
through deposits

2.1.3 RETAIL CUSTOMERS

These are customers who by goods and services in large quantities and break into smaller
quantities then again they sell to there customers. They will be achieved by providing highly
quality goods and services.

2.1.4 FOREIGN CUSTOMERS

These are customers outside the country. The business will be reaching even those who are
outside the country. These will be done through internet and online shopping
(Www.carenshop.com) and this is where customers will be allowed to buy online.

2.1.5 END USER

These are customers who buy goods for their personal use. The common end user will be worker
of Masinde Muliro University eg uniforms which they put on during there manual work.

2.2 MARKET SHARE

Mama Hope tailoring shop is not the only tailoring shop around but there are some other shop
such as Kings collection , Highway tailoring shop located along the road. The shares are brought
due to hard work in the business .This will also determine the kind of your customers around.

The following will be my market share in the unit depending on the number of customers.

6
 Name of the firm Quantity Selling prices Sales per % Share

Best Lady Tailoring shop 200 800 100000 60%

Mama Hope Tailoring shop 100 400 40000 20%

Kings Collection Tailoring shop 50 200 10000 10%

Highway Tailoring shop 50 200 10000 10%

2.3 COMPETITION

The competition of the business will be Mama Hope Tailoring shop, Kings collection Tailoring
shop Highway Tailoring shop

MAMA HOPE TAILORING SHOP

STRENGTH

High skilled employee.

Provides discount to the customers.

WEAKNESS

It is located away from the market.

Offers discounts only on regular customers.

Does not offer promotion.

KINGS COLLECTION TAILORING SHOP

STRENGTH

It is located at strategic place

WEAKNESS

Poor payment to customers.

There is no credit offer.

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HIGHWAY TAILORING SHOP

STRENGTH

Good relations with the customers

Has experienced workers

WEAKNESS

Lack of qualified personnel

Poor payment of the customers

No credit offer

WAYS OF OVERCOMING COMPETITION

1) Offering unique services to the customers

2) Introducing trainings and seminars for the potential customers
3) Adequate stock level
4) Listening to customers complaints

2.4 PRICING STRATEGY

The owner will decide to develop variable pricing model which will be vital role to the business
putting the following into consideration

a) Government pricing control

The business will work within the rule of law & the constitution

b) Cost of production

When the cost of production will be high then there will be low supply of materials by the
business

c) Competitors selling prices

The owner will ensure that his price operates slightly lower than of his competitors

8
 d) Marketing Demands

The owner will also ensure that she will be able to manage the growth of the business. He will be
able to meet and satisfy the increased demand.

The business will offer discount only on regular customers and bulk buyers to appreciate their
contribution to the business

There will be no credit sale since the business is at young age.

2.5 SALES TACTICS

After analyzing all the weaknesses of the owners competitors The BEST LADY TAILORING
SHOP is likely to use the weaknesses of its competitors as its strength. Employing of sales
persons to deliver the goods on promotions on the streets, school and business places.

2.6 ADVERTISEMENTS AND PROMOTIONS

Advertisement

These are the channels the owner will use to make sure the business reach many people.

i) Radio

This is the most common form of communication and also very cheap

Almost everyone can afford to have radios

They are also important in that they are very flexible i.e. radio uses all languages

The business owner will make the advertisement mainly at 7.00am and 8.00pm

ii) Television

Television as a mean of visual media it enhances both pictorial and sound

The owner of the business will make arrangement for the business to be advertised at every news
hour on citizen channel.

9
 iii) Posters

They will be made on reach and every corners of the town to ensure that people are conversant
with them

iv) Newspaper

An advertisement will be once in a month on the Daily Nation

v) Sign Post

There will be a board at the junction of the Kakamega to Bungoma road, Kisumu and Kakamega
town.

Best Lady Tailoring Shop

P.O. Box 63 – 40606

Kakamega

Email: adisicaren@gmail.com /bestladytailoringshop@yahoo.com

Contact: 0796439500/ 0700273607

Promotion

These include what the owner of the business will be in position to offer so that the owner have
many customers

i) Offer

Customer who buy goods in large quantity will be given offer which may motivate the
customers.

ii) Debts

Debts should be offered to regular customers.

The rule of giving debts shall be followed e.g. Debts will not be allowed twice.

10
2.7 DISTRIBUTION STRATEGY

This is how business will make the services reach customers

Here the owner of the business must tell customers when and how the customer will get the
goods

WHOLESALER

RETAIL INSTITUTIONAL

END USER

Transport

Goods will be transported using good channels of transportation under good security to reach the
people or the customers outside the country. The transportation will be charged according to the
commodities carried and the distance.

The owner will make sure the transportation fee is lower than the normal fee

Problems during Distribution

a) Inadequate products
b) Poor infrastructure like roads
c) Lack of market knowledge

Solutions to the problems

a) Providing training programs

b) Construction of good roads
c) Making good relationship with the customers

11
 CHAPTER THREE

3.0 ORGANIZATION & MANAGEMENT PLAN

Management is the act of running and controlling a business Best Lady Tailoring Shop need
people who will coordinate in the business so that the shop runs smoothly

Management team are the people who will help the owner in the running of the business

The owners management team include;

i) General Manager

The business manager will be in charge of any movement, interaction in the business premises

The manager will be able to work under management policy of the business promises.

ii) Cashier

He will be in charged of selling the products and keeping the sales records

iii) Distributors

Make sure goods reach people and customers

iv) Cleaner

This is a person who will be in charge of sanitation in the business premises.

v) Watchman

He will be in charge of security during working hours and when the business is closed.

12
3.1 ORGANIZATIONAL STRUCTURE

GENERAL MANAGER

CASHIER DISTRIBUTOR

CLEANER WATCHMAN

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3.2 STAFFING AND THEIR QUALIFICATION

STAFF QUALIFICATION DUTIES

General Manager - Diploma in Business - Supervising the employees

Management - Controls the business

Cashier - Certificate in - Keeping financial records

Accounting - Make financial returns

Distributor - Certificate in any - Keeping financial record

business course - Make financial returns

Cleaner - KCPE Certificate - General cleaness

Watchman - 18 Years and Above

- KCSE Certificate
- Experienced

3.3 RENUMERATION, SALARIES & ALLOWANCES

Establishment No Basic Salary Medical Allowances Gross pay

General Manager 1 16000 2500 18500

Cashier 1 12000 2000 14000

Distributor 1 7000 1000 8000

Cleaner 2 4000 500 4500

Watchman 1 3000 300 3300

TOTAL 48300

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3.4 TRAINING AND PROMOTION

i) Training

the owner of the business will be giving the following training of her employees in order for
them to gain more experience and skills

 Offering short skills

 Organizing seminars
 Workshops
iii) Promotion

The owner of the business will promote his employees basing on the following;

 Performance
 Educational level
 Seniority

3.5 LICENCE PERMITS AND LEGAL REQUIREMENT

The owner of the business require a licence for the business to operate peacefully

The licence will be obtained from Kakamega County Government at a cost of five thousand
shillings.

The business will also need the following Acts as stated by the law

a) Health Act

This will include the cleanness of the products and the employees selling the products.

b) Safety Act

This act contain all the safety measure that the owner will put in place to protect his customers
and the employees

c) Environment Act

It shows that the business has been given the permission to operate under a specified
environment and also the owner requires a permit to dispose off the waste.

15
 CHAPTER FOUR

4.1 OPERATIONAL PLAN

The business will lay the following strategies in order to improve the production of goods and
achieve the maximum profit

a) Give discount and free samples to the customers

b) Allowing debts to frequent customers
c) Timely delivered of goods and services

4.2 PRODUCT DESIGN & DEVELOPMENT

i) PRODUCT DESIGN

The business will be mainly dealing with ready made clothes both for the ladies and men

The clothes will be n different design as desired and different sizes.

The goods will be packed in good and attractive carrier bags to attract and make customers
comfortable and also easy to carry.

ii) DEVELOPMENT

The owner of the business will buy machines which are modernized to make work easier and
faster within a shorter period of time and this will also increase the productivity.

4.3 PRODUCTION FACILITY AND CAPACITY

The table below shows the list of facilities and equipment that Best Lady Tailoring Shop require.

FACILITY NO DATE ACQUIRED SOURCE COST

Machines 7 1/10/2022 Company 70,000
Desks 1 1/10/2022 Carpentry Shop 10,000
Materials 10 1/10/2022 Industry 50,000
CCTV 1 1/10/2022 Electrical Shop 50,000
TOTAL 180,000

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REPAIR AND MAINTENANCE

The machines will be repair by a mechanic on weekly basis to ensure smooth running of the
business activities.

The repair and maintenance of the machines will cost the owner 10,000 per month.

4.4 PRODUCTION STRATEGY

A) MONTHLY MATERIAL REQUIREMENT

MATERIAL AMOUNT PRICE TOTAL

Fabric 50 Metres 1000 50,000

Packaging bags 30 100 3000

Sewing thread 100 170 17,000

TOTAL 70,000

b) MONTHLY LABOUR REQUIREMENT

LABOUR NO MONTHLY PAYMENT

General Manager 1 18500

Cashier 1 1400

Distributor 1 8000

Cleaner 2 9000

Watchman 1 3300

TOTAL 52800

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 c) MONTHLY PRODUCTION EXPENSES

MONTHLY EXPENSES MONTHLY PAYMENT

Repair 10,000

Transport 40,000

Electricity 15,000

Water 7,200

Telephone 5,000

Rent 20,000

TOTAL 97,200

d) MONTHLY TOTAL COST OF PRODUCTION

MONTHLY EXPENSES AMOUNT

Monthly Material Requirements 70,000

Monthly Labour Requirement 52,800

Monthly Production requirement 97,000

TOTAL 220,000

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4.5 PRODUCTION PROCESS CAPACITY

Transportation of Goods

Delivery to preferred locations

Transportation to the shop

Confirmation by the Owner

Selling to Customers

4.6 GOVERNMENT REGULATION AFFECTING THE BUSINESS

i) ENVIRONMENTAL ACT

Waste products from the shop will be disposed properly to avoid environmental pollution.

ii) HEALTH ACT

The workers will be taken medication incase of any illness and the bill will be catered by the
business. The owner will do this by providing monthly medical allowance.

iii) SAFETY ACT

The owner of the business will be protecting his employees against any harm within the working
areas.

19
 CHAPTER FIVE

5.0 FINANCIAL PLAN

This is the systematic plan that shows how the owner of the business will manage and analyze
his funds.

It is an important tool in the operation of the business.

5.1 PRE-OPERATIONAL COSTS

This is the amount required for a business to start its operation.

ITEM AMOUNT

Transport 10,000

Insurance 3,000

Electricity 5,000

Rent 6,000

Water 600

Equipment 150

Total Cost

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5.2 WORKING CAPITAL
ITEM AMOUNT
Current Assets
Cash at Bank 500,000
Cash in Hand 1,600,000
Debtors 300,000
Total Current Assets
Creditors 40,000
Bank Overdraft 50,000
Loan 1,500,000
Total Current Liabilities
Creditors 40,000
Bank Overdraft 50,000
Loan 1,500,000
Total Current Liabilities 1,590,000
Total working Capital 810,000

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 5.3 PROJECTED CASH FLOW

5.3.1 PROJECTED CASH FLOW FOR THE YEAR 2022

ITEM JAN FEB MAR APR MAY JUNE JULY AUG SEPT OCT NOV DEC TOTAL
Bal b/f - 2,211,000 2,606,450 2,838,450 3,131,450 3,459,400 3,843,85 1,8090,600
0
Sales 400,000 450,0000 300,000 250,000 400,000 450,000 500,000 2,850,000
Capital 200,000 2,000,000
Total inflow 2,400,000 2,661,000 2,906,450 3,188,450 3,531,480 3,909,400 4,343,85 22,940,000
0
Insurance 5,000 5,000
Rent 20,000 20,000
Electricity 2,500 2,000 1,500 1,000 15,000 2,500 4,000 15,000
Water bill 1,000 1,050 1,000 1,000 1,050 1,050 1,050 7,200
Wages/Salaries 10,500 11,000 12,000 15,000 16,000 17,000 18,000 99,500
Licence 10,000 10,000
Transport 40,000 40,500 40,000 40,000 40,000 45,000 40,000 285,500
Total Outflow 189,000 54,550 68,000 57,000 72,050 65,550 63,050 569,200
Bal c/d 2,211,000 2,606,450 2,838,450 3,131,450 3,459,400 3,843,800 4,280,80 22,371,400
0

22
 5.3.2 PROJECTED CASH FLOW FOR THE YEAR 2023

ITEM JAN FEB MAR APR MAY JUNE JULY AUG SEPT OCT NOV DEC TOTAL

Bal b/f 4,280,800 4,554,050 4,838,200 5,107,25 5,371,650 5,722,300 6,070,45 6,405,450 6,754,200 7,108,05 7,515,850 7,919,000 63,724,750

0 0 0

Sales 500,000 500,000 500,000 500,500 600,000 600,000 600,000 600,500 600,500 700,000 700,500 800,000 8,050,000

Debtors 30,000 30,000 25,000 30,000 35,000 35,000 35,000 35,000 40,000 450,000 40,000 450,000 405,000

Total inflow 4,810,800 5,084,050 5,363,200 5,637,75 6,006,650 6,705,950 7,040,95 7,394,700 7,853,050 7,256,35 8,764,000 8,824,000 76,354,250

0 0 0

Purchase 200,000 210,000 220,000 230,000 240,000 250,000 260,000 250,000 250,000 300,000 300,000 350,000 4,240,000

Insurance 6,000 6,000

Electricity 250 250 250 300 350 350 400 350 350 400 450 400 4,200

Waterbill 5,000 600 700 800 9,000 1,000 900 800 700 800 900 1000 11,200

Transport 15,000 15,000 15000 15,000 15,000 15,000 15,600 15000 15000 15000 15000 15000 109,800

Wages/Salaries 20,000 20,000 20000 20,000 20,000 20,000 20,000 20000 20000 20000 20000 20000 240,000

Licences 15,000 15,000

Total Outflow 256,750 245,850 255,950 266,100 284,350 286,350 300,500 286,750 286,650 337,200 337,350 387,450 3,831,250

Bal c/f 4,554,050 4,838,200 5,107,250 5,371,65 5,722,300 6,070,450 6,405,45 6,754,200 7,108,050 7,515,85 7,919,000 8,376,550 72,101,300

0 0 0

23
24
 5.3.3 PROJECTED CASH FLOW FOR THE YEAR 2024

ITEM JAN FEB MAR APR MAY JUNE JULY AUG SEPT OCT NOV DEC TOTAL

Bal b/f 8,376,65 8,333,250

Sales 300,000 350,000 400,000 400,000 400,000 400,000 550,000 550,000 550,000 600,000 650,000 700,000 5,850,000

Debtors 20,000 20,000 25,000 25,000 30,000 30,000 35,000 35,000 40,000 40,000 45,000 50,000 285,000

Total inflow 8,696,55 8,703,250 8,782,950 8,911,650 9,044,35 9,126,000 9,310,650 9,490,25 9,614,850 9,794,550 9,974,200 10,207,80 95,575,470

0 0 0 0

Purchase 300,000 300,000 250,000 250,000 300,000 350,000 350,000 400,000 400,000 450,000 450,000 500,000 4,230,000

Insurance 7,000 - - - - - - - - - - - 7,000

Electricity 300 300 300 300 350 350 400 400 300 350 400 400 4,500

Transport 10,000 15,000 16,000 17,000 18,000 20,000 25,000 35,000 30,000 35,000 30,000 40,000 297,000

Wages/Salaries 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 360,000

Licence 16,000 - - - - - - - - - - - 16,000

Total Outflow 363,300 345,300 296,300 297,300 348,350 400,350 405,400 465,400 460,300 515,350 516,400 570,400 5,623,600

Bal c/f 8,333,25 8,357,950 8,486,650 8,614,350 8,696,00 8,725,650 8,905,250 9,024,85 9,154,550 9,279,200 9,457,800 9,637,400 115,049,450

0 0 0

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5.4 PROFOMA INCOME STATEMENT
ITEMS YEAR 1 2021 YEAR 2 2022 YEAR 3 2023
Sales 2,850,000 8,650,000 5,850,000
Less cost of sale
Opening stock 4,280,800 8,376,550
Add purchases 2,960,000 4,240,000 4,230,000
Less closing stock 2,211,000 4,554,050 8,333,250
Gross profit 639,000 3,966,750 4,273,250
Gross profit total 2,211,000 4,683,250 1,576,700
Less expenses
Insurance 5,000 6,000 7,000
Rent 20,000
Electricity 15,000 42,000 45,000
Water bill 7,200 11,200
Wages/Salaries 99,500 240,000 360,000
Licence 10,000 15,000 16,000
Transport 285,500 109,806 297,200
Net profit before tax 1,768,800 4,297,044 892,200
Net profit after tax 15% 265,320 64,455,606 133,830

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5.5 THE PROFOMA BALANCE SHEET FOR THREE YEARS
ITEM YEAR 1 YEAR 2 YEAR 3
FIXED ASSETS
Furniture 250,000 260,000 280,000
Building 1,500,000 2,00,000 2,500,000
Electricity 42,000 50,000 55,000
CURRENT ASSETS
Cash at hand 280,000 290,000 300,000
Cash at bank 600,000 700,000 800,000
Stock 5,500,000 3,500,000 1,580,000
Total assets 8,172,700 8,010,00 812,000
CURRENT LIABILITIES
Bank loan 2,200,000 3,141,000 2,492,200
Accounts payable 500,000 2,000,000 1,500,520
TOTAL LIABILITIES 3,600,000 5,141,080 4,392,520
FINANCED BY 1,800,000 1,733,220 3,370,000
Capital 4,541,570 3,001,700 418,200
ADD NET PROFITS 7,263,280 8,141,220 8,142,580

5.6 EXPECTED PROFITABILITY RATIO

5.6.1 GROSS PROFIT RATIO
Net Profit = Gross Profit – Opening Expenses
YEAR 1 YEAR 2 YEAR 3
2211000 4683250 1576700
= x 100% = x 100% = x 100%
2850000 8650000 5850000

= 77.58% = 54.14% = 26.95%

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5.6 NET PROFIT

Net Profit Ration = Net Profit/Sales x 100

Net Profit after tax of 16%

YEAR 1 YEAR 2 YEAR 3
265320 644556.6 133830
= x 100% = x 100% = x 100%
2850000 8650000 5850000

= 9.31% = 7.45% = 2.29%

5.6.3 Return on Investment = Profit After tax = 100/capital

= Net profit before tax/capital employed
YEAR 1 YEAR 2 YEAR 3
265320 644556.6 133830
= x 100% = x 100% = x 100%
1768800 4297044 892200

= 15% = 15% = 15%

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5.7 BREAK EVEN POINT

Break-even point analysis will help Best Lady Tailoring shop to determine the level ofwhich
business does not make profit or suffer loss

5.7.1 Contribution for year 3

Contribution= Sales – Variable Cost

YEAR 1 YEAR 2 YEAR 3
Sales – Variable Cost Sales – Variable Cost Sales – Variable Cost
= 2,850,000 – 1,500,000 = 8,650,000 – 3,966,750 = 5,850,000-2,960,000
= 1,335,000 = 4,683,250 = 2,890,000

5.7.2 Contribution Margin

Contribution margin = Contribution/Sales x 100%
YEAR 1 YEAR 2 YEAR 3
1355000 4683250 2890000
x 100 x 100 x 100
2850000 8650000 5850000
=46.84% =54.14% =49.40%

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5.8 DESIRED FINANCE
This refers to breakdown of how capital is to be used i.e. operational cost + working capital =
Desired Finance
DESCRIPTION AMOUNT
Pre-operational cost 1,550,500
Working capital 950,000
Miscellaneous 40,000
Total 2,540,500

5.9 PROPOSED CAPITALIZATION

ITEM AMOUNT
Owners equity 500,000
Friends and Relatives 40,000
Loan from bank 1,950,000
Credit from suppliers 50,500
Total 2,450,500

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