DAIRY PRODUCTION ENTERPRISE

TABLE OF CONTENTS

DECLARATION

ACKNOWLEDGEMENT

DEDICATIONS

EXECUTIVE SUMMARY

CHAPTER ONE

1.1 BUSINESS NAME

1.2 BUSINESS LOCATION

1.3 BUSINESS OWNERSHIP

1.4 BUSINESS TYPE

1.5 PRODUCT / SERVICE

1.6 INDUSTRY SECTOR

1.7 JUSTIFICATION

1.8 BUSINESS GOALS

1.9 ENTRY AND GROWTH STRATEGY

CHAPTER TWO

2.0 MARKETING PLAN

2.1 POTENTIAL CUSTOMERS

2.2 MARKET SHARE

2.3 PRICING STRATEGY

2.4 SALES TACTICS

2.5 ADVERTISING AND PROMOTION STRATEGY

2.6 DISTRIBUTION STRATEGY

CHAPTER THREE

3.0 MANAGEMENT PLAN

3.1 KEY MANAGEMENT TEAM

3.2 ORGANIZATION CHART

3.3 RECRUITMENT, TRAINING AND PROMOTION

3.4 REMUNERATION AND INCENTIVES

3.5 LICENSE AND PERMITS

3.6 SUPPORT SERVICES

CHAPTER FOUR

4.0 PRODUCTION PLAN

4.1 PRODUCTION FACILITIES AND CAPACITY

4.2 PRODUCTION PROCESS

4.3 PRODUCTION PROCESS

4.4 RELEVANT GOVERNMENT REGULATIONS

CHAPTER FIVE

5.0 FINANCIAL PLAN

5.1 PRE – OPERATIONAL COSTS

5.2 WORKING CAPITAL REQUIREMENT

5.3 CASH FLOW PROJECTION

5.4 PROFORMA INCOME STATEMENT

5.5 PROFORMA BALANCE SHEET

5.6 BREAK EVEN LEVEL

5.7 DESIRED FINANCING

5.8 PROPOSED CAPITALIZATION

5.9 PROFITABILITY RATIO

APPENDIX
DECLARATION

I declare that ht compiling of this script is my work as a result of the skills and

knowledge I acquired during my studies in business entrepreneurship.

I swear that this project has not been presented to Kenya National Examination Council

before.

Student’s Name ……………………………………………………..

Signature ……………………………………………………………

Date …………………………………………………………………

Supervisors Name …………………………………………………

Signature ………………………………………………………….

Date ………………………………………………………………..
DEDICATION

I dedicate this project to my beloved parent’s role towards my academic program. May

God bless you.

ACKNOWLEDGEMENT

I wish to express my heartfelt gratitude to whoever might have contributed in one way or

the other towards the successful writing of this business entrepreneurial project.

Thanks for the efforts of my supervisor Mr. Samuel for his guidance and direction during

my printing of this business plan up to its completion.

EXECUTIVE SUMMARY

1.0 BUSINESS DESCRIPTION

The business name will be Dairy production enterprise”. It will be located in

Moi’s Bridge Town on the outskirts of Kitale Town, Kitale – Eldoret Highway.

Most of its operations will be within the town, however if pension after

establishment will take place it will take its products and services to other

neighboring towns and places. The business is a sole – proprietorship which is

 expected to supply milk and farmyard manure within the town and other places.

With a capital outlay of Kshs 650,000 the business will specialize on supply of

milk and rare animals (Cows).

2.0 MARKETING PLAN

The proposed business will serve commercial customers, domestic and

institutional customers. the business is targeting the traders dealing with supply of

milk and its products. Domestic customers, the business is targeting people living

around the dairy farm and those living in the nearby centers. Under institutional

customers, the business is targeting neighboring school like, Riverbank academy,

Moi’s Bridge High School, Star of the Sea Academy, Moi’s Bridge Health

Centre, Milimani High School, Eshikulu Secondary School. Commercial

customers will be those people operating small diary joints. Advertisement and

promotion of the business will be done by various means, i.e. posters word of

mouth. Supply of milk will be by bicycles, motorbikes and vehicles. The pricing

will be lower compared to other dairies i.e. lower. The business is expected to

enjoy a market share of 37.5 %.

3.0 ORGANIZATION PLAN AND MANAGEMENT

The management of the business will be done by the proprietor of the proposed

business with the help of his assistant and an accountant . There will also sales

persons to market the milk, all this will have relevant qualifications for the jobs.

The business will get some supportive and advisory services from banks, postal

services, insurance, lawyers and Auditors. Afterwards the business will have to
 pay permits and licenses of Kshs 2,400 per annum, Dairy Board of Kenya Kshs

4,000 per annum. Total for salaries will sum up to Kshs 48,900 per annum.

4.0 OPERATIONAL PLAN AND PRODUCTION PLAN

The business will ensure there is adequate, steady supply of milk throughout the

year. This is by provision of enough animals feed in the store and water.

The production steps will be milking, boiling, culturing, cooling and finally

supplying the milk. A qualified veterinary will ensure that animals are in good

health all the season of the year. Some necessary equipment will be purchased

monthly and some expenditure incurred. The total amount for production cost will

be Kshs 146,200, total amount for raw materials Kshs 94,000, total amount for

labour requirement Kshs 48,900. Production and facilities will total to Kshs

341,200.

5.0 FINANCIAL PLAN

The proposed capital for BRIDGE WAY DAIRY FARM to start is expected to be Kshs

650,000 from which the proprietor expects to invest; there will also be a loan of Kshs

200,000, which he will start at the beginning of the year. Sales will be estimated to

Kshs 2,000,000 in the first year hence increment to the second and third year

respectively. The working capital for the year estimation being Kshs 1,106,900,

owner’s equity Kshs 981,900 while a loan of Kshs 200,000 will be borrowed from

Barclays Bank. The annual net profit for the first three years is expected to be Kshs

1,186,900, Kshs 1,378,720, Kshs 1,674,220 respectively.

 CHAPTER ONE

1.0 BUSINESS DESCRIPTION

1.1 BUSINESS NAME

The name of the proposed business will be DAIRY PRODUCTION

ENTERPRISE.
 BUSINESS LOCATION

The business will be located in my home area, this is Uasin – Gishu District.

Moi’s Bridge Town. It’s along the Kitale – Eldoret road just after the bridge of

river Nzoia. It’s about 19 km on the outskirts of Kitale town.

The climatic condition prevailing in the district is favorable to dairy cattle as

pertains their products and humanity disease.

DAIRY PRODUCTION ENTERPRISE FARM

P.O BOX 719

MOI’S BRIDGE

TELEPHONE 0728- 551 221

1.2 BUSINESS OWNERSHIP

The business will be a sole – proprietorship, it will be wholly controlled and

managed by George ojara as the owner due to her administration and experience

in dairy field.

1.3 BUSINESS TYPE

The business deals with dairy products, namely supply of milk and milk product.

This includes for the cattle.

1.4 PRODUCTS AND SERVICES

The business will specifically based on supply of milk, farm yard manure and

biogas production.

It will also collect milk from other bigger firms like, Brook side Dairies, Mois

bridge Dairies, thus acting as agent between farmers and other big firms.

1.5 INDUSTRY SECTOR .

 The is under the production industry established for production of milk from the

herd of cattle of the farm.

It’s expected to be a medium size organization practiced on a fire acreage piece of

land.

The business will only have one competitor in the region, this is Moy’s bridge

Dairies even though this business is large. It will just have to ensure that it has

enough to supply throughout the year to its large surrounding population.

The business is a growing industry, this is because the number of head available

will increase will increase as the cows will be calving and will ensure they calf at

different times so as to have all through milk supply

1.6 JUSTIFICATION

The business will ensure that it gets exotic breeds from Agricultural Development

Corporation from Kit ale hence different from other indigenous breeds within the

region.

The owner has and will also be attending seminars in various animals health and

production seminars and vetenary skills form the Artificial Insemination project

Moronjo because the proprietor used to heard her father’s cattle since her youth.

The business is quite different most.

The business is quite different most farmers around the region are not concerned

with supply of milk but they just sue for their domestic purposes, hence the

market sometimes lacks enough supply of fresh milk.

The business will be able to be successful because the proprietor will also plant

some nippier grass on one acre of land for cattle feed.

1.7 BUSINESS GOALS

 Short term goals

 Long term goals

1.8.1 SHORT TERM GOALS

 To satisfy the customers’ needs as well as to maximize the profits of about

150 % by the end of the year.

 To ensure that the farm will supply 200 liters and more of raw milk and will

maintained throughout at appropriate time to the potential customers by the

end of the year.

 The employment is expected to offer employment and to other employees

1.8.2 LONG TERM GOALS

 The business is excepted to add pick – up vehicle to help in supply of milk

and collection of farmers milk.

 The business is expected to expand its operation hence it requires 5 more

acres of land for its heard of cattle in a duration of 2 and a half years.

1.9 ENTRY AND GROWTH STRATEGY

It will commence by advertising, the business will advertise through posters and

local newspaper, this will enable both the literate and illiterate to be able to know

its existence.
 There will be also serious at the local town dealing with animals health and

veterinary services, this will enable both literate and illiterate to be able to know

its existence, this will also enable the proprietor to get more information about

cattle rearing their possible diseases. The name at the business “BRIDGE WAY

DAIRY FARM” will be printed on large signposts at the junction to the farm

entrance by the highway and at the gate so that it can be seen from a distance.

The business will also ensure the quality of its milk is for standard thus increasing

from the market and individual customers.

CHAPTER TWO

2.0 MARKETING PLAN

2.1 POTENTIAL CUSTOMERS

The business has three groups if customers

(I) Individual customers

 (ii) Commercial customers

(iii) Institutional customers

2.1.1 INDIVIDUAL CUSTOMERS

Individual customers or domestic customers will be those people who use or

consume milk directly, this includes local customers in the market or at the gate

of the farm. These customers make use of the milk at their own homes, most are

those who are within the locality.

2.1.2 COMMERCIAL CUSTOMERS

DAIRY PRODUCTION ENTERPRISE FARM EXPERTS some customers to

buy from the farm and re –sale the milk to their customers, this will be mostly

small to their customers, this will be mostly small dairy points like Canaan Dairy,

corner Dairy and Jambo Diary center

2.1.3 INSTITUTIONAL CUSTOMERS

Institutional customers will include school, hospitals, these customers are

expected to buy milk in bulk quantity like 50 liters, 100 liters. Those customers

include :-

1. Moi’s Bridge Health Centre

2. Moi’s Bridge High School

3. Milimani High School

4. Milimani Hospital

5. River Bank Academy

2.2.1 COMPETITORS
 In the modern world of business, there must be stiff competition so as the

business enterprise can exist DAIRY PRODUCTION ENTERPRISE FARM

COMPETITORS includes-

Moi’s Bridge Dairy

Herdsman Dairy

Jumbo Dairy Farm

These competitors are of the same locality, this business is directly competitors

because they sell the similar type of products like “ OJARA” although the latter

one specializes on Yoghurt Milk production.

2.2.2 STRENGTH AND WEAKNESS ANALYSIS TABLE

BUSINESS STRENGTHS WEAKNESS

Moi’s Bridge  Arrange machines and  Poor advertisement

 Dairies equipment’s  No enough working

 Well known  Poor promotion strategies

 Links with supplies

Herdsman Dairies  Best machines  Poor products and services

 Enough working  Poor transportation

 Well known  High prices

Jambo Dairy Farm  Modern equipment and machines  Irregular supply at milk

 Average in price  Poor promotion strategies

 Enough workers  Unqualified personnel

 Poor infrastructure

Bridge Way Dairy  High quality milk product  Not well know

Farm  Fall prices  Not established itself in the

 Modern equipment and machines market

 Good promotion strategy  Not established links with

 Qualified personnel supplies

2.2.3 COMPETITIVE ANALYSIS TABLE

BUSINESS PRODUCT PRICE PROMOTIO PERSONNEL TOTAL

NAME AND MAXIMUM N MAXIMUM

 SERVICE POINTS MAXIMUM POINTS

MAXIMUM POINTS

POINT

Moi’s Bridge 6 4 3 6 19

Dairy

Herdsman Dairy 6 4 4 6 20

Jambo Dairy 4 3 4 5 16

Bridge way 6 5 5 5 21

Dairy farm

2.2 MARKET SHARE

The entire location and the market center, the surrounding consists of population

of 16,000 people. The proposed business targets about 6,000 people within the

available population

6,0000 x 100
16,000

37.5 %

2.3 PRICING STRATEGY

The proposed business will implement competitive pricing by analyzing other

Dairies and comparing the prices and this will enable the business to decide his
 prices. The pricing will also be psychological and attractive i.e. if other Dairies

sell a liters at Kshs 19.00 the business will sell at Kshs 18.00 hence it will sell its

product 1,012 shillings loss than other Dairies.

2.4 SALES TACTICS

Bridge way Dairy farm will use personal selling where customers will be attended

friendly at the gate where it will be one of the farm sales point this point will also

advertise the business products. Frequent customers will be offered credit

facilities and discounts on purchase of bulk products i.e. more than 10 liters of

milk customers will also be shown how the biogas works license hence get access

to the farm and thus attracts more customers from within the locality sales will be

manly on cash basis or ordinary customers.

2.5 ADVERTISING AND PROMOTION STRATEGY

“Bridge Way Dairy Farm” will attract customers in various ways, this means like

advertisement through posters which will be glued on frees and shops walls

around the centers and nearby rural areas.

Also advertisement will be done through the word of mouth, salesman and staffs

will use reducing language to attract customers and inform them about our

products hence customers have a desire to know more. The business will also

paint signposts of its name and products on the two junctions towards the

highway, this will enable those traveling to be able to know about the business,

this will be done also in one or two shelters of bus stop in the town.
 The business will also be conducting demonstrations on bio- gas plants this will

be producing biogas which will be used for boiling milk products and this will be

able to know the business

2.6 DISTRIBUTION STRATEGY

The proposed business will be selling its products directly to customers and to

agents and also other retailers like small dairy joints.

2.7 DISTRIBUTION CHANNEL

DAIRY PRODUCTION ENTERPRISE

FARM

AGENTS

CUSTOMERS OR END USERS

 CHAPTER THREE

3.0 MANAGEMENT PLAN

3.1 KEY MANAGEMENTS

Manager I

Qualifications

 Should have a diploma in Business Administration and experience of two

years in a dairy processing industry or firm.

Duties and Responsibilities

 Administration all the operations of each section of the dairy farm

 Recruiting employees and other casual laborers in the farm

 Acting as the public relation officer between the farm and outside public.

 Ensuring that the work in the farm is done as per the planned schedule for

effectiveness.

ASSISTANT MANAGER 1 (SUPERVISOR)

Qualifications

 Should have a diploma in dairy processing from any dairy processing

institution with 2 years’ experience form the relevant field.

Duties and responsibilities

 All the employees in the farm as per the required standards to ensuring that

work.

 Ensuring the tallying for milk received from each farmer is of high quality

 Being in charge of the operations of the farm while the manager is not

 ensuring employees are punctual in attendance and work hard in the farm
Accountant

Qualification

Should have CPA section 1 or diploma in accountancy with experience of 1 year

from a busy firm.

Duties and responsibilities

 Preparation of payrolls for the monthly and daily cash farmers in the farm

 Booking of farmers and the farm milk and preparation of monthly sale

summary.

 Preparation of tallying for milk received and utilized in the farm.

 Preparation of monthly pay for employees in the farm both casual and

permanent employees.

Salesman 2

Qualification

 Should have certificate in sales and marketing from recognized institute and

experience of 1 year.

Duties and responsibilities

 Sale of milk at the gate and at the nearby local centers and towns

 Creating awareness of farms products and services to the customers by

advertising its products.

 Sales promotion of products at market days in the nearby centers

 Distribution of milk to daily customers door to door within the locality

3.3.0 ORGANIZATION CHART

MANAGER

ASSISTANT MANAGER
SUPERVISION

ACCOUNTANT

SALESMAN

DRIVER

Driver

Qualification

Should have at least O – level certificate with D + and a clean driving license

from a well-known driving school

Duties and Responsibilities

 Collecting milk from the neighboring farmers in the morning and evening

 Collecting and fetching water and nippier grass from the herd of cattle in the

farm.
 Distribution of milk to various customers of the business both commercial

customers and institutional customers

SECURITY: WATCHMAN 2

Qualification

 Should be over 25 years of age and physically fit

Duties and responsibilities

 Ensure the farm is out of raiders and animals are safe

 Make sure the gate is closed and is only open for customers or the farmers.

VATINARY OFFICER

Qualifications

 Should have a recognized certificate from a government institution

Duties and responsibilities

 Not permanently employed, but has an office at the farm for vetinary services

 Making sure all the animals in the farm are healthy and well catered for.

 Advising the farmers on cleanness of the dairy and milking sheds

HERDSMAN

Qualifications

 Should have at least KCPE or English and some relevant experience on the

field of dairy cattle rearing.

Duties and responsibilities

 Milking of the herd of cows in the compared and in the right time

 Collecting dairy feeds from the nearby cattle’s feed store for the herds

 Store the milk at the right containers for sale to

3.4.0 RECRUITMENTS, TRAINING AND PROMOTION

Recruitment

Bridge way dairy will poster around frees and walls to advertise for the jobs. They

will put in a strategically positions and nearby centers i.e. Moi’s Bridge, Milimani

requirements and will be interviewed by the managers successful candidates will

be employed and familiarized with the operation.

3.4.1 TRAINING

Bridge way dairy farm will employ already trained and experienced staff. It will

not train its employees but it will provide a chance for seminars and workshops,

this will be concerning the field of cattle rearing.

PROMOTION

Employees will be promoted on their hard work experience and dedication to

work. Promotion will be necessary when the dairy farm will have enough

resources for expansion.

3.4.2 REMUNERATION AND INCENTIVE

JOB TITLE NO OF BASIC HOUSE TOTAL

PERSONS SALARY ALLOWANCE

Manager 1 7,200 1,500 8,700

Assistant 1 6,200 1,500 7,700

Manager Accountant 1 6,200 1,500 7,700

Salesperson 2 6,200 1,000 5,000

Driver 1 4,000 800 3,800

Vet nary officer 1 3,000 - 3,000

Herdsman 4 2,500 - 10,000

Security 1 1,500 - 3,000

Total 48,900

3.5 LICENSE AND PERMITS

The business will obtain 2 licenses, one from the Municipal Council and one from

dairy board of Kenya.

The local trade license will be obtained from the Municipal Council of Trans –

Nzoia this is at the Head Office at the district in Kitale Town. The other license is

for the dairy board of Kenya this will be obtained from the dairy boar head office

at Eldoret town.

Trade license 2,400 per annum 2,400 per annum

Dairy board of Kenya 4,000 per annum

Total Amount
3.6 SUPPORT SERVICES

The proposed business will require support from professional field i.e. Insurance

against fire, theft animal health. This policy will be obtained at Eldoret Insurers in

Kitale Town on legal matters the business will have its advocates in Kitale Town,

Achiengs and associates. The business will hold its account both fixed and current

accounts at the Barclays Bank of Kenya Kitale Town.

It will also get some services from Maronjo Artificial Insemination project, this

firm deals with artificial insemination of cattle hence producing quality breeds for

the cattle thus increasing production of milk.

 CHAPTER FOUR

4.0 PRODUCTION PLAN

4.1 PRODUCTION FACILITIES AND CAPACITY

ITEM QUANTITY UNIT PRICE COST

Wheelbarrow 2 1,500 3,000

Weighing machine 1 5,000 5,000

Milk cans 50 lts 5 3,000 15,000

Milk cans 30 Lts 5 1,000 2,000

Measuring Jar 2 5,000 2,000

Milking machine 4 - 5,000

Furniture and fittings - 145,000 145,000

Vehicles (pick up) 1 5,000 5,000

Boiler (Electric) 1 200 1,000

Spade (folk ) 5 200 1,000

Spade 5 15,000 15,000

Freezer (ice) 1 1,500 3,000

Sealer 2 1,500 3,000

Cattle (Friesian) (cows) 6 12,000 72,000

Total 341,000
4.1.1 REPAIR AND MAINTENANCE

Business facilities and equipment’s will be maintained and repaired once any

breakage is note. Every tool and equipment will be placed at the right places in

the farm store. This is to ensure they are safe from any defects expenses is

incurred in any repair will be made and entered in the expenses account in the

expenditure record.

4.1.2 BUSINESS LAYOUT

The business is on 5 acre plot of land and its outcast is near the famous river

Nzoia which provide the animals in the farm with enough drinking water.

4.2 PRODUCTION STRATEGY

4.2.1 PRODUCTION DESIGN AND DEVELOPMENT

Bridge way dairy farm will ensure there is a steady way of milk to its customers,

this will be possible by ensuring the animals get enough grass and water

throughout the year. The farm will be used in dry seasons when there will be

insufficient grass in the paddock. Purchasing of every litters of milk will be issued

with a receipt, the farm will also ensure there is proper packing of milk for the

customers are of high quality. All customers buying less than five liters of milk

will get it on a well packed packet having the name of the business on it “Bridge

way” dairy kwa Maziwa Bora” Those who will be buying more than 5 liters of

milk will be required to come with their own containers.

4.2.3 MONTHLY RAW MATERIALS REQUIREMENTS

ITEM QUANTITY COST TOTAL

Milk flesh 2,000 20 40,000

Packing paper 10,000 2 20,000

Cultured milk 2,000 7 34,000

Total 94,000

4.2.4 MONTHLY LABOUR REQUIREMENTS

Direct material 94,000

Direct labor 48,900

Prime cost

Over heads

Transport 1,000

Electricity 300

Motor vehicle 1,200

Fire wood 800 3,300

146,200

4.3 PRODUCTION PROCESS

STEP ONE – MILKING

Cows are milked and the milk is stored in the milk cans and milk buckets

STEP TWO BOILING

 Milk in the milk – cans is boiled to kill the bacteria present in the milk. It also

helps to kill any germs in the milk

STEP THREE CULTURING

After the milk has been boiled. Its then able come bacteria to ferment it, this

makes it to be sour milk “ Maziwa Mala “

STEP FOUR – COOLING

After the milk has been belied, cultured its stored in the refrigerator to prevent it.

STEP FIVE SELLING / SUPPLYING

This will be done to the local customers and supplying to the nearby centers and

in institutions.

4.4 RELEVANT GOVERNMENT REGULATIONS

Bridge way dairy firm will be registered and a bide by the government regulations

of ensuring that the environment is protected from hazardous substances that may

be dangerous to human beings i.e. nylon papers.

The proposed business will also ensure health and safety by ensuring that there is

total cleanness in the handling of milk products and packages.

The proposed business will have its trade mark, which will be “ B.W.D.F” the

Dairy Board of Kenya will recognize this trademark as the recognition of the

business and its quality products.

The milk sold will be of high quality, this will be one of the requirements of

Kenya Bureau of standards, this ensures the quality of milk sold to customers is of

high standard.
 CHAPTER FIVE

5.0 FINANCIAL PLAN

5.1 PRE – OPERATIONAL COSTS

These are costs incurred before the business begins to operate the costs are

shown below.

DESCRIPTION AMOUNT IN KSHS

Licenses and permits 6,400

Tools and equipment’s 10,000

Furniture and fittings 50,000

Electricity installation 5,000

Initial advertisement 4,500

Total 75,900

5.2 WORKING CAPITAL ESTIMATION DESCRIPTION

This is the ultimate difference between current assets and current liabilities that

is working capital = current – current liabilities

DESCRIPTION YEAR 1 YEAR 2 YEAR 3

Stock of raw materials 489,000 492,000 494,000

Work in progress 342,000 348,000 356,000

Stock of finished goods 272,000 278,000 283,000

Debtors 3,000 5,000 6,000

Working 1,106,000 1,123,000 1,139,000

 5.3 CASH FLOW PROJECTION
DESCRIPTION JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC TOTAL
Cash inflows
Cash sales 195,000 180,000 165,000 170,000 169,000 190,000 175,000 167,000 167,000 185,000 170,000 189,000 2,115,000
Collection from debtors - 710 1,200 400 - - 680 1,310 - 650 1,450 1,000 7,300
Bank loan 100,000 - - - - - 100,000 - - - - - 200,000
Total 295,000 180,710 166,200 170,400 169,000 160,000 290,680 176,310 167,000 185,550 171,450 190,00 2,334,300
Cash outflows
Salaries 48,900 48,900 48,900 48,900 48,900 48,900 48,900 48,900 48,900 48,900 48,900 48,900 588,800
Electricity 180 380 320 350 200 200 300 330 400 440 370 430 3,900
Telephone 1,200 900 600 300 600 900 600 600 200 500 300 600 7,400
Advertising 400 320 300 280 320 360 - - - - 520 600 3,500
Postage 80 120 100 120 60 140 100 110 110 100 80 120 1,240
Transport 2,500 1,300 1,000 1,300 1,200 1,000 1,300 1,500 1,500 2,500 2,00 2,00 19,100
Insurance 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 36,00
Loan repayment - - - - - - - - - - - - -
Interest 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 60,000
License and permits 6,400 - - - - - - - - - - - 6,400
Repair and maintenance 1,200 - - - - - - - - - - - 1,200
Cash purchases 32,000 28,000 26,000 27,000 24,000 26,000 30,000 31,000 31,500 26,900 27,500 28,000 337,900
Stationary 280 120 200 180 220 200 170 190 210 225 250 215 2,460
Total outflow 11,940 88,040 85,420 86,430 83,500 85,700 89,370 90,630 90,920 87,565 87,565 88,865 1,076,300
Surplus 183,060 92,670 80,780 83,970 85,500 74,300 211,310 97,680 76,080 97,985 83.530 101,135 1,258,000
Accumulated cash 183,060 275,730 356,510 440,480 525,980 600,280 801,590 899,270 975,350 1,073,335 1,156,865 1,258,000
5.4 PROFORMA INCOME STATEMENT

DESCRIPTION YEAR 1 YEAR 2 YEAR 3

Sales 2,115,000 2,315,000 2,615,000

Collection from debtors 7,300 8,100

Less cost of goods sold 252,000 259,100

Gross profit 1,870,300 2,064,000 2,361,400

Expenses

Stationary 2,460 2,940 3,240

Salaries 586,000 586,000 586,000

Electricity 3,900 400 4,200

Telephone 7,400 7,600 7,800

Advertising 3,100 3,300 3,500

Postage 1,240 1,240 1,240

Transport 19,100 20,000 21,000

Insurance 36,000 36,000 36,000

Loans repayment and interest 5,000 5,000 5,000

License permits 6,400 6,400 6,400

Repair and maintenance 12,000 12,000 12,000

Total expenses 683,400 685,280 687,220

Net profit before tax 1,156,900 1,378,710 1,674,220

Provision for tax 20 % 237,380 275,744 334,844

Net profit after tax 949,520 1,102,976 1,339,376

5.5 PROFORMA BALANCE SHEET

DESCRIPTION AS AT THE BEGINNING END OF YEAR 1 END OF YEAR 2

Fixed assets

Land and buildings 213,300 213,300 213,300

Furniture and fittings 50,000 50,000 50,000

Vehicles 145,000 145,000 145,000

Accumulated dep 20 % (29,000) (29,000)

Equipment’s 25,000 25,000 25,000

Accumulated dep 10 %

Current assets

Cash at bank 132,000 127,000 143,000

Stock 620,000 640,000 650,000

Debtors 3,000 5,000 6,000

Total assets 1,186,300 1,205,300 1,232,300

Liabilities

Short term

Creditors 6,400 7,200 8,400

Long term

Owner equity 981,900 963,900

Loan 200,000 260,000

Total 1,188,300 1,205,300 1,232,300

5.6 BREAK EVEN LEVEL

DESCRIPTION (V.C) AMOUNT (KSHS)

Transport 19,100

Electricity 3,900

Telephone 7,400

Advertising 3,100

Postage 1,240

Total cost 34,740

Fixed costs

License and permits 6,400

Salaries 586,800

Insurance 36,000

Total fixed cost 629,200

Total 663,940

Contribution = Sales – Variable costs

= 2,115,000 – 34,740

= Kshs 2,080,260

Contribution Margin = Contribution x 100

Sales
= 2,080,260 x 100
2,115,000
= 98 %
Break-even point level = Fixed cost
Contribution margin %

= 629,200
0.98

= Kshs 642.040

5.7 DESIRED FINANCING

Pre –operational cost 75,900

Working capital 1,106,900

Total 1,181,900

5.8 PROPOSED CAPITALIZATION

Owners equity 981,900

Loan 200,000

Proposed capitalization 1,181,900

5.9 PROFITABILITY RATIO

1. Gross profit margin = G.P x 100

Sales

Year 1 = G.P x 100

Sales

= 1,870,300 x 100
2,115,000

= 88 %

Year II = G.P x 100

Sales

= 2, 064,000 x 100
2,315,000

= 89 %

Year III = G.P x 100

Sales

2,361,400 x 100
2,615,000

= 90 %
2. Return on Equity = N.P before tax x 100
Equity

Year 1= N.P. B.T x 100

Equity

= 1,186,900 x 100
981,900

= 120 %

Year II = N.P.B.T x 100

Equity

= 1,378,720 x 100
981,900

= 140 %

Year III = N.P.B.T x 100

Equity

= 1,674,220 x 100
981,900

= 170 %
3. Return on Investment

= Net profit before Tax + Interest x 100

Total Investment

Total Investment = Owners = Equity + Total loan

Year I = 1,186,900 x 100

981,900

= 120 %

Year II = 1,378,720 x 100

981,900

= 143 %

Year III = 1,671,220 x 100

963,900
= 173 %
 APPENDIX

DAIRY
PRODUCTION
ENTERPRISE FARM
SCHOOL

MOI’S BRIDGETOWN

RIVER
NZOIA

SHOPPING CENTRE

BRIDGE TOWN

SHOPPING CENTRE