THE BIDII PLUMBING AND ELECTRONICS TRADERS

P.O BOX 437-50200

BUNGOMA
thatmamati@gmail.com

ENTREPRENEURIAL: BUSINESS PLAN

PRESENTED BY: MAMATI K. THADEUS

CENTER CODE: 503111

COURSE CODE: 2707

PAPER CODE: 305

INDEX NO: 5031111900

DEPARTMENT: BUILDING AND CIVIL ENGINEERING

SUBMITTED TO: KENYA NATIONAL EXAMINATIONS COUNCIL IN

PARTIAL FULFILMENT FOR THE AWARD OF DIPLOMA IN CIVIL
ENGINEERING

SUPERVISOR: SIMON ODENYO

SERIES: NOVEMBER SERIES 2023

1
DECLARATION
I sincerely declared that this my own original work done and it has never been existed and neither has
never existed and neither has ever been presented to the Kenyan national examination council or any
other examination body.

CANDIDATE’S NAME: MAMATI K. THADEUS

SIGNATURE: ………………………………………………………

DATE: ………………………………………………………………

SUPERVISOR’S DECLARATION
This plan has been submitted for defense with my approval as the course supervisor.

SUPERVISOR: SIMON ODENYO

SIGNATURE: ………………………………………………………..

DATE: ……………………………………………………………..….

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DEDICATION
I dedicate this work to the family especially my parents, aunt, uncles, lecturers, and friends who have
supported me through this project.

ACKNOWLEDGEMENT
3
I would like to send my sincere gratitude to all those who have given me the support in production of
this work especially More thanks to MR.SIMON ODENYO for his work as my supervisor. Also I
will not forget my class mates for giving me their assistance in some areas.

TABLE OF CONTENTS

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DECLARATION................................................................................................................ii
TABLE OF CONTENTS..................................................................................................v
EXECUTIVE SUMMARY.................................................................................................1
1.1 BUSINESS DESCRIPTION......................................................................................1
1.2 MARKETING PLAN..................................................................................................1
1.3 ORGANISATIONAL/MANAGEMENT PLAN........................................................1
1.4 OPERATIONAL/PRODUCTION PLAN..................................................................1
1.5 FINANCIAL PLAN.....................................................................................................2
1.0 BUSINESS DESCRIPTION......................................................................................3
1.1 BUSINESS NAME.....................................................................................................3
1.2 BUSINESS LOCATION............................................................................................3
MAP OF PHYSICAL LOCATION OF THE BUSINESS.............................................4
.............................................................................................................................................4
1.3 FORM OF OWNERSHIP..........................................................................................5
1.4 TYPE OF BUSINESS................................................................................................5
1.5 PRODUCTS AND SERVICES.................................................................................5
1.6 JUSTIFICATION OF THE OPPORTUNITY...........................................................5
1.7 INDUSTRY..................................................................................................................5
1.8 GOALS OF BUSINESS............................................................................................6
1.8.1 SHORT TERM GOALS..........................................................................................6
1.8.2 LONG TERM GOALS............................................................................................6
1.9 ENTRY AND GROWTH STRATEGY.....................................................................6
1.9.1 ENTRY STRATEGY...............................................................................................6
1.9.2 GROWTH STRATEGY..........................................................................................6
CHAPTER TWO................................................................................................................7
2.0 MARKETING PLAN..................................................................................................7
2.1 POTENTIAL CUSTOMERS.....................................................................................7
2.2 MARKET SHARE......................................................................................................7
2.3 COMPETITION...........................................................................................................8
2.3.1 COMPETITORS......................................................................................................8
2.3.2 COMPETITORS STRENGTH AND WEAKNESSES........................................9

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2.3.3 OPPORTUNITIES FOR THE STRENGTH AND WEAKNESS.....................10
2.4 METHODS OF PROMOTION AND ADVERTISING..........................................10
2.4.2 PROMOTION STRATGEY..................................................................................11
2.5 PRICING STRATEGY.............................................................................................11
2.6 SALES TACTICS.....................................................................................................11
2.7 DISTRIBUTION STRATEGY.................................................................................12
CHAPTER THREE.........................................................................................................13
3.0 ORGANIZATIONAL/MANAGEMENT PLAN......................................................13
3.1 ORGANIZATION STRUCTURE............................................................................13
KEY MANAGEMENT PERSONNEL...........................................................................13
3.3 OTHER BUSINESS PERSONNEL.......................................................................14
3.4 RECRUITMENT, TRAINING AND PROMOTION OF PERSONNEL..............15
3.4.1 RECRUITMENT....................................................................................................15
3.4.2 TRAINING..............................................................................................................15
3.4.3 PROMOTION.........................................................................................................15
3.5 REMUNERATION AND INCENTIVES FOR PERSONNEL..............................15
3.5.1 REMUNERATION.................................................................................................15
3.5.2 INCENTIVES.........................................................................................................16
3.6 LICENSE, PERMITS AND BY-LAWS..................................................................16
3.6.1LICENCES..............................................................................................................16
3.6.2 PERMITS................................................................................................................16
3.6.3 BY-LAWS...............................................................................................................16
3.7 OTHER SUPPORT SERVICES.............................................................................16
CHAPTER FOUR............................................................................................................18
4.0 OPERATIONAL/PRODUCTION PLAN................................................................18
4.1 PRODUCTION FACILITIES AND CAPACITY....................................................18
4.2 PRODUCTION STRATEGY...................................................................................19
4.2.1 MONTHLY MATERIALS REQUIREMENTS....................................................19
4.2.2 MONTHLY LABOUR REQUIREMENT.............................................................19
4.2.3 MONTHLY PRODUCTION OVERHEADS AND AMOUNTS INVOLVED. .20
4.2.4 COST OF PRODUCTION....................................................................................20

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 4.3 PRODUCTION PROCESS.....................................................................................21
4.4 REGULATIONS AFFECTING OPERATIONS....................................................21
CHAPTER FIVE..............................................................................................................23
5.0 FINANCIAL PLAN BIDII PLUMBING AND ELECTRONICS TRADERS gets the
service of finance through:........................................................................................23
5.1 PRE-OPERATIONAL COSTS...............................................................................23
5.2 WORKING CAPITAL ESTIMATES......................................................................23
5.3 PROPOSED CASH FLOW STATEMENT...........................................................24
5.3.1 BIDII PLUMBING AND ELECTRONICS TRADERS DEALER MONTHLY
CASHFLOWSTATEMENT FOR THE YEAR 2022...................................................24
5.3.2..................................................................................................................................25
5.3.3..................................................................................................................................26
5.4 PRO – FORMA INCOME STATEMENT..............................................................27
5.5 PROFORMA BALANCE SHEET BIDII PLUMBING AND ELECTRONICS TRADERS
DEALER PROFORMA BALANCE SHEET ASAT 31ST DEC 20, 2021 AND 202228
5.6 BREAK EVEN POINT.............................................................................................28
5.7 PROFITABILITY RATIOS......................................................................................29
5.8 DESIRED FINANCING............................................................................................29
5.9 PROPOSED CAPITALIZATION............................................................................29

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EXECUTIVE SUMMARY
1.1 BUSINESS DESCRIPTION
The proposed business will be a startup business. The name of the business is BIDII
PLUMBING AND ELECTONICS TRADERS and will be located in Bungoma town.
The proposed business will be both retail and wholesale and caters for all electrical
masonry plumbing equipment materials.
The contact address will be:
P.O BOX 41 –Bungoma
MOBILE NO: 0748045943
EMAIL: thatmamati@gmail.com

BIDII PLUMBING TRADERS will be a sole proprietorship type of business, owned by

MAMATI K. THADEUS The business will require a starting capital of Ksh 500,000.

1.2 MARKETING PLAN

The potential customers for the business will include: Institutions, farmers, industries,
contractors, civil servants and individual customers. The market share of the business at
the start is expected to be 25%. The anticipated competitors for the business are: Lee
plumbing and electronics Umoja plumber's enterprise and Mwananchi plumbing center.
The business will popularize itself through advertisement in local Radio stations and local
newspapers, posters and bill boards.

1.3 ORGANISATIONAL/MANAGEMENT PLAN

The proposed business will be managed by the owner, Mr. MAMATI K. THADEUS the
business will require five supporting staff, which includes: Cashier, 2 salesmen, a
watchman and 2 casual workers.
The estimated remuneration for the staff at the start of business is to be Ksh 35000,
exclusive of allowances. The business will also require supportive services like banking,
postal, Insurance, Health, legal services and business management consultancy services.

1.4 OPERATIONAL/PRODUCTION PLAN

The proposed business will require a premise, which will be rented within the town. The
business will also require a pickup, furniture and fittings among others. The business will
spend approximately Ksh 180,000 for the purchase of the equipment and tools, rented
premise.
The startup stock is estimated at Ksh 300,000
The intended business will observe the following regulations, Health safety,
environmental, labor, trademarks and patents and compliances and approvals necessary
before commencement of business.

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1.5 FINANCIAL PLAN
The financial plan determines the financial requirement of the business venture. It also
provides proposal for sources and users of funds. Financial information is contained in
proforma income statement, balance sheets, projected cash flow statements and break-
even point.
The business proposed capitalization would be as follows:
a. Owner’s contribution – 200,000
b. Loans from bank (s) - 300,000
c. Total investment - 500,000

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 CHAPTER ONE
1.0 BUSINESS DESCRIPTION
1.1 BUSINESS NAME
The proposed business name will be BIDII PLUMBING ELECTRONICS TRADERS
The name was chosen because it is easy to pronounce, easy to remember and it sound
unique.
The intended investment capital amount in this particular business is Ksh 500,000
The amount is to be raised as follows:
Sources amount
Personal contribution 200,000
Loan from bank 300000
Total capital 500000
Amount expressed in ratio form is 2:3 for personal contribution to loan from bank.

1.2 BUSINESS LOCATION

The proposed business will be located in Bungoma County, Bungoma town. It will be
situated in chebkube market next to Shell Filling station.

The owner based on the following reasons for the location site.
● Well-developed infrastructure

● Availability of the market

● Competition is not stiff

● Availability of cheap labor

The business will operate under the following address for all its transactions both
eternally and internally.

BIDII PLUMBING AND ELECTRONICS TRADERS

P.O BOX 41 – BUNGOMA

3
MAP OF PHYSICAL LOCATION OF THE BUSINESS

The Bidii Plumbing

and Electronic

FROM MUMIAS ROAD

PETROL
STATION

KANDUYI MARKET

AP CAMP

FROM KANDUYI

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1.3 FORM OF OWNERSHIP
The proposed business will be a sole proprietorship type of business thus the owner will
be manager.
The reasons for choice of the selected ownership are:-
✔ The owner enjoys profit alone

✔ There are few legal formalities required to start

✔ Required small capital to start compared to other forms of business.

The owner of the proposed business will be Mr MAMATI

1.4 TYPE OF BUSINESS

The proposed business will be a trade type of business. This is because the business will
be both retail and wholesale and caters for both plumbing, electronics and masonry tools

1.5 PRODUCTS AND SERVICES

The business will stock ready made products. The products offered in the business will be
all hardware products.
The business will offer both direct and indirect services.
The sources of goods for the business will be manufacturers, suppliers and distributors.

1.6 JUSTIFICATION OF THE OPPORTUNITY

The proposed business operation and potentiality in the market is justified by the
following:
● High demand of plumbing and electrical materials

● Supply of hardware and wiring materials have been dealing due to high capital
needed.
● Increase population justifies the availability of the market for the business as
shelter is a need not a want.
● Business location will be in a strategic position.

● Business owner have entrepreneurial skills for decision making and business
management.

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 ● An agricultural activity in the area is increasing and therefore selling of farm
tools justifies the viability of the business.

1.7 INDUSTRY
The proposed business belongs to hardware industry. The kind of technology which will
be used in the industry would be labor intensive. The number of employees which the
owner will intend to employ is six. These are: Cashier, 2 salesmen, watchman and 2
casual workers, the capital which should be used in medium of which to increase when
the firm grows.
The business will have fair competition because there is little other hardware. So this will
need to provide high quality products and services in order to cope up with competition
from other hardware’s.
The problems faced by the industry include:
⮚ Fluctuation in demand for products at different seasons

⮚ Lack of enough capital to start big business

⮚ Price fluctuations

1.8 GOALS OF BUSINESS

1.8.1 SHORT TERM GOALS
⮚ Have a good relationship with customers

⮚ Attract high dales to have adequate finance in the business to maximize profits

⮚ Ensure within a period of one year the business will acquire its own premises.

1.8.2 LONG TERM GOALS

❖ To expand the business to other places operating the same

❖ To create employment opportunities to the neighboring community

❖ Use of computers to increase the accuracy and speed of data processing and also
to offer a more reliable storage of large information about our business.
❖ Carrying out trade fairs and exhibitions during the annual shows in the county.

1.9 ENTRY AND GROWTH STRATEGY

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1.9.1 ENTRY STRATEGY
● The business shall use signboards on the main road in order to lead customers to
the business.
● Advertisements will be made in community’s local language radio stations and
newspapers to inform customers.
1.9.2 GROWTH STRATEGY
✔ The proposed business will provide discounts to its customers in order to retain
customers.
✔ The price of the products will be according to market value and thus affordable to
customers
✔ Able to learn from competitor’s mistakes and borrowing ideas.

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 CHAPTER TWO
2.0 MARKETING PLAN
2.1 POTENTIAL CUSTOMERS
These are those people who have the resources and are willing to buy our products and
services at a given price. They include:

i) Institutions
These include hospitals, schools and colleges found within the area. They require
plumbing farm tools and wiring materials for renovations and general development. They
can easily and readily obtain them from the business.

ii) Farmers
There exists small scale farmers in the area and are in great need of tools and equipment
for their daily production. For instance they have to cultivate using jembes and fenced
their shambas with posts and barbed wires that are available in the business.

iii) Industries
Bungoma Flour millers located not far from Bungoma Town. They will be able to buy
their needs both agricultural and wiring tools from the business premises at affordable
rates.

iv) Contractors
These are people or companies that deal wither in hardware of various things based on
contract basis. They will have the basis of obtaining their wiring materials from their
business. Example of contractors include Abem works located near Bungoma town.

v) Civil servants
These are people employed by the government in various sectors. They have the potential
of purchasing goods or products from the business for their personal development. Most
of these people live within the business location especially teachers.

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 vi) Individual customers
These are people within the locality of the business or outskirts who do not fall under the
above categories and may be or may not be regular customers. They may be goods in
small or large quantities to cater for their needs.

2.2 MARKET SHARE

The proposed business is to serve 25% of the total market share due to fair competition.
This arises from the total estimated number of customers according to 2019 statistics.

Pie chart showing business market share

8%
12%

Ujamaa plumbing and

25% electronics

umoja plumbers en-

35% terprise

20%
lee plumbing and
electronics

janda electronics

2.3 COMPETITION
2.3.1 COMPETITORS
These are other businesses we compete in selling common products. They include:
LEE PLUMBING AND ELECTRONICS
Located directly opposite Bungoma market and has the greatest market share of 35%. It
is the oldest dealer since it has been existing in the market for many years.

Advantages
⮚ Has more customers

⮚ Sells their goods at low prices

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 ⮚ Located in a strategic position

⮚ Has large size with largest stock in Bungoma town

Disadvantages
✔ Has irregular working hours

✔ Does not offer after sale service

UMOJA PLUMBERS ENTERPRISE

It emerges recently but it appears to be performing well. It is located centrally in the
centre of Bungoma town

Advantages
⮚ It is centrally located

⮚ Has modern facilities

⮚ Gives discounts on some goods they sell

Disadvantages
✔ Has less number of workers who cannot attend their customers well.

✔ Sell their products at relatively high prices.

MWANANCHI PLUMBING CENTER
It came up recently and has gained a lot of popularity

Advantages
⮚ It is situated in a good strategic position

⮚ Has qualified personnel

⮚ Offers quality products to their customers

Disadvantages
✔ It opens up late in the morning

✔ Charges high prices

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JANDA ELECTRONIC

Advantages
⮚ Charges low prices

⮚ It is strategically located

⮚ Manager is a technical by profession and therefore has entrepreneurial skills

Disadvantages
✔ Has few stock due to small in size

✔ Has less number of workers who cannot attend their customers well

2.3.2 COMPETITORS STRENGTH AND WEAKNESSES

STRENGTHS
● The capital invested in the business has enabled their business to be strong

● Their original sources of finances had a low interest rate and therefore they were
able to maximize profit.
● Many of the businesses have their own premises

● The customers are well retained by the long existing time of the business, very
potential
● Many have supplying contracts to many wiring companies

WEAKNESSES
● Failure to identify the price being low or high

● Lack of marketing strategies and skills for both distribution and pricing

● Lack of management and entrepreneurial skills in some managers

● Inability to have also one supplier, they collect from different suppliers

11
 ● Failure to identify other sources of finance like banks for loan.

2.3.3 OPPORTUNITIES FOR THE STRENGTH AND WEAKNESS

❖ Coming up with better methods of capturing the market share

❖ Expansion of the business by having branches in other trading centers

❖ Penetrating the market by having free transport services and other kinds of free
services
❖ Employing people with the knowledge about the products and services offered in
BIDII PLUMBING AND ELECTRONICS TRADERS

2.4 METHODS OF PROMOTION AND ADVERTISING

2.4.1 ADVERTISEMENT
The business plans advertisement methods for used advertise its product to attract more
customers to the business. They include:
a. Signboards
Signboards will be planted on all roads enter Bungoma town showing the direction and
planted with attractive colors for customers to notice.

FOR ALL YOUR CONSTRUCTION

MATERIALS

b. Window displays

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Window displays will be arranged neatly to catch the eyes of the customers. Same
displays will be arranged outside the business during the day.
c. Media
The business will intend to advertise its products and services through the radio as well as
in the local newspapers and newsletters available in the area. This will enhance a wider
market for the products.

2.4.2 PROMOTION STRATGEY

The business will use the following tactics to execute sale promotion strategy.
✔ Offering credit facilities

✔ Free transportation

✔ Free calendars

✔ Free caps written the name of the business

✔ Free gifts, diaries and paper bags will be given after purchase of any item.

2.5 PRICING STRATEGY

The proposed business will base its pricing strategies on the following before deciding on
what price to sell the products.
❖ Transportation cost

❖ Labor cost

❖ Cost of materials

❖ Competitors selling price

Factors to consider while pricing

● Market value price

● Competitors selling price

● The government control price strategies

● Demand for the product

● Target share of the market

13
 ● Cost of buying the product

2.6 SALES TACTICS

The proposed business will use both direct and indirect selling methods as a tactics to
make sales.

Direct selling
The customers who come directly to certain products from the business premises
emphasizes is made on its advantage to make him or her buy the product.
Indirect selling/personal selling
Involve employing of salesmen, agents or distributors who will be distributing the
products and making sales outside the location of the business.

Methods of motivating distributors

● Giving team a commission according to their sales

● Promotion to those who make frequent high sales

● Delegation of duties for those who perform well

● Increasing their packages or additional pay

● Recognition when a job is well done.

2.7 DISTRIBUTION STRATEGY

The channel to be used in the distribution of products will be as follows:

PRODUCER

WHOLESALER (mkhwasi)

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 DISTRIBUTORS RETAILER (mkhwasi) AGENTS

CONSUMERS

Nature of the channel

Products will be collected directly from the producer to the wholesalers who are BIDII
PLUMBING AND ELECTRONICS TRADERS
Goods from the wholesalers will be transported to the distributors and agents
Products will also be sold directly to the consumer from the retailer and services offered.

CHAPTER THREE
3.0 ORGANIZATIONAL/MANAGEMENT PLAN
3.1 ORGANIZATION STRUCTURE
MANAGER

CASHIER
15
KEY MANAGEMENT PERSONNEL
1. Manager
Mr. MAMATI who is the proprietor of the business will be the manager. He has a
considerable experience obtained during industrial attachment and from entrepreneurship
education during the training period.

Duties and responsibilities of a manager

✔ He will be in charge of all business transactions

✔ Gives out job analysis and description to the workers

✔ Responsible for training, promoting and finding key staff

✔ He will be concern with wages and salaries of his employees

✔ Decision making and business growth planner

✔ He will be in charge of all the profits of the business

✔ He finds tenders for the business

2. Cashier
The business will employ a cashier

Qualification
● Holder of certificate in book keeping and accounting

● Has good communication skills

Duties and responsibilities

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 ✔ Report to the manager

✔ Keeping all the books of accounts and records of receipts

✔ Recording all the money paid out and paid in

✔ Prepares the budget

✔ Receiving money from the customer

3.3 OTHER BUSINESS PERSONNEL
The proposed business will require other personnel who include the following: -
a) Salesmen
b) Casual workers
c) Security guard

a)SALES MEN
The business will employ two salesmen
Holder of certificate in sales and marketing
Have good communication skills and personal relationship

Duties and responsibilities

✔ Report to the cashier

✔ Keeping the records of all the materials and products in store

✔ Takes a market survey for the expansion of the business

✔ Follow-up all the business tenders and distributions

✔ Gathering and analyzing information to evaluate and inform on going marketing

strategies.
b)CASUAL WORKERS
The business will employ two casual workers

Qualification
● K.C.P.E holder and above

● Must be of good health

Duties and responsibilities

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 ✔ Arranging the display items in orderly manner

✔ They should be able to give information related to the displays to the customers.

✔ The cleaners of the business premises

✔ Packing and unpacking goods for the customers

✔ Helping in the transportation of products from one place to the other.

c) SECURITY GUARD
Qualification
● Age between 20 – 30 years

● Should be flexible to work at odd hours

● Medically fit

Duties and responsibilities of a watchman

✔ Offer security in the premises

3.4 RECRUITMENT, TRAINING AND PROMOTION OF

PERSONNEL
3.4.1 RECRUITMENT
The recruitment will be done through advertisements on posters and personal contacts.
Interested applicants should apply. The manager short listed them and invites from
interview competent persons will be chosen appointed for the job.

3.4.2 TRAINING
Workers will be trained internally; newly employed workers will be given an interdictory
training so that he will be familiar with the job environment for him/her to suit the post
Training enables workers to develop confidence and feel that belong and are part of the
organization.

3.4.3 PROMOTION
Promotion will be done by the manager with respect to the code of conduct competence
and period one have worked with the organization. It will be done in terms of salary
increment and allowances.

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3.5 REMUNERATION AND INCENTIVES FOR PERSONNEL
3.5.1 REMUNERATION
The employee’s wages and salaries will be given in arrears and at the end of each month.
The employee’s salaries/wages per month will be scheduled as follows: -
Position Number of workers Monthly payment allowances Total
Manager 1 7000 1000 8000
Cashier 1 5500 500 6000
Salesman 2 5000 500 11000
Watchman 1 4500 500 5000
Casual workers 2 4000 500 9000
Total monthly payment 39000

3.5.2 INCENTIVES
The business will give the workers incentives as a way of motivating them. The
incentives will include: -
● Free meals

● Two days off every month payable

● Small loans in case of emergency

● Annual parties

3.6 LICENSE, PERMITS AND BY-LAWS

3.6.1LICENCES
The business will acquire a trade license that allows the business to carry on its
transaction without any hindrance, from municipal council of Bungoma. The fee will be
paid for the licenses and will be renewed annually upon payment of the same.
3.6.2 PERMITS
The business permits shall be issued under the trade and licensing act cap 591. Also there
shall be permits offered by the Bungoma county council and shall be renewed annually.

3.6.3 BY-LAWS
The local government Act cap 265 requires that an enterprise have a copy which
authorizes it to abide by the rules laid concerning the type of business arising or being
established.

19
The business shall have to abide and follows the rules laid down during the operations of
the business.

3.7 OTHER SUPPORT SERVICES

A. BANKING SERVICES
The banking services will be provided by the Kenya Commercial Bank, Bungoma
branch. This bank has good plans for small enterprises.

B. POSTAL SERVICES
The business location is near Bungoma post office; all postal correspondence will be
made through this post office. The business rental box will be available here.

C. INSURANCE
The business will be insured against fire and burglary under the Amaco Insurance
Company of Kenya. Employees on permanent basis will also be insured by the same
company.

The address of the firm is:

AMACO INSURANCE COMPANY LTD
P.O BOX 412, TEL 052-20216
BUNGOMA.

D. HEALTH
The business staff will access medical services from Bungoma sub-district hospital which
provides medical services at an affordable fee.
The fee will be paid by national hospital insurance fund and medical allowances. The
contact address of the hospital is:

Bungoma sub-district hospital

P.O box 9
Bungoma.

E. LEGAL SERVICES
The business intends to employ the services of Were and Company advocates to assist
them in case of any legal requirement.

The contact address is:

Khakula and Company Advocates

20
 P.o box 300
Bungoma

BUSINESS MANAGEMENT CONSULTANCY SERVICES

The business will also engage the services of external bodies that have the experience in
running retail and wholesale businesses. This will enable the business to learn how to
deal with customers in a business friendly manner.

F. OTHERS
West FM and Sulwe FM broadcasting stations for advertisement
Kenya power and lighting company for electricity services

21
 CHAPTER FOUR
4.0 OPERATIONAL/PRODUCTION PLAN
4.1 PRODUCTION FACILITIES AND CAPACITY
The proposed business will require the following machinery and equipment for its
production and operational activities.

PREMISES
The business premises will be that of rental, the proposed business intends to rent a room
Vertex dealer ground floor. The room is spacious and has an adequate storage space for
the goods. The premises will be rented at Ksh 5000 per month, with an initial deposit of
Ksh 30000 for six months.

A PICK – UP
The business will require a pick up vehicle which will need for the transportation of
goods from the premises to its customers and for other purposes. The pick-up will be
bought on second hand basis at a cost of Ksh 120,000.

FURNITURE AND FITTINGS

The business will require an assorted of furniture and fittings to ensure that business
operation is carried out effortlessly. These includes: chairs, tables, shelves, benches
among others. All these facilities will be bought before the start of the business.

PROPOSED BUSINESS FLOW PLAN LAYOUT

ENTRANCET
STORE
O STORE MANAGER’S
OFFICE

PAYMENT
COUNTER

ENTRANCE/
EXIT

22
4.2 PRODUCTION STRATEGY
4.2.1 MONTHLY MATERIALS REQUIREMENTS
The proposed business will deals with the sale of finished goods.
These will be purchased directly from the manufacturers, suppliers and distributors for
resale.
The table below shows of the items required by the business on monthly basis.
Materials Quantity Unit cost (Kshs) Total cost (Kshs)
Cements 50bags 700 35000
80bags 40000
Nails 40kg 100 4000
Soft boards 50pieces 300 15000
Barbed wire 3 rolls 3000 9000
Paints 60kg 200 12000
Others materials 5000
Tools and equipment 10000
Total 130000

4.2.2 MONTHLY LABOUR REQUIREMENT

The business will depend on skilled and unskilled labor which includes manager, cashier,
salesman, security guard and casual workers.
The total labor cost per month will be:-
Job description Number of workers Monthly salary (Kshs)
Manager 1 7000
Cashier 1 5500
Salesman 2 10000
Security guard 1 4500
Casual workers 2 8000
35000

4.2.3 MONTHLY PRODUCTION OVERHEADS AND AMOUNTS

INVOLVED
The monthly production overheads will be as follows:-
Expense Amount (Kshs)

23
 License and permits 600
Electricity 400
Telephone 2000
Water 500
Rent 5000
Transport 3000
Insurance 2500
Repair and maintenance 2000
Miscellaneous 4000
Total 20,000

4.2.4 COST OF PRODUCTION

The business will carry out this through approximation because difficulty to determine
the exact amount to be produced and amount to be used in production. The concern
personnel will estimate these operational expenses and approximate the figures
considered.

4.3 PRODUCTION PROCESS

The production process of Bungoma general dealer will include obtaining goods from
suppliers until they are sold to customers. The production process will include purchases,
transport, delivery to business premises and rearranging them in selves, putting codes
numbers, taking records and waiting to be sold.

Purchase

Delivery to premises

Re-arranging them in shelves

Putting code numbers

Taking records

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 Re – selling them to customers
4.4 REGULATIONS AFFECTING OPERATIONS
Rules and regulations which will affect the business operations and employment will be
adhered to. These include:-

I. HEALTH REGULATIONS
The manager will ensure that the business is situated in a clean and hygienic surrounding.
The business will also employ people with certificate of good health, who are not
terminally ill so as to ensure that operations of business are not interfered with.
The business will also provide a very good sanitation for its employees and customers by
maintaining very clean and hygienic washrooms.

II. SAFETY REGULATIONS

The business manager will ensure that all his employees are provided with uniforms
while on duty. The business will also provide them with head gears and gumboots for
safety in case of accidents.
The business will also ensure that there is: -
● First aid box within the business premises

● Firefighting equipment

● Proper ventilation within the premises

III. ENVIRONMENTAL REGULATIONS

The business will intend to maintain a very clean environment, avoid air, soil and water
pollution within the premises. The business will provide waste bags for wastes and this
will be collected by the municipal Lorries to be disposed at designated areas.
The business will also provide a poster or signboard around its premises with the message
“Keep your town clean”

IV. TRADEMARKS, PATENTS AND COPYRIGHTS

The business will have its own logo, trademark and patents to distinguish it from the
others, and will also avoid copyrights.
The intended business will also respect other business logos, patents and expect the same
from other businesses.

25
 V. COMPLIANCES AND APPROVALS REGULATIONS
The business will comply with all regulations and approvals necessary before
commencement of business. All costs associated with such compliances and approvals
must be paid. These will ensure smooth running of the business without interference from
the government.

VI. LABOUR LAWS

The business will respect the labor laws of the county, which include:-
✔ Non-employment of non-citizens

✔ Non-employment of people under the age of 18 years

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 CHAPTER FIVE
5.0 FINANCIAL PLAN BIDII PLUMBING AND ELECTRONICS
TRADERS gets the service of finance through:
Personal savings
Loans from Kenya commercial bank.

5.1 PRE-OPERATIONAL COSTS

The proposed business will incurred the following amount of money before the business
become operational.
Item Amount
Business registration 3000
Rent deposit 30000
Renovation and installation costs 7000
Licenses 4000
Advertisements 2000
Vehicle 120000
Electricity deposit 2000
Stationary 2500
Furniture and fittings 6500
Stock 300000
Total 477000

5.2 WORKING CAPITAL ESTIMATES

Working capital = current assets – current liabilities
Item Year 2021 Year 2022 Year 2023

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Current assets
Stock 450000 900000 920000
Debtors 710000 925000 980000
Cash in hand + 103600 914100 1461700
bank 1263600 2739100 3361700

Current liabilities 615000 1015000 1055000

Creditors 615000 1015000 1055000
648600 1724100 2306700
Working capital

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 5.3 PROPOSED CASH FLOW STATEMENT
5.3.1 BIDII PLUMBING AND ELECTRONICS DEALER MONTHLY CASHFLOWSTATEMENT FOR THE YEAR 202
PARTICULARS/
MOTHS JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC TOTAL
cash inflow
capital 50000 -- --- ---- --- --- -- --- --- --- --- --- 50000
bal. b/f 103600 79600 184660 283610 414030 558480 696830 822030 962430 1038280 1058000 6201550
cash sales 160000 180000 240000 250000 260000 280000 290000 300000 310000 280000 240000 260000 3050000
loan 300000 300000
debtors 60000 40000 40000 50000 60000 70000 80000 80000 70000 60000 50000 50000 710000
total received 570000 323600 359600 484660 603610 764030 928480 1076830 1202030 1302430 1328280 1368000 10311550
cash outflows 0
purchases 300000 130000 70000 100000 80000 100000 120000 130000 120000 150000 150000 180000 1630000
creditors 50000 55000 45000 40000 50000 45000 50000 60000 55000 50000 55000 60000 615000
loan repayment 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 60000
license and permits 7000 7000
electricity 400 450 420 500 480 450 500 600 500 650 600 500 6050
telephone 2000 2500 2500 2500 2000 2500 2000 3000 2500 2000 3000 2500 29000
salaries/wages 35000 35000 35000 35000 35000 35000 35000 35000 35000 35000 35000 35000 420000
rent 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 60000
transport 3000 3500 4000 4500 4000 3500 4500 5000 6000 6500 5500 6000 56000
insurance 2500 2500 2500 2500 2500 2500 2500 2500 2500 2500 2500 2500 30000
repairs/maintenance 2000 2000
water 500 550 520 550 600 600 650 700 600 500 680 600 7050
miscellaneous 4000 4500 5000 5500 5000 6000 6500 8000 7500 7000 8000 7500 74500
total payments 416400 244000 174940 201050 189580 205550 231650 254800 239600 264150 270280 304600
net cash flow c/f 103600 79600 184660 283610 414030 558480 696830 822030 962430 1038280 1058000 1063400
5.3.BIDII PLUMBING AND ELECTRONICS DEALER MONTHLY CASHFLOWSTATEMENT FOR THE YEAR 2022
PARTICULARS/MOTHS JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC TOTAL
cash inflow
capital -- --- ---- --- --- -- --- --- --- --- --- ---- ----
111770 115992 119882
bal. b/f 1063400 1086750 0 1149020 0 0 1291170 1369920 1460070 1569650 1697400 1844700 16008520

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cash sales 280000 320000 300000 290000 350000 330000 360000 330000 350000 370000 400000 450000 4130000
loan 0
debtors 70000 50000 80000 70000 65000 100000 70000 80000 60000 90000 120000 80000 935000
149770 157492 162882
total received 1413400 1456750 0 1509020 0 0 1721170 1779920 1870070 2029650 2217400 2374700 21073520
cash outflows 0
purchases 170000 210000 190000 220000 250000 200000 200000 180000 160000 200000 220000 250000 2450000
creditors 80000 60000 90000 60000 55000 70000 80000 70000 70000 60000 80000 75000 850000
loan repayment 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 60000
license and permits 4000 4000
electricity 550 500 600 450 500 530 600 650 670 650 550 600 6850
telephone 3000 2500 2500 2000 3000 2500 2000 2500 3000 3000 3500 3000 32500
salaries/wages 38500 38500 38500 38500 38500 38500 38500 38500 38500 38500 38500 38500 462000
rent 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 60000
transport 6000 5500 6500 7000 7500 6500 8000 7500 7000 8500 7500 8000 85500
insurance 2500 2500 2500 2500 2500 2500 2500 2500 2500 2500 2500 2500 30000
repairs/maintenance 3500 3500
water 600 550 580 650 600 620 650 700 750 600 650 600 7550
miscelleneous 8000 9000 7500 8000 8500 6500 9000 7500 8000 8500 9500 9000 99000
total payments 326650 339050 348680 349100 376100 337650 351250 319850 300420 332250 372700 397200
114902 119882 129117
net cashflow c/f 1086750 1117700 0 1159920 0 0 1369920 1460070 1569650 1697400 1844700 1977500

5.3.3BIDII PLUMBING AND ELECTRONICS DEALER MONTHLY CASHFLOWSTATEMENT FOR

THE YEAR 2022
PARTICULARS/MOTHS JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC TOTAL
cash inflow
regard
capital -- --- ---- s--- --- -- --- --- --- --- --- ---- ---

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 197750 203935 210560
bal. b/f 0 0 0 2E+06 2221560 2359260 2455060 2598230 2713380 2877580 3091700 3277500 29885050
cash sales 320000 310000 340000 360000 420000 400000 380000 370000 390000 480000 550000 520000 4840000
loan 0
debtors 60000 70000 65000 70000 60000 75000 80000 70000 100000 90000 120000 110000 970000
235750 241935 251060
total received 0 0 0 3E+06 2701560 2834260 2915060 3038230 3203380 3447580 3761700 3907500 35695050
cash outflows 0
purchases 180000 170000 190000 220000 200000 220000 180000 170000 180000 200000 320000 300000 2530000
creditors 50000 70000 75000 80000 70000 85000 60000 80000 20000 80000 85000 90000 845000
loan repayment 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 60000
license and permits 4000 4000
electricity 650 600 620 570 650 600 680 650 650 630 600 650 7550
telephone 3000 3500 3000 2500 2000 2500 3500 3000 2500 3000 3500 3500 35500
salaries/wages 42000 42000 42000 42000 42000 42000 42000 42000 42000 42000 42000 42000 504000
rent 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 60000
transport 7500 7000 8500 9000 6500 7000 8000 7500 9000 8000 10000 9500 97500
insurance 2500 2500 2500 2500 2500 2500 2500 2500 2500 2500 2500 2500 30000
repairs/maintenance 4500 4500
water 600 650 650 700 650 600 650 700 650 750 600 650 7850
miscellaneous 8000 7500 10000 9500 8000 9000 9500 8500 8500 9000 10000 9500 107000
total payments 312750 313750 342270 376770 342300 379200 316830 324850 275800 355880 484200 468300
203935 210560 216833
net cash flow c/f 0 0 0 2E+06 2359260 2455060 2598230 2713380 2877580 3091700 3277500 3439200

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5.4 PRO – FORMA INCOME STATEMENT
BIDII PLUMBING AND ELECTRONICS
PROFORMA INCOME STATEMENT FOR THE YEAR ENDING 2020, 2021,
AND 2022
ITEM Year 2020 Year 2021 Year 2022
Sales 3050000 3920000 4820000
Cost of goods sold 1630000 2450000 2530000
Gross profit 1420000 1470000 2290000
Expenses
Wages/salaries 420000 462000 504000
Electricity 6050 6850 6900
Telephone 29000 32500 35500
Rent 60000 60000 60000
Transport 56000 85500 97500
Insurance 30000 30000 30000
Repairs/maintenance 2000 3500 4500
Water 7050 7750 7850
Miscellaneous 74500 99000 107000
Total expenses 684600 787100 853250
Net profit before tax 735400 682900 1436750
Taxation 10% 73540 68290 143675
Net profit after tax 661860 614610 1293075

5.5 PROFORMA BALANCE SHEET BIDII PLUMBING AND ELECTRONICS

DEALER PROFORMA BALANCE SHEET ASAT 31ST DEC 2020, 2021AND 2022
Item Opening year 1(2020) End of year 2 (2021) End of year 3 (2022)
Assets
Current assets
Cash at hand + bank 103600 914100 1461700
Debtors 60000 925000 980000
Stock 300000 820000 800000
Total current assets 463600 5669100 3241700
Fixed assets
Motor vehicle 120000 120000 120000
Acc. depreciation (-) (4800) (72000)
120000 72000 48000
Furniture and fittings 6500 6500 6500
Acc. Depreciation (-) (1300) (1950)
6500 5200 4550
Total fixed assets 126500 77200 52550
Total assets 590100 2736300 3294250
Liabilities
Current liabilities
Creditors 50000 1015000 1055000

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 Total current liabilities 50000 1015000 1055000
Long term liabilities
Bank loan 300000 300000 300000
Capital employment (equity) 240000 806690 646175
Profit (-) 614610 1293075
Total long term liabilities 540100 1721300 2239250
Total liabilities 590100 2736300 3294250

5.6 BREAK EVEN POINT

1. Contribution margin = Total sales – variable costs
= Kshs 3050000 – 1801600
= kshs 1245400

2. Contribution margin % = Contribution margin x 100%

Total sales
= 1245400 x 100
3050000
= 40.83%

3. Total fixed costs (expenses for year 2020) = kshs 510,000

4. Break even point (in sales) = Fixed costs

Contribution margin %
= kshs 510000
40.83
= 1249081.60

5.7 PROFITABILITY RATIOS

Ratio type Working formula 2020 2021 2022
Gross profit ratio Gross profit x 100 46.56% 37.5% 47.51%
Total sales
Return on equity Net profit after tax x 100 65.73% 43.24% 66.68%
Owner’s equity
Return on Net profit after tax + interest x 100 132.37% 122.92% 258.62%
investment Total investment

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5.8 DESIRED FINANCING

ITEM AMOUNT
pre-operational costs 248500
Working capital 125000
Fixed assets 126500
Total 500000

5.9 PROPOSED CAPITALIZATION

ITEM AMOUNT
Owner’s contribution 200000
Loans from bank 300000
Total investment 500000

34