BUSINESS PLAN

TITLE : VERA'S BOUTIQUE

P.O BOX 643,

KARATINA KENYA.

email:verohmaina13@gmail.co.ke.

PRESENTED BY : MAINA VERONICAH WANJIKU.

PRESENTED TO : THE NYERI NATIONAL EXAMINATION COUNCIL

IN PARTIAL FULFILLMENT FOR AWARD OF A
CRAFT CERTIFICATE IN CATERING AND
ACCOMMODATION.

CENTRE NAME : THE NYERI NATIONAL POLYTECHNIC

INDEX NO : 2021150331

COURSE NAME : CRAFT CERTIFICATE IN CATERING AND

ACCOMMODATION.

SUPERVISOR : MR MWANGI.

EXAM SERIES : NOVEMBER 2023

Table of Contents
DECLARATION...............................................................................................................................................i
Declaration by the Student...........................................................................................................................i
Declaration by the Supervisor.......................................................................................................................i
DEDICATION..................................................................................................................................................i
ACKNOWLEDGEMENT..................................................................................................................................ii
EXECUTIVE SUMMARY.................................................................................................................................ii
CHAPTER ONE..............................................................................................................................................1
1.0 BUSINESS DESCRIPTION.....................................................................................................................1
1.1 BACKGROUND OF THE OWNER..........................................................................................................1
1.2 BUSINESS NAME................................................................................................................................1
1.3 BUSINESS LOCATION AND ADDRESS..................................................................................................2
1.4 FORM OF OWNERSHIP.......................................................................................................................2
1.5 TYPE OF BUSINESS.............................................................................................................................2
1.6 THE PRODUCT AND SERVICES OF THE BUSINESS...............................................................................2
1.7 JUSTIFICATION OF BUSINESS OPPORTUNITY......................................................................................3
1.8 INDUSTRY...........................................................................................................................................3
1.9 THE GOALS AND OBJECTIVES OF BTHE BUSINESS..............................................................................3
1.9.1 GOALS.........................................................................................................................................3
1.9.2 OBJECTIVES.................................................................................................................................3
1.10 ENTRY AND GROWTH STRATEGY......................................................................................................3
1.10. ENTRY STRATEGY.............................................................................................................................4
1.11 GROWTH PLAN................................................................................................................................4
CHAPTER 2...................................................................................................................................................5
2.0 MARKETING PLAN..............................................................................................................................5
2.1 POTENTIAL CUSTOMER......................................................................................................................5
2.2 MARKET SHARE OR SIZE.....................................................................................................................5
Table 2.2.0 shows the competitors similar to the market....................................................................6
2.3 COMPETITION....................................................................................................................................6
Table 2.3.0 shows the strength, weakness of the competitors and how to cope with the weakness.. 6
2.4 METHODS OF PROMOTIONS AND ADVERTISEMENT.........................................................................7
2.4.1 ADVERTISEMENTS.......................................................................................................................7
2.4.2 PROMOTIONS.............................................................................................................................7
 2.5 PRICING STRATEGY.............................................................................................................................7
2.6 SALES TACTIC.....................................................................................................................................8
2.7 DISTRIBUTION STRATEGY...................................................................................................................8
CHAPTER 3...................................................................................................................................................9
3.0 ORGANIZATION AND MANAGEMENT PLAN.......................................................................................9
3.1 BUSINESS MANAGER(S).....................................................................................................................9
3.2 OTHER PERSONELS...........................................................................................................................10
3.3 RECRUITREMENT, TRAINING AND PROMOTION..............................................................................11
3.3.1 Recruitment..............................................................................................................................11
3.3.2 Training.....................................................................................................................................12
3.3.3 Promotions...............................................................................................................................13
3.4 REMUNARATION AND INCENTIVES..................................................................................................13
3.5 LEGAL REQUIRMENTS......................................................................................................................14
3.5.0 Summary of Legal Requirement................................................................................................15
3.6 EXERNAL SUPPORT SERVICES...........................................................................................................15
3.7 GENERAL ORGANIZATION................................................................................................................16
CHAPTER 4.................................................................................................................................................18
4.0 OPERATIONAL AND PRODUCT PLAN................................................................................................18
4.1 PRODUCTION FACILITIES AND CAPACITIES.......................................................................................19
4.1.0 Production Facilities..................................................................................................................19
4.1.1 Business Premises.....................................................................................................................20
4.1.2 Material for Production............................................................................................................20
4.1.3 Utilities of Production...............................................................................................................21
4.2 PRODUCTION STRATEGY..................................................................................................................22
4.2.0 Production Control....................................................................................................................22
4.2.1 Quality control..........................................................................................................................22
4.3 PRODUCTION PROCESS................................................................................................................23
4.4 OFFICE PLAN LAYOUT.......................................................................................................................23
4.5 REGULATIONS AFFECTING OPERATIONS..........................................................................................24
CHAPTER 5.................................................................................................................................................25
5.0 FINANCIAL MANAGEMENT..............................................................................................................25
5.1 BOOKS OF ACCOUNTS......................................................................................................................25
5.1.0 Purchases journal......................................................................................................................25
 5.1.1 Sales journal..............................................................................................................................26
5.1.2 Return inwards journal.............................................................................................................26
5.2.3 Return outwards journal...........................................................................................................26
5.2 PRE-OPERATION COST......................................................................................................................26
Table 5.2.0 shows the pre-operation cost..........................................................................................26
5.3 Working Capital...............................................................................................................................27
Table 5.3.0 shows Working Capital Year 1..........................................................................................27
Table 5.3.1 Working Capital Year 2.....................................................................................................27
Table 5.3.2 Working Capital Year 3.....................................................................................................28
5.4 Income and Expenditure..................................................................................................................28
5.4.0 Income and Expenditure Year 1................................................................................................28
5.4.1 Income and Expenditure Year 2................................................................................................29
5.4.2 Income and Expenditure Year 3................................................................................................30
5.5 Balance Sheet..................................................................................................................................31
5.5.0 Balance Sheet Year 1.................................................................................................................31
5.5.1 Balance Sheet Year 2.................................................................................................................31
5.5.2 Balance Sheet Year 3.................................................................................................................32
5.6 Cash Flow.........................................................................................................................................33
5.7 BREAK-EVEN CALCULATIONS............................................................................................................37
5.7.0 YEAR 1.......................................................................................................................................37
5.7.1 YEAR 2.......................................................................................................................................37
5.7.1 YEAR 3.......................................................................................................................................37
5.8 Profitability Ratios............................................................................................................................39
5.9 Desired Financing............................................................................................................................40
5.10 Proposed Capitalization.................................................................................................................41
 DECLARATION
Declaration by the Student
I wish to declare that this business plan is my original work and has not been presented for any
award to the Kenya National Examination Council.

Candidate's Name ………..……...

Signature .......... Date …………….........…............

Declaration by the Supervisor

This project has been submitted to the Kenya National Examination Council for the partial
fulfillment of the requirements for award of a Craft Certificate in Catering and Accommodation
with my approval as The Nyeri National Polytechnic Supervisor.

Supervisor's Name …………....……….….

Signature….............……. Date …………….......

DEDICATION
This business plan is dedicated to Almighty God who has seen and guided me through. I would
also like to dedicate it to my parents Eustace and Magdaline for their loving and showing me the

i
right path always as well as for their love, financial support and care.

ACKNOWLEDGEMENT
I wish to express my sincere gratitude to almighty God and my lecturer Mr. Mwangi for sharing
his guidance and support in every step of this business plan as it would not have been possible to
do it without his guidance. I also want to thank you my brothers Eric and Peterson as well as my
sister Grace for encouragement and love they have given me.

EXECUTIVE SUMMARY
1.0 The proposed business will be named Vera's Boutique and it will operate under a sole
proprietorship business. The business will be located alongside Sagana streets in Kirinyaga
County while it will involve itself in selling fashionable clothes and accessories.

2.0 In chapter two, the discussion is all about the potential customers of the business, their
market shares and their size. It also shows all about the competition, the competitors who will be
competing against the proposed business, their strength as well as their weakness. It also discuss
the methods that the business will use for its promotion and advertisements, the pricing strategy,
sales tactic as well as the distribution strategy that the business is going to use.

ii
3.0 In chapter three, it’s all about the organization and management plan. Those who will assist
the proposed business during its operations, different methods that will be used in recruitment,
training and promotions are also outlined. It also outlines the legal requirements, the external
support services as well as the general organization to the business.

4.0 In chapter four, it’s all about the operation and production plan. This chapter outlines the
production strategy, production process as well as the office plan layout of the business. It also
gives out the regulations affecting the operations of the proposed business.

5.0 In chapter five which is the last chapter, it outlines the financial management. It also outlines
the books of accounts, the pre-operation cost, working capital, income and expenditure as well as
cash flow of the proposed business.

iii
CHAPTER ONE

1.0 BUSINESS DESCRIPTION

The business will operate under the name Vera's boutique shop and will be located along
Makaton road. The proposed business address will be PO BOX 643, Karatina and will use the
owner’s number 0795421226 for communication. The business will operate as a sole proprietor
by the name Veronicah Maina. This will make it easy and faster when it comes to decision
making because the owner does not need to spend a lot of time consulting before making any
decision.

1.1 BACKGROUND OF THE OWNER

Name of the Owner : Veronicah Maina

Age : 20 Years

Marital : Single

Occupation : Business Lady

Professional qualification : College Diploma

1.2 BUSINESS NAME

The name of the business will be Vera's boutique. The name of the business has been extracted
from the owner of the business name that is Veronicah. The owner preferred the name because it
is easy and it will help the customers to be able to identify the owner of the business. The
business logo will create a strong first impression and it will also enhance brand loyalty.

1
1.3 BUSINESS LOCATION AND ADDRESS
The business will be located along Karatina-Makutano road, Sagana streets, Tower buildings,
2nd floor Room number 10. The proposed business address will be:

VERA'S BOUTIQUE

P.O BOX 643,

KARATINA KENYA.

EMAIL; verohmaina@gmail.co.ke

TELEPHONE: 0795421226

1.4 FORM OF OWNERSHIP

The business is owned by one person thus it is a sole proprietorship business. The business will
also operate under my overall directive management of Veronicah Maina assisted by other four
sailed employees. The business will be a sole proprietorship because:

i. Establishing and operating the business will be simple.

ii. It will be easy to change the business legal structures later if circumstances change and
easily wind up the business.

iii. The business start-up costs will be low.

iv. The business owner will be able to keep all the profits

v. .The business owner will be the boss of the business.

1.5 TYPE OF BUSINESS

The business is a start-up business because it's starting. The business will also operate under
wholesalers and retailers mainly because customers will require transportation of their bulky
goods. The business is scheduled to start by March 2024, the business will involve its activities
in selling of fashionable clothes and accessories or a special selection of other merchandise. The
business targets to start its operation with a capital of Five Hundred and Fifty Thousand shillings.
The capital will be obtained from personal savings and as well as contribution from family
members.

1.6 THE PRODUCT AND SERVICES OF THE BUSINESS

Just as the name suggest the business will be involved in selling of fashionable clothes and
accessories or a special selection of other merchandise e.g.; Handbags, Leggings and Athleisure
and Perfumes etc. The services offered in the business will be alterations, giving personal
appointments to customers and personal shopping because this will help the owner of the
business find the perfect items.
2
1.7 JUSTIFICATION OF BUSINESS OPPORTUNITY
The business will be successful as there is a ready market because the competitors do not offer
fashionable products which are latest in the market. This will attract customers as their guests to
have the new fashionable products of their satisfaction.

The business will also be successful due to acquired entrepreneurial skills by the owner the
business, availability of good infrastructure, security and different styles of running the business
to cope with the competitors in the market. The business also targets to increase the standards of
living to the people living in the area and beyond hence availing all the required products in time.

1.8 INDUSTRY
The proposed business will belong to fashion industry, where the business will deal in multi-
billion dollar global enterprises devoted to the business of making and selling of clothes that is
taking place day to day in one area to another thus leading to high investment in the field. The
owner of the business will invest more capital on other activities that will help her run the
business in terms of technology and also invest in the bank account and this will enable the
business owner in the future running of the business.

1.9 THE GOALS AND OBJECTIVES OF BTHE BUSINESS

1.9.1 GOALS
The goals of the proposed business owner will be both long term and short term goals. They
include:

1. Hire more employees.

2. Acquire a new location for alteration.

3. Increase of stocks.

1.9.2 OBJECTIVES
The business want to achieve the following objectives in a short term.

1. Introducing formal methods of payments by the use of credit cards.

2. Hire a developer to create new website for the business.

3. Increasing products.

1.10 ENTRY AND GROWTH STRATEGY

Through good conduct and interaction with customers and also skilled manager will make the
proposed business be conducted smoothly thus making more profits, and also keeping the
employees focus and aligned.

3
1.10. ENTRY STRATEGY
The proposed business will not have stiff competition since the business will be providing
durable goods and services at a reduced cost and also the owner of the business will be giving
promotions and discounts to the customers so as to attract many customers to her business.

1.11 GROWTH PLAN

The proposed business in order to grow effectively, there must be competitors whom to compete
with thus the proposed business requires an area where it will help in growth of the business thus
the business will venture in newly products in the market and make them to reach to customers.

4
CHAPTER 2
2.0 MARKETING PLAN
The owner of the business aims at increasing the amount of profits in the next four years. This
will be achieved by her employee’s hard work and well skilled in dealing with customers.
Through the beneficial profit she will be able to increase her stock as well as expanding her
business.

Enhancing customer’s relationship will be another plan from both the owner of the business and
the customers thus she will be able to sell her products at fair prices so as to attract more
customers into the business.

2.1 POTENTIAL CUSTOMER

The proposed business will be targeting and aiming at offering its products to individuals and
retailers. Individuals are the most important customers because they purchase goods and pays
immediately hence avoiding debts that may lead to the proposed business operating at a loss.
Some people within the locality of the proposed business will be able to purchase the products
because some are civil servants while others are self-employed.

The targeted customers are the middle-aged and the owner of the business expects that the
customers will derive some benefits from the products that she might have brought and these
may include; Durability of the products because they are made from the best material.

The owner of the business also expects her products to be purchased much at the end of month
because most of the people will have received their salaries and they will be able to pay the
goods through M-pesa or by cash. The proposed business will not only allow the owner to create
better products and services for customers by will also allow her to more-effectively reach them
through advertising and promotions of her products.

2.2 MARKET SHARE OR SIZE

The proposed owner of the business has analyzed and estimated that the number of customers
will be about 15,000 of which the reliable population 0f about 4,500 have been captured by the
competitors that had earlier established their business.

The proposed business market share will be approximately 50% and she will ensure that she
provides durable goods through this the owner of the business will be able to expand her
business in 2 years’ time. The owner of the business in 4 to 5 years’ time is expected to have
increased the sales of the business and also ensuring that there is growth to the market share of
the business as well as offering good services to the customers.

Table 2.2.0 shows the competitors similar to the market.

Business Name Market Share

5
Vera’s boutique shop 45%
Think twice shop 25%
Tana’s fashions 20%
Freeze and shine clothing 10%

2.3 COMPETITION
The main competitors in the market are Think Twice shop, Tana’s fashions and Freeze and shine
clothing’s. Think twice was established 5 years ago thus it is the biggest challenge because it is
well known, it has 25% of the market share and it is located 100m from the proposed business.
Tana has a small market share of about 20% and it is located far away from the market. Freeze
and shine is another competitor, it has the least market share and it sells its product at a very high
price.

Table 2.3.0 shows the strength, weakness of the competitors and how to cope with the
weakness.
Name of the Market Location Strength Weakness How to cope
competitor share with the
weakness of
the
competitors
Think Twice 25% Sagana 1. Well known 1. High prices 1. Deliver
Shop by customers. on their excellent
2. Good products. products and
location. 2. Poor services
service 2. Lower the
price on their
products.
Tana’s 20% Sagana 1. Quality 1. Located far 1. Test out
fashion products. from trends.
2. Product customers. 2. Hiring skilled
range 2. Unskilled staff.
personnel’s
from the
employee’s.
Freeze and 10% Sagana 1. Good 1. Poor 1. Deliver good
shine customer location and excellent
clothing service 2. Poor speed customer
to market service.

6
 2. Offer pricing
comparison.

2.4 METHODS OF PROMOTIONS AND ADVERTISEMENT

2.4.1 ADVERTISEMENTS
The owner of the business tends Electronic media e.g. Television and Radio because they
transmit information everywhere in the world while advertising her products which will be done
1 to 2 times per day because this will make the audience will become familiar with both the
owner of the business and her products.

The business owner will also develop a strong brand identity that will help in creation of a good
image of her products in the mind of consumers. Looking at her financial statements will also
help the business owner to measure the effectiveness of her business.

2.4.2 PROMOTIONS
The business owner will be giving away free samples of her products and services to draw in
customers so that they can have a taste of what she offers, Hopefully they will be enticed buy
from her thus increasing the bottom line. The owner of the business will also employ sponsorship
promotional method because with sponsorships her business will strengthen the credibility of her
advertising by partnering with a well-established person or brand thus increasing popularity and
reputation.

2.5 PRICING STRATEGY

The business owner will be using the method of calculating the cost price and the profit margin
to get the selling price of her products and services.

Nature of competition will influence the owner of the business price setting hence, she decides to
set her actual prices at 1000 Shillings based on the competitor's prices rather than on her own
cost and profits objectives. She will be giving credits to loyal customers and the one she knows
at the end of the month and the customers are expected to pay immediately to avoid the business
operating at a loss. The proposed business will not only offer trade discounts to customers who
buys in large quantities but also offer transport means in order to attract more customers.

7
2.6 SALES TACTIC
The owner of the business tends to employ personal selling to customers as a sales tactic because
it involves direct communication between the salesperson and the potential customer. This form
to selling will be able to personalize and humanize the selling process because the owner of the
business will be able to receive complains directly from customers and can occur in person, Over
e-mail or via Video call, thus this will help the owner of the business to improve her products and
services.

2.7 DISTRIBUTION STRATEGY

The business owner will be getting her products from Mombasa to Kirinyaga through air.
Through distributors the owner of the business will be road transporting her products to
customers on time through face to face and this will help the business from identifying various
problems and how to come up with solutions to the problems.

8
CHAPTER 3
3.0 ORGANIZATION AND MANAGEMENT PLAN
The owner of the business have to come up with a proper plan on developing policies. This will
include staff development and the human resource management. This plan will include time
management, proper financial plan ensuring that every activity is done properly and for the
intended purpose. The business owner will be the overall manager of the business, she will
oversee all the activities carried out in the boutique. She will ensure best employees are recruited
in the business, this will help in good communication to the customers hence if they engage well
with the customers, and more customers will be attracted to the business.

Training will be provided for the employees and they will have an opportunity to undergo a
training on how the boutique will operate. The business will provide quality and quantity
products. This will help in attracting more customers to the business. The business will also
provide good customer services for all its clients. Job analysis will also be carried out as this will
help in coming up with the new methods to complete with the competitors in the market.

3.1 BUSINESS MANAGER(S)

The manager of the business will be the sole proprietor, she will make and give the final
decisions in the business. She will set goals and objectives for the business so as to achieve the
intended purpose of the business. The business manager name will be Veronicah Maina and she
is 20 years of age.

She will oversee the activities of the business as the manager, she have experience as she have
worked in several boutique. She had earlier worked in a company as a sale marketer with this
knowledge it will be easy to market her products and services. This will in return help in
ensuring that the business satisfies its customer, ensure that it works towards making profits and
avoiding unnecessary loses. It will also help the business in having the ability to compete with
the other competitors in the market.

For the business to attain its objectives and goals it’s the responsibility of the manager to ensure
that the business run smoothly by ensuring that the products and services provided to the
customer are of high quality and quantity. With this the customers will be satisfied and this will
make it easy to make more sales than its competitors hence making high products. The manager

9
will supervise her employees to ensure that they work to their best.

She will also have the responsibility to solve disputes that may occur between her employees. It
will also be her responsibility and duty as well as to train and show her employees on the best
ways negotiate with customers as this will make the customers purchase goods from them. The
manager will also work towards creating good relationship between the business customers and
the workers who will always be with the customers in case the manager is not around. It will be
the responsibility of the business owner to plan, control and coordinate all the activities in the
business.

She will also be in charge of hiring new employees in case the business need to add more
employees at its main aim is to ensure that there is growth, more employees will also be required
to assist in the operations of the business.

3.2 OTHER PERSONELS

The manager of the business will work with other four employees in total the business will
therefore have five personnel’s to carry out all these business activities. For one to qualify to be
hired to work in the business he or she must have skills in sales and marketing and they should
have an experience of at least one year. Anyone who had earlier worked in a boutique will have
an added advantages as they will have more skills as required by the business. The business will
also require an employee who is able to operate and work with a computer. This will be more
required for the employer who will get to the position of the cashier of the business.

With the assistance of these four employees, it will be easy to run the business without more
challenges which may result as a result of having more customers with no personals to serve
them. This will lead to delays and this may cause the customers to opt in shopping in other shops
where they are served in the right way and with no delays. Hiring more employees in the
business will depend on the growth of the business. The employee’s salary will be depending on
the area of specialization. Each and every employee to be recruited should have at least 18 years
and above. The employees will have the privileges of having off days.

The best performing employee will also be motivated for working hard. The manager will also
have to motivate any employee who works for extra time in the business. The employee’s salary
will be monthly payment, each and every employee will receive their salary and the owner of the

10
business have laid good plans to ensure that employees are paid in good time.

Personnel Number required Qualification Duties and

responsibilities.
Manager 1 Have a collage Manage the
certificate. business.
Make decisions.
Supervise the
employees.
Hiring and firing of
employees.
Sales personnel 3 Be 18 years and Serving customers.
above. Marketing business
Have a certificate in products.
sales and marketing. Book keeping.
Have at least one
year experience.
Cashier 1 Certificate in Recording
computer. payments.
Be 18 years and Issuing receipts.
above.
Have accounting
knowledge.

3.3 RECRUITREMENT, TRAINING AND PROMOTION

3.3.1 Recruitment
Before the business starts it operations it will need the employees who will help in day to day
running of the business. To get these personnel’s recruitment will be done. The business owner
will start by advertising on the opening of the new business as well as the need to recruit new
employees into the business. This advert will state the requirements for one to be recruited in the
business. This will include the post required to be filled, the number of personnel’s required as
well as the qualifications one need to have to be recruited in the business.

After the advertisement the candidates who place their applications and selection will be done.
The most qualified candidates will be shortlisted and there after called for the interview. When
the interviews are done the best candidates will be recruited to join the business and fell the
vacant positions. In case of any vacancy when the business kicks off the position will be
advertised selection done after the selections then interviews will follow then the best soothing
candidate will feel the vacant position.

11
The business adverts will always be done through posters, announcements will also be done
churches as well as barazas which may occur before the recruitment process starts. This will
make it easy for the business to reach many people hence through this many people will be able
to apply for the positions and the business will be able to recruit the best of the candidates to fill
the position. After the recruitment process the chosen candidate will be issued with letters which
will indicate the date when they should start their work.

In these letters the newly recruited will also be informed of their basic salary they will be able to
earn at the end of the month. The rules and regulations for the business will also be included in
this letter and each and every new recruited employee will be required to fill and sign it as an
agreement between themselves and the employer who is the owner of the business. I t will also
include all the tasks that the employees will be required by the manager to undertake. As well the
number of leave days will be included in this letter and any other necessity that the employee
needs to know before they start their job.

3.3.2 Training
After the reporting of the employees there will be an orientation for all the employees
immediately after they report. This will be followed by training of the employees on how the
business is going to work. The training will be internally conducted as this will help to reduce the
amount of expenses incurred when undergoing an external training. Through this the business
will have saved on the cost as it will avoid spending a lot of money taking the employees for
training. This training will involve all the new recruits as it will be necessary for all the
employees in the business.

The business goes on the employees will be given to participate on the job training and this will
enable the employees to go for further training. Through these trainings new skills will be
learned and this will benefit the business as its employees will have gained new skills on how to
operate. Special training will also be conducted in case of any recruitment which might take
place when the business kicks off. All the employees both the employees who have been working
in the business and the newly recruited will be allowed to go for the training.

The employees will also be allowed to go for seminars which concerns and will have a benefit to
the business. Through these trainings and seminars the employees will have the opportunity to
learn new skills for operation in the business they will also have a chance to learn on good
communication skills with the customers and this in return will benefit the business as it will
have attracted customers as they will always prefer going to buy their products where they are
welcomed and served well.

These on the job training will be catered for by the business else the employees will not be
required to pay anything to go for the training. The business will require its employees to work
hard so that the business grow and make more profits and this will give the owner of the business
morale to allow them to go for training as she will know that after the training more skills will be

12
learned and this will return make and improvement hence more sales will be done as well as
more customers will be attracted to the business retaining its old customers in the business.

3.3.3 Promotions
The business plans to have various ways of promoting its employees in the business. Different
methods and criteria’s will be used when it comes to promotions. There will be set goals and
objectives that an employee has to meet for them to be promoted in the business hence these
qualifications will be done before making any promotion. Academic qualifications will be one of
the qualifications which will be used to determine whether and employee require and qualify for
the promotion as the business will be growing hence it will be in need of more learned
employees.

Work experience will also be another determinant and this will be hand in hand with the best
performing employees hence it will mean that employees who are performing well in the
business will be considered first. This promotion will be based on the employees who meet their
target sales in time. The promotion will also consider the discipline of the employees, their
honesty, effectiveness and efficiency in what they do as well as time management by the
employees and any employee who have this qualifications will be entitled to promotion in the
business.

Through these promotions the employees will be highly motivated hence this will give them the
morale to work hard and make more sales in the business. Promotions will also involve salary
increment hence this will motivate the employees as each and every employee will work hand so
as to attain the qualification required for them such that they are able to get more pay in the
business. Through this employees will be able to grow then selves not only with the high salary
pay but also they will have gained more skills in the business and this may help them in future
when they decide to go for higher positions.

Promotions will boost the employee’s morale it will also reduce the employee turnover and by
this the owner will have saved a lot of cost that could have been incurred recruiting new
employees and training them when those already trained employees start leaving their jobs to
look for better jobs. Promotions will lead to job satisfaction hence this will prevent employees
from leaving the job and going to look for other jobs. Through certainment of the employees the
business will have the ability to grow, make more sales hence more profits as it will not incur the
expenses which may result when its experienced employees leave the job.

3.4 REMUNARATION AND INCENTIVES

Remuneration is the regular pay for the work payable to an employee in any business while
incentive is a something of value or desired action that motivates an employee to do more of
whatever was encouraged by the employer through the chosen incentive. In order the business to
perform well it will need to ensure that its employees are well paid and as well ensure that it
motivates the employees to perform well in their day to day duties. This will help the business in

13
making more profits as the employees will always be motivated to work hard.

The owner of the business will ensure that its employees are well paid and in good time. This
will help to prevent employees from being demotivated as a result of delays in their salary. It will
also help to prevent employees from leaving the job to look for other jobs where they feel they
will be paid well and in time as agreed between the employee and the employer. The business
manager will also ensure that employees who work for extra time will be paid for the over time.
This payment will not be included in the basic salary of the employees as it’s not part of the basic
salary hence employees who work for overtime will be required to claim for their over work and
it will be directly paid to them.

Employees will also be entitled to leave days as well as day offs. This will also be used as a tool
for motivating the employees as they will have time to rest. The business owner will also
motivates her employees by involving them in decision making as this will make the employees
feel as part of the business hence they will feel motivated and part of the business. The owner
of the business will also ensure that the best performing employees are motivated through salary
increment, training so that they can in return give back to the business by making more sales
which will result to more profits of the business.

3.5 LEGAL REQUIRMENTS

For the business to start its operation it will require to have been authorized by the government.
These requirements are known as the legal requirements for the business. Approvals and
compliance of the business will be required so that it’s allowed to carry out its operations freely.
These legal requirements will include license for the business, legal forms of the business
ownership, registration of the business as well as permit to operate the business at its intended
location. To have adhered to all these requirements some expenses will be incurred by the
business.

The sole proprietor will ensure that she acquires all the required documents for the business to
start its operation. With the requirements it will be easy for the business to operate and run
smoothly as it will not have interference from the government as a result of lacking some
operational documents. The business will acquire its trade registration documents from the
county government of Kirinyaga as it will carry out its operations in the county and this
documents will make the business to be recognized as one of the business carrying out its
operation under the county government. It will also acquire permit certificate to carry out its
operation from the government as well.

The owner of the business will also require to get the legal documents from the Ministry of
health. These documents will be for the public health for the business to ensure cleanness and
hygiene in its premise it will operate. This will ensure safety of the employees as well as its
customers and the surrounding environment. With the cleanness the business will have avoided
the sickness that may be as a result of living in a dirty environment hence this may even lead to

14
closure of the business.

The business will also need to insure itself with an insurance company. The owner of this
business will insures her business from any damage e.g.; damage from fire and theft. She will
need to cover her employees in case of any accident which may occur when on duty. The
business will be issued with the By-laws which will be provided by the government this will help
to ensure safety of the employees and the customers as well as the safety of the business. With
this insurance it will be easy for the business to carry out this operations.

The business will also have the responsibility to pay tax as a requirement by the government.
This will start by ensuring that the business have Kenya Revenue Authority Pin Number which
will be use when it comes to payment of tax and as well it will include the amount that the
business is required to pay every year. The business will then be issued with Kenya Revenue
Authority Compliance certificate. This certificate will be used as proof that the business pay its
tax to the Kenya Revenue Authority.

3.5.0 Summary of Legal Requirement

No. Requirements Description Where Fee payable

obtained
1 Government Trading Ministry of 1000 Once
regulation of licence trade
Kenya
2 Public health Sanitary and Ministry of 1000 Once
hygiene health
certificate
3 Local Local County 1000 Annually
authority authority council
regulation licence
4 Taxation V.A.T Kenya 2500 Annually
P.A.Y.E revenue
authority
5 Insurance Fire out Insurance 20,000 Annually
brake and company
theft.

3.6 EXERNAL SUPPORT SERVICES

For the business to run smoothly it will require some external support services. These will
include services like the transport services, Banking services, Business Advisory services as well
as services from the suppliers who will be supplying the business with the products and services
to offer to their customers. The business will open a bank account with the KCB Bank for easy

15
business transactions. The bank will be used by the business to store its cash as this will help to
avoid storing for cash in the business premise which is not a recommended method for keeping
business cash.

Through the use of bank it will be easy for customers’ to pay for their purchases by the use of
cheque. The manager will also be able to pay her employees through the bank accounts. Through
the use of the bank the business will have a safe custody of the business money. The business
advisory personnel will also be one of the external support for the business. They will advise the
business on what it should do to make more sales. The employees will also be advised on how to
handle the customers so that the business can retain its potential customers and as well be able to
attract more customers bin to the business as the customers will prefer a place where they are
handled and served well.

The business suppliers will be also provide external support services to the business as they will
always supply the business with goods and services to sell to its customers. The suppliers will be
the most important to the business as they need to supply the business with the best quality and
quantity products and ensure that the products are supplied in good time. This will prevent
customers who need certain products from finding that the products are not available hence
forcing them to go and look for the goods in other shops as this might cause the customers to opt
to going to the other business where they got the product last time. This will have lowered the
business sales as the competitors will be have made the sales.

Transport services will also be require by the business for it to carry out its operations smoothly.
Since the business will not have a private means of transport when it starts the owner of the
business will have to look for and external transport means where the business will always get
the transport services whenever they are required. The business will ensure that it gets transport
means from one source as this will help to grow good relationship between the transporters and
the business hence promoting the business by ensuring that whenever transportation is required
the transporter avail themselves in good time to avoid unnecessary delays which may lead for
failure of the business.

3.7 GENERAL ORGANIZATION

The business will have a general organization as plane by the manager of the business. The
manager will ensure that the business is organized accordingly. The business will have the sales
personnel’s, the cashier who will deal with all the finances and the owner of the business who
will be the manager. The sales personnel will work towards ensuring that the business products
are promoted as by doing this the business will make more sales. They will also give the best
services to the customers and give any support or help needed by the customers of the business.

The business cashier will ensure that there is smooth flow of all the transactions made by the
customers as well as ensuring that the customers are issued with the receipts and ensuring that
the business receipts are kept well. The cashier will also help in calculating the profit made by

16
the business from the sales made as well as keeping the journal and the cashbook of the business.
The manager will ensure that every activity of the business is run smoothly with the help of the
other employees.

17
CHAPTER 4
4.0 OPERATIONAL AND PRODUCT PLAN
Operational plan is the plan that the business has come up with on how it will carry out its day to
day operations. Product plan is how the business has come to up with the means of getting
products, the kind of products and how to get the products as well as where to get the product.
The business will work on already produce good as it will deals with selling of cloths. The
business will operate on daily bases from Monday to Saturday and it will start its activities from
7:30 am to 6:00 pm. On Sundays the business will be closed. The employees are expected to
adhere to the time set for opening the business and also ensure that no employee who leaves he
business before time.

For the business to be successful it should have set operational plan as well as goals. Every
employee will be expected to adhere to each and every rule and regulation set for the aim of
business success. The manager will ensure that in the operational plan allocation of duties will be
done such that each and every employee will always know what is expected of them and the
duties they are required to do in day to day activity of the business. By doing this there will be
division of work and this will help to avoid idleness of the employees as they will not have work
to do. This will also enable the employees to focus on what they support to do hence they will be
able to serve their customers to their best.

Operational plan will help the employees as they will be able to do the right thing in the right
time as expected of them. It will be easy to run the business smoothly with set operational plan.
As the business will always have what it has planned to achieve in future hence it will always
work as guided by the set plan. Good operational plan will lead to good service offer to the
business customers as a result the business will be able to operate at a profit. Operational plan
will help the business avoid losses which may occur where by the business operates with no
plans of what it need to achieve in the business.

When it comes to business product plan the business will deal with selling of cloths. The
business products will be of the best quality and fashionable. The business will get the products
from its suppliers with whom it has made all the plans of getting the products and in good time.
The business will ensure that it means all its customers need and desires by ensuring that no
customer should come to the business premise and lack what they expected to purchase from the
business. By doing this the business will be able to retain its customers and as well it will be able
to attract more customers to the business hence this will to more business gain and more profits
will be made by the business.

4.1 PRODUCTION FACILITIES AND CAPACITIES

4.1.0 Production Facilities
The business will require some production facilities for it to operate smoothly be successfully

18
and meet its objectives and set goals. These facilities and equipment’s will include hangers,
receipt books, shelves, cash drawer, tables and chairs. The table below shows the items required
their description and the cost of the items. The business will need to have it for it to meet its
objectives and its future plan.

Table 4.1.0 Production facilities

Items Description Model Use Cost Quantity

Hanger Blue and red Plastic Hanging of 25 150
hanger cloths
Receipt Showing list of
Have white Evidence of 100 5
books products and pages payment by
description. the
customers
Shelves Middle sized Wood For holding 10000 2
with a flat cloths being
base displayed
Cash drawer Middle sized Wood For storing 3000 2
cash, coins
and stamps
Table Rectangular Wood For placing 3000 2
shape middle receipts
sized books and
other
business
tools
Chairs Blue Wooden For sitting 1500 5 15000
chairs made on
Customer Blue Plastic For the 600 8 4800
chairs customers
to sit on

The facilities and equipment’s will be purchase by the use of cash. The business expects the
sellers of the equipment’s and provides of the facilities to cater for the transportation services to
the business. Those who will provide the business with the tools like the shelves will be expected
to fix the shelves in the business premises as they provide this facility for their customers. The
manager will allocate an employee the duty to always check on the equipment’s. In case any of
these is found to be found to be damaged and need to be repaired then the manager will be
informed. It will be the duty of the manager to call and expert to come over and repair the
damaged equipment’s.

19
The expert will be expected to come from the dealers who provided the business with the
facilities. Any spare parts need will also come from the dealers who supplied them facilities to
the business. The maintenance of the equipment will be done after every six months to ensure
that everything is in order. These facilities will be locally purchased as the suppliers and dealers
are just from within. They are also considerable as they sell equipment’s and provides facilities
of high quality equipment’s. The business expects that those tools and equipment’s purchased for
the business will give the business service for a long period of time as they are made from the
best material.

4.1.1 Business Premises

The business expects to carry out its operations in a rental premise. The Premises has been well
build, it has been installed with electricity, clean water for use by the employees as well as the
customer and clean wash rooms. The premise have enough space for the business to run its
operation as it provides room for expansion as the business expects to expand in future. The rent
expense incurred will be 5000 Kenya shillings monthly. The owner the business of is expected to
carry out renovation of the premise before the business starts its operation in the premises.

She will also be allowed to do the renovation any time she feels like as she may need to make
some drawing on the front walls of the premises displaying the products of the business. These
drawings may be done as a result of the business wanting to attract more customers to the
business as the customers will be able to be attracted by the drawings from a far distance.
Parking space will also be provided by the business for its customers hence customers will not
suffer looking for where they can pack their cars when they come for shopping in the business
and this will too attract more customers as they will always know that parking space will be
provided for them.

4.1.2 Material for Production

The business will require some production materials for it to meet its objectives and set goals.
Most of the materials that the business will need in day to day running of the business and not
coming up with the final product as the business will always be supplied with finished products.
The materials will be necessary for establishing smooth running of the business. Some of these
production materials will include raw materials such as receipts books, pens, and stamps and
well as the files. The receipt books will be used to write down all the payments made by the
customers.

The pens will be used for writing, the business will also have stamps which will require contain
the name of the business. These stamps will be used to stamp on the receipts as it will show that
the receipts are from the business. The business will also need to have files these files will be
used to store the documents for the business. This will ensure safety of the office document as
well as ensuring that documents for reference are available in case any need for reference occurs
and the business need to male some consultation from the documents then they will be readily
available. By the use of the files it will also help to prevent the document from getting lost.

20
Table 4.1.2 Raw Materials
No. Item Description Quantity Cost per Total
per month unit
1 Receipt Showing cost of 4 150 600
books product sold to
the customers.
2 Pens For writing. 10 20 200
3 Stamps Showing 1 300 300
business name
and address
where the
receipts for the
purchase have
been gotten
from.
4 Files For filling 1 100 100
business
documents.

4.1.3 Utilities of Production

The business will require some utilities for production for it to be successful in its activities.
Some of these utilities will include electricity, telephones, computers as well as water. The
manager of the business will ensure that the business has all these utilities required and as well
ensure that the utilities are functional. She will ensure that the premise is well installed with
electricity for the use. She will also ensure that the premise has a telephone for communication in
the premise and also for making business calls outside the premise such as communicating with
the suppliers and the business customers.

The business will also require to have a complete computer of high quality as it will help in
storing of data for the business. Through the use of the computer it will ensure safety of the
business data. The business will need clean water for use as well as for drinking it will be the
duty of the manager to ensure that clean water is provided for use. This water will also be used
for cleaning of the premises as well as the wash rooms to ensure cleanness and hygiene in the
premise as this will help to avoid unnecessary sickness which may be as a result of using water
that is not safe for drinking.

Table 4.1.3 Utilities for production

Item Description Quality Cost Total
Electricity Hydro 80 units 50 4000
Computer Desktop Best quality 9500 19000

21
Telephone Mobile Best quality 5000 5000
Water Fresh 10m^3 200 2000
Total 30,000

4.2 PRODUCTION STRATEGY

The propose business will provide various product of high quality to its customers. The manager
will ensure that the business provided its products to the customers at reasonable and affordable
prices such that all its customers will be able to purchase the products. She will also ensure that
the business has enough stock at all times so that it can compete with the other business offering
similar products in the same market place.

4.2.0 Production Control

The business will ensure that its product are of the best quality and quantity in the market. The
business will also ensure that it provides products of the latest fashion in the market. This will
make the business attract more customers hence making for sales which in return will result to
more profits and as well win against the competitors in the market. The business manager will
ensure that the business has the best employees who will be able to approach welcome customers
as well as serving then well as this will always make customers to come back to the business for
more goods.

The manager will also ensure that the business does not produce excess product and this may
result due to ordering more stock of goods at the same time which may lead to the stock
remaining in the enterprise for a long period of time and at the same time new fashion or
products will be supplied hence making the old fashion products to remain in the business for a
long period of time as the business will deal with selling of cloths. As a result the manager will
ensure that the business only orders enough stock for a certain period of time to prevent it from
having excess.

4.2.1 Quality control

The business will work towards providing the best quality products in the market. This will be
done by ordering the products from trusted suppliers who will always provide supply the
business with the best and fashionable products. The business will also do some market research
such that it come get to know what products satisfy the customers in the market. With this
knowledge the business will be able to know on what kind of goods to order to meet the
customers need and male its customers happy as well as attract more customers to the business
where they can get the best of what they need.

Through this the business will be able to make more sales and more profit. The business will also
be able to grow as well as expanding as it will have many customers who will be getting there
goods from the business. For all this to occur it will be the duty of the manager to ensure that the
business operations are run smoothly. She will also have the responsibility to ensure that all the

22
customers are received and served to the best as this will help in retaining customers for the
business and in return the business will be growing at a high rate such that the manager can have
plans of expanding the business.

4.3 PRODUCTION PROCESS

The business will operate through selling of ready-made products. The business will operate
under a process which will include purchasing of the products from the suppliers, storing the
products and displaying the products, advertising of the products as well as marketing the
products to make the business sales. The manager will be making orders for the business from
trusted suppliers who are well known for having high quality products. Through this the business
will always be assured of having the best products in the market.

The business will be opened from Monday to Saturday and the opening time will be as from
7:30am to 6:00pm on daily bases. The business will be closed on Sundays. The business might
face some of the external and internal factors which may affect the business production process.
Some of these challenges might include employees reporting to work late, absenteeism from
work without permission and lack of cooperation between the employees. These challenges may
lead to poor performance of the business as the businesses production process will not be
smoothly ran.

The manager will ensure that there is total cooperation between the employees so as to avoid this
kind of challenges. She will also ensure that employees report to work in time and as well ensure
that no employees who absent themselves from work without permission. The manager will also
ensure that the business always have enough stock for making sales before the next order of the
products is done. To avoid running out of the stock the business manager will ensure that before
the available stock is over she requested for delivery of new stock to the business.

Insecurity is another challenge that the business may face as it carries out its operation. To
overcome this challenge the owner of the business has planned to locate the business where there
is enough security. The business location is just a few meters from a police post hence this will
make it easy for the business to be secure. As the police offers in the area provides security by
doing patrols during the night to ensure that there are no suspects or group of people who might
be planning to bring insecurity in the market place.

4.4 OFFICE PLAN LAYOUT

The business operation will be carried out in an open office layout. By using this layout the
business will have saved on floor space as their will be do division of offices in the business.
This will also facilitate sharing of business equipment and tools as all the business operations
will be carried under one open room hence the employees will all be under the same room
making it easy for them to share the business tools. This kind of office layout will also make it
easy to pass and communicate necessary information to all the employees at the same time
without wasting a lot of time as compared to closed office layout.

23
Open office layout also makes it easy to supervise the employees as they are all under one room.
It will make it easy for the manager of the business to notice if an employee absents themselves
from work without permission from the manager. This office layout will also help to minimize
movement of the employees which is caused by the employees moving from one office to the
other as all the employees will be working and carrying out their operation under one room. It
will also save and economies on electricity as only few bulbs will be required in an open office
layout compared to closed office layout where each office requires a bulb as well as the corridas.

The manager of this business intents to use this type of office layout as it will help to minimize
on the cost which could be incurred when using the other type of office layout. Such cost will
include the cost which could be incurred in the division of the office, facilitation of all the offices
with the required office equipment’s and tools as well as reducing on electricity bill. By using
this kind of office layout it will be easy for the business to save on a lot of cost which could have
been paid for using the little cash the business has as well as using the profit gotten from the
business sales to pay for the bills.

4.5 REGULATIONS AFFECTING OPERATIONS

For the business to carry out its operations smoothly it will need to meet some government
regulations as required. Some of these requirements will include trading license from the
government. For one to acquire these they will need to make some payment hence this is comes a
challenge of many of the business. The business will also need to ensure that it means the public
health standards as required by the government. For one to acquire this certificate from the
public healthy some amount of fees will also be requires hence making the owner of the business
to incur act of expenses as they adhere to the government regulations.

High taxation rate by the government is another regulation affecting the operations of the
business as the business will be needed to pay taxes for it to carry out its operations smoothly.
These expenses incurred when getting all these legal certificate will affect the business so much
as the owner of the business will have to spend so much money to adhere to all these regulations.
Insurance is another requirement to for the business hence the business will have to incur another
expense on the insurance cover for the business. These government regulations will affect the
business operation so much but the business owner will have to adhere to the regulations.

24
CHAPTER 5
5.0 FINANCIAL MANAGEMENT
The sole proprietor will require to have a source of finance for the business the carry out its
operations successfully. The finances will be obtained from personal savings and contributions
made by the family members. The business will require five hundred and fifty thousand to start
its operations. The business owner will always ensure that she has money in her personal savings
as she will be able to get some money to boost her business. She will as well get support from
the family member who will help her in financing for the business. The business owner will use
these two methods to boost and finance for her business until it comes stable.

When the business comes stable the sole proprietor will be able to finance her business through
the use of the profits got from the business as well she will be able to acquire a bank loan to
boost the business and pay later from the profits she will gain from the business since the
business will have become stable hence she will be able to repay the loan using the business
profits. The owner intents to mostly use the amount of money obtained from the business as
profit to increase on the sales and as well use it to expand on her business as she hopes that the
business will be successfully and in return she will be able to gain more profits from the business
sales and she can use to boost on the business.

The owner of the business will ensure that she has good planning for the business finances as
well as the profits gained from the business this will help to avoid her from suffering from lack
of capital to order new stock for the business as well as to expand on the business due to misuse
of the money she will be earning from the business. Lack of good financial management will
lead to failure of the business or even collapse. This is because without good financial
management a lot of cash will be wasted and this may lead the business to lacking capital and
money to operate by its own without any support from the outside. It may even lead to the
business lacking money to pay its employees.

5.1 BOOKS OF ACCOUNTS

For smooth running of the business, the business will require some books of account for
transactions and record keeping. These books will help the business as they will contain very
important information for the business which can be used when it comes to business decision
making. The business will also be able to use the books as a tool for reference in future. These
books will include the purchases journal, sales journal, return inwards journal as well as return
outwards journal.

5.1.0 Purchases journal

This is where the business will record its purchases invoices for goods bought on credit. These
are the purchases which the business has not paid for but will be paid later. It will help the
business keep track of purchases made on credit and as well will help the business the current

25
amount of money it is required to pay to the suppliers.

5.1.1 Sales journal

For each credit sale the business will give or send a document to the buyer showing full details of
the goods sold on credit and the prices of each good. I t will also show the date when the sales
transaction was made, the customer’s name the invoice number as well as the total amount the
buyer is required to pay to the business for the goods sold to them by the business on credit
bases.

5.1.2 Return inwards journal

When the business agrees to take back goods sold and refund the money in full or part of the
amount to the customer. A document will be sent to the customer showing the amount of the
allowance given by the business. This document will be used as prove that the business received
back the goods and as well refunded the amount agreed back to the customer.

5.2.3 Return outwards journal

This is a document which will be used by the business if the supplier of goods to the business
agrees that goods bought previously by the business may be returned. The business will write to
the supplier giving details of the goods and the reason as to why the business decided to return
the goods back to the supplier

5.2 PRE-OPERATION COST

This will include the initial expenses that the business expects to incur for it to have all the
requirements and be able to start its operations. Some of this expenses will include rent,
installation and purchase of furniture’s and equipment’s, initial stock cost, license, telephone,
public health. Rent and rent deposits is the amount of money the business owner will be required
to pay for her to be allowed to occupy the premises. There will also be money incurred to
purchase on the equipment’s and tools to be used by the business. License and public health
expenses will also be included.

Table 5.2.0 shows the pre-operation cost

Description Amount (ksh)

Rent and rent deposit 10,000

Furniture and equipment’s 25,000

License 1,000

Initial stock 250,000

Public health certificate 1,000

Telephone 500

26
Total 292,000

5.3 Working Capital

Working capital is the difference between the total current asset and the total current liabilities of
the business. For a business to operate at a profit and be said that its stable the total assets should
be more than the total liabilities.

Table 5.3.0 shows Working Capital Year 1

ITEM Opening as of Year
1
ASSETS
Current Assets
Initial Stock 250,000
Debtors 15,000
Cash at bank 250,000
Cash at hand 300,000
Prepayments 150,000

ASSETS 965,000
Current liabilities
Creditors 20,000
Overdraft 190,000
Dividends 15,000
Accruals 50,000

Liabilities 175,000
Working Capital 1 690,000

Table 5.3.1 Working Capital Year 2

ITEM Opening as of Year
2
ASSETS
Current Assets
Initial Stock 300,000
Debtors 20,000
Cash at bank 350,000
Cash at hand 250,000
Prepayments 200,000

27
ASSETS 1,120,000
Current liabilities
Creditors 30,000
Overdraft 150,000
Dividends 120,000
Accruals 45,000

Liabilities 245,000
Working Capital 1 875,000

Table 5.3.2 Working Capital Year 3

ITEM Opening as of Year
2
ASSETS
Current Assets
Initial Stock 250,000
Debtors 15,000
Cash at bank 500,000
Cash at hand 240,000
Prepayments 185,000

ASSETS 1,190,000
Current liabilities
Creditors 40,000
Overdraft 100,000
Dividends 10,000

Liabilities 150,000
Working Capital 1 1,040,000

5.4 Income and Expenditure

These are the foundation of the business

5.4.0 Income and Expenditure Year 1

Description Amount Description Amount

ccbb 250,000 Sales 1,520,000

Opening stock
dddd

28
Carriage inwards 50,000

Purchases 400,000

Goods available for sale 700,000

Less closing stock 80,000

Gross profit 900,000

1,520,000 1,52000

Rent 60,000 Gross profit 900,000

Electricity 10,000

Repairs 20,000

Advertisement 5,000

Telephone 5,000

Transport 100,000

Net profit 700,000

900,000 900,000

Net profit 700,000

5.4.1 Income and Expenditure Year 2

Description Amount Description Amount

ccbb 300,000 Sales 1,600,000

Opening stock
dddd
50,000
Carriage inwards
450,000
Purchases

800,000
Goods available for sale
90,000
Less closing stock
890,000

29
Gross profit 1,600,000 1,600,000

60,000 Gross profit 890,000

Rent 8,000

Electricity 10,000

Repairs 4,000

Advertisement 2,500

Telephone 105,000

Transport 700,500

Net profit 890,000 890,000

Net profit 700,500

5.4.2 Income and Expenditure Year 3

Description Amount Description Amount

ccbb 250,000 Sales 2,000,000

Opening stock
dddd
80,000
Carriage inwards
600,000
Purchases

930,000
Goods available for sale
80,000
Less closing stock
1,150,000
Gross profit
2,000,000 2,000,000

60,000 Gross profit 1,150,000

Rent
10,000
Electricity
15,000
Repairs
7,000
Advertisement
3,000

30
Telephone 107,000

Transport 948,000

Net profit 1,150,000 1,150,000

Net profit 948,000

5.5 Balance Sheet

A balance sheet shows the assets, liabilities and capital of a business in a given period of time.
Assets are classified into two fixed assets and current assets, while liabilities are classified into
short term liabilities are payable within a period of one year or less and long term liabilities are
payable within a period of more than an year.

5.5.0 Balance Sheet Year 1

Balance sheet year 1

As at 31st Dec 2024

Fixed assets Amount (ksh) Amount (ksh)

Equipment 15,000 Capital 500,000

Furniture 10,000 Net profit 700,000

Computer 30,000 1,200,000

55,000 Short term liabilities
Current assets Creditors 20,000
Stock 800,000
Overdraft 190,000
Debtors 15,000
Dividends 10,000
Bank 250,000
220,000
Cash 300,000

1,365,000

1,420,000 1,420,000

5.5.1 Balance Sheet Year 2

Balance sheet year 2

As at 31st Dec 2025

31
Fixed assets Amount (ksh) Amount (ksh)

Equipment 20,000 Capital 250,000

Furniture 10,000 Net profit 700,500

Computer 30,000 950,500

60,000 Short term liabilities
Current assets Creditors 30,000
Stock 470,500
Overdraft 150,000
Debtors 20,000
Dividends 20,000
Bank 350,000
200,000
Cash 250,000

1,090,500

1,150,500 1,150,500

5.5.2 Balance Sheet Year 3

Balance sheet year 3

As at 31st Dec 2026

Fixed assets Amount (ksh) Amount (ksh)

Equipment 45,000 Capital 200,000

Furniture 45,000 Net profit 948,000

Computer 60,000 1,148,000

150,000 Short term liabilities
Current assets Creditors 40,000
Stock 383,000
Overdraft 100,000
Debtors 15,000
140,000
Bank 500,000

32
Cash 240,000

1,098,000

1,288,000 1,288,000

5.6 Cash Flow

Cash flow will include the amount of cash which the business receives or gives out as a way of
payment.

33
 Cash Flow

Year 1

Year 2024 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec TOTAL
Opening 33400 38550 25000 23950 44350 84700 94600 93250 87350 73750 42700 641600
cash
Cash sales 150000 120000 10000 110000 140000 15000 120000 110000 115500 100000 80000 10500 1400500
0 0 0
Debtors 900 450 1250 800 1000 950 1200 1050 1100 3000 2000 1300 15000
Total cash 150900 153850 13980 135800 164950 19530 205900 295650 20985 190350 155750 14900 1921300
inflow 0 0 0 0
Salary 100000 100000 10000 100000 100000 10000 100000 100000 10000 100000 100000 10000 1200000
0 0 0 0
Rent 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 60000
Water 2000 1500 1400 1500 1000 1100 500 900 1600 500 2000 1000 15000
Transport 10000 8000 7000 4500 14000 4000 5000 5500 15000 10500 5500 11000 100000
Electricity 500 800 1400 850 600 500 800 1000 900 600 550 1500 10000
Total cash 117500 115300 114800 111850 120600 110600 111300 112400 12250 116600 113050 118500 1385000
overflow 0
Ending 33400 38550 25000 23950 44350 84700 94600 93250 87350 73750 42700 30500 672100
cash

34
 Cash Flow

Year 2

Year 2024 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec TOTAL
Opening 30500 33500 36550 48000 67400 80350 101700 96850 93250 96780 114600 111300 865350
cash
Cash sales 150000 120000 10000 110000 140000 15000 120000 110000 115500 100000 80000 10500 1485000
0 0 0
Debtors 900 450 1250 800 1000 950 1200 1050 1100 3000 2000 1300 20000
Total cash 150900 153850 13980 135800 164950 19530 205900 295650 20985 190350 155750 14900 2370350
inflow 0 0 0 0
Salary 100000 100000 10000 100000 100000 10000 100000 100000 10000 100000 100000 10000 1200000
0 0 0 0
Rent 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 60000
Water 2000 1500 1400 1500 1000 1100 500 900 1600 500 2000 1000 12400
Transport 10000 8000 7000 4500 14000 4000 5000 5500 15000 10500 5500 11000 105000
Electricity 500 800 1400 850 600 500 800 1000 900 600 550 1500 12000
Total cash 117500 115300 114800 111850 120600 110600 111300 112400 12250 116600 113050 118500 1397900
overflow 0
Ending 33500 33500 48800 67400 44350 84700 94600 109250 111300 114600 111300 13760 972450
cash 0

35
 Cash Flow

Year 3

Year 2024 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec TOTAL
Opening 137600 10995 105400 84850 104600 113900 118450 94600 146100 16270 149900 9300 1340400
cash 0 0
Cash sales 90000 110000 95000 12500 140000 150000 22000 110000 115500 17800 165000 105000 3040000
0 0 0
Debtors 900 450 1250 800 1000 950 1200 1050 1100 3000 2000 1300 15000
Total cash 228500 25385 239800 23580 264950 295300 20590 295650 209850 19035 255750 149000 4392700
inflow 0 0 0 0
Salary 100000 10000 100000 10000 100000 100000 10000 100000 100000 10000 100000 100000 1200000
0 0 0 0
Rent 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 60000
Water 2000 1500 1400 1500 1000 1100 500 900 1600 500 2000 1000 13000
Transport 10000 8000 7000 4500 14000 4000 5000 5500 15000 10500 5500 11000 107000
Electricity 500 800 1400 850 600 500 800 1000 900 600 550 1500 10000
Total cash 117500 115300 116800 16185 120600 190600 111300 116000 222500 116600 116000 118500 1546000
overflow 0
Ending 109950 10540 34850 10460 113900 118450 94600 146250 162350 14995 93000 164390 2846700
cash 0 0 0 0

36
5.7 BREAK-EVEN CALCULATIONS
This will be the contribution margin equal to the difference between sales and total variable.

5.7.0 YEAR 1
Description Amount

Sales 1520000

Debtors 15000

1535000

Advertisement 5000

Creditors 20000
Telephone 5000
Electricity 10000

40000

5.7.1 YEAR 2
Description Amount

Sales 1600000

Debtors 20000

1620000

Advertisement 4000

Creditors 30000
Telephone 2500
Electricity 8000

44500

5.7.1 YEAR 3
Description Amount

37
Sales 2000000

Debtors 15000

2015000

Advertisement 7000

Creditors 40000
Telephone 3000
Electricity 10000

60000

YEAR 1

Contribution margin = sales – total variable cost

= 153500 – 40000

= 1495000

contribution margin
Contribution margin % = ∗100
sales

1495000
= ∗100
153000

= 97.4%

Fixed cost

Rent 60000

Salary 1200000

Insurance 20000

License 1000

1281000

Break-even level of sales

38
 ¿ cost
Break-even level =
contribution margin %

1281000
=
97.4

= 13151.95

Break-even revenue; Total sales = 1520000

Less cost of sale = 400000

Contribution = 1120000

contribution
Contribution ratio% = ∗100
total sales

1120000
= ∗100
1520000

= 73.7%

¿ cost
Break-even turnover =
contribution margin %

1281000
=
97.4

= 13151.95

Break-even unit = contribution margin

= 1495000

5.8 Profitability Ratios

These are the best techniques which the business owner will use so that they can help her
interpret the information contained in a financial statement. They help when it comes to making
business decisions.

Profitable Ratios

Item Amount(ksh)

Total assets 965000

Gross profit 900000

39
Net profit 700000

Sales 1520000

4085000

net profit
Net profit to sales% = ∗100
sales

700000
= ∗100
1520000

= 46.05%

net profit
Net profit of total assets = ∗100
sales

700000
= ∗100
965000

= 72.53%

gross profit
Gross profit to sales = ∗100
sales

900000
= ∗100
1520000

= 59.2%

net profit
Net profit to gross profit = ∗100
gross profit

700000
= ∗100
900000

= 77.8%

5.9 Desired Financing

This is the total sum of pre-operation cost, working capital fixed assets and the transport.

DESIRED FINANCING

Item Amount(ksh)

Pre-operation cost 292000

40
Working capital

Fixed assets 690000

Transport 55000

100000

1137000

5.10 Proposed Capitalization

The business will be financed with money from the personal savings and contribution from
family members.

PROPOSED CAPITALIZATION

Description Amount(ksh)

Personal savings 350000

Family contribution 200000

550,000

41