MASINDE MULIRO UNIVERSITY OF SCIENCE AND TECHNOLOGY

NAME: NAMONDO ODHIAMBO JAVANS

REG NO: MIE/0007/12

MIE/0007/12

COURSE CODE: ECC 418

COURSE TITLE: ENTREPRENEURSHIP FOR ENGINEERING

DEPARTMENT:
DEPARTMENT: MECHANICAL
MECHANIC AL & INDUSTRIAL
INDUSTRIA L ENGINEERING
ENGINE ERING

FACULTY: ENGINEERING

TASK: TAKE-AWAY CAT

DATE OF ISSUE: 10 TH 2017

DATE OF SUBMISSION: 23RD JUNE 2017

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Table of Contents

Title
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Table of Contents.............
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RETAIL
RETAIL HARDW
HARDWARE
ARE STORE BUSINESS
BUSINESS PLAN..............
PLAN.............................
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1.0 EXECUTIVE SUMMARY................................................................................................................1
Business Objectv
Objectves............
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Mission Saemen............
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Guiding Principles..................
Principles................................
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Key o Success...
Success..................
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2.0 COMP
COMPANY
ANY DESCRIPTION.............
DESCRIPTION...........................
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2.1 OWNE
OWNERSHIP.
RSHIP................
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2.2 LEGAL FORM..................
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2.3 START UP SUMMARY....................................................................................................................2
2.4 LOCATION AND FACILITIES........................................................................................................3
3.0 SERVICES.
SERVICES................
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3.1 DAILY OPERATIONS AND PRODUCTION..................................................................................3
3.2 COMPE
COMPETITIV
TITIVE
E COMPARISON
COMPARISON.............
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3.3 SUPPLI
SUPPLIERS....
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3.4 MANAG
MANAGEMENT
EMENT CONTROLS...
CONTROLS.................
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3.5 ADMINISTRA
ADMINISTRATIVE
TIVE SYSTEM.............
SYSTEM............................
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4.0 MARKET ANAL
ANALYSIS.......
YSIS......................
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4.1 Marke
Markett Trend.....
Trend....................
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4.2 Marke
Markett Size................
Size...............................
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4.3 Marke
Markett Growth.......
Growth......................
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4.4 Main Competito
Competitor.............
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4.5 Target Market Segment Strategy........................................................................................................6
5.0 MARKETING STRA
STRATEGY
TEGY AND POSITIONING..............
POSITIONING............................
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5.1 Streng
Strengths..
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5.2 Weakness.....
eakness....................
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5.3 Oppo
Opportuni
rtunities.
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5.4 Threa
Threats........
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 5.5 Posit
Positionin
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g Statement....
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5.6 Prici
Pricing
ng Strategy.....
Strategy....................
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5.7 Marke
Markett Program.......
Program......................
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6.0 ORGANIZA
ORGANIZATION
TION AND MANAGEMENT..............
MANAGEMENT.............................
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6.1 Orga
Organizat
nizationa
ionall Structure.
Structure................
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6.2 Manage
Management
ment Team.....................
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6.3 Manag
Managing
ing Team Gaps..............
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6.4 Futur
Futuree Service.........
Service........................
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7.0 FINACIAL PLAN.........................
PLAN.......................................
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7.1 Source and Use of Funds.............
Funds............................
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7.2 Proje
Projection
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RETAIL HARDWARE STORE BUSINESS PLAN
1.0 EXECUTIVE SUMMARY
The Javah Hardware will be a moderately priced hardware located along the Kakamega-Mumias
road, offering goods and services to its customers. Products such as cement, steel bars and rods,
white cement, roofing sheets, door hinges, roofing nails, flooring tiles, welding rods among
others will be available.

The hardware will be family owned and operated by Samson and Samuel Namondo. Together
they have 3 years of experience in sales and marketing. The site location was previously a
bookshop, owned by Justus. The location will therefore require some additional renovation
before fully acquiring it.

Sales projection assume customers per week resulting in weekly sales of just over Ksh.20, 000 or
Ksh.950, 000 annually. This will lead to much profit hence the idea is good to venture in.

Total stand-up cost will Ksh.700, 000 of which Ksh.300, 000 will be contributed by the owners
and the remainder will be secured by a proposed bank loan and grants.

Business Objectives
 To be the premier local hardware along Kakamega region
 To promote quality hardware products at reasonable prices
 To provide exemplary services to our customers
 To achieve price cost ratio lower than 65%

Mission Statement
Our mission is to provide quality products and services to our customer’s satisfaction. This
will be achieved by having enough stock of the products.

Guiding Principles
 Treating our customers with much respect that they deserve
 Being mindful of our staff and respecting them
 Providing quality service to our customers

Key to Success
-Hiring a salesman to be going around the region scouting for any new upcoming sites.
-Locating the business where it is accessible to the main road to reduce the transport cost to
our customers.
-A variety of products at affordable prices
-Employing qualified and highly skilled employees

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2.0 COMPANY DESCRIPTION
The Javah Hardware will be located along Kakamega-Mumias road, next to Jamal Filling
Station, 7 kilometers from Kakamega Town. The hardware will be owned and operated by
Samson and Samuel Namondo. It will provide products such as cement, steel bars, nails, door
hinges, paints, glass panes, pipes, roofing sheets, etc. and offer services such as delivery
services to customers. The hardware will operate for six days in a week as follows:

DAY OF THE WEEK TIME OF THE DAY

Monday 07:30 AM- 5:00 PM
Tuesday 07:30 AM- 5:00 PM
Wednesday 07:30 AM- 5:00 PM
Thursday 07:30 AM- 5:00 PM
Friday 07:30 AM- 5:00 PM
Saturday 09:00 AM- 4:00 PM
Sunday CLOSED

2.1 OWNERSHIP

The hardware will be owned by Samson and Samuel Namondo. Both are sales and marketing
graduates from Masinde Muliro University of Science And Technology and have three years
of experience in storekeeping and marketing of products. They both worked for Bamburi
Cement Company as sales persons for one and a half years and one year respectively.
Due to demand for more labor in the hardware, we will require the family to fill in where
possible until we are off the ground and making a profit.

2.2 LEGAL FORM

Javah hardware will be organized as a single business wholly owned by Samson and Samuel
Namondo. It will be registered as a property in Kakamega County.

2.3 START UP SUMMARY

o Starting stock- Ksh. 500,000 (200 bags of cement, 100 pieces of steel bars; among
others).
o Rent and deposit- Ksh 50,000 (may vary).
o Single business permit.
o KRA ETR machine.
o Other minor requirements e.g. renovations.
o The minimum starting budget for this SME will be Ksh 700,000.
o Ksh 300,000 of the startup budget will be funded by the owners. The owners’ source

of funds is a combination of liquid assets and marketable securities.

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2.4 LOCA
LOCATION
TION AND FACILITIES
The 2,300 square foot hardware will be located in Kakamega County along Kakamega-
Mumias road, 7 Km from Kakamega town.

The hardware is located in the major traffic area at the intersection of Kotecha Road and
Mumias Road.
The region has a population of over 45,000 people according to the year 2,000 Census Report
of Kenya. The residential population in the immediate area is comprised of a mixture of
single families, students and multi-family housing.

3.0 SERVICES
3.1 DAIL
DAILY
Y OPERATIONS
OPERATIONS AND PRODUCTION
Javah hardware will be operated six days a week. Lunch and dinner will be provided by the
owners. Samson will write the schedules.

Proper labelling and rotation techniques, accompanied by ample storage facilities will ensure
that high quality prepared products will be sufficiently available to meet the demands during
business hours.

Samuel will be responsible for ordering, receiving and manufacturing sufficient inventory to
meet the production demand.

Stocktaking exercise will be done after every two weeks. This will help us understand which
products are moving fast off the shelves as which ones need immediate restocking.

3.2 COMPETITIVE COMPARISON

Kakamega region is made up of thirteen hardware stores. Major stores include: Nabongo,
Pramukh, Walias and Mugo general stores.

The nearest competitors are Nabongo hardware and Mugo general stores. Nabongo’s
hardware is a sole proprietorship with six employees and generates 1.2 million shillings
annually.

Mugo general stores is located within the target market of Kakamega-Mumias road but deals
with a wider variety of products apart from only those required in the hardware. Its profit
ranges between 1.5 to 2.0 shillings annually.

3.3 SUPPLIERS
Because of their years of experience and knowledge acquired in college, Samson and Samuel
Namondo have established relationship with Bamburi Cement Company as their main
supplier of cement. They also have a relationship with Eston pipe manufacturers. These
suppliers can provide reasonably priced products, delivered according to their schedule.

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3.4 MANAGEMENT CONTROLS
The Namondos will practice sound management procedures in order to control costs, ensure
quality of products and provide friendly customer services. The following system will be
used by management:

1) Order guide:
guide: the hardware
hardware will use an
an item specific
specific order
order guide
guide to track
track order history
and maintain designated levels of products in inventory.
2) Weekly inventory:
inventory: management
management will conduct
conduct a weekly
weekly inventory
inventory to determine
determine the
evaluation for use in the preparation of weekly projects and job reports.
3) Daily inventory
inventory tracking:
tracking: daily
daily inventory
inventory will
will be taken
taken on specific
specific items.
items. Movement
Movement
will be compared to sales data to ensure designated products have been properly
accounted for.

3.5 ADMINISTRATIVE
ADMINISTRATIVE SYSTEM
With a limited staff, it’s crucial that sums remain current with daily cash outlay. The purchase
of Point Of Sale system (KRA ETR machine) will immensely help them with the use of daily
administrative reports.

1) Dail
Daily
y cas
cash
h cont
contro
roll

Sales and receipts recorded by the POS system will be compared to actual cash and credit
card deposits on a daily basis. Acceptable over/short amounts will be limited to Ksh 500 per
day. Discrepancies greater than 500 will prompt management to conduct an immediate audit
to account for the difference. Monthly totals will be compared to actual profit and loss
account, statement for accuracy. Cash, debit card and credit card receipts will be deposited in
a deposit.

2) Purchasi
Purchasing
ng records/
records/pay
payable
abless

A part time bookkeeper will process and record invoices and credit daily. Reports detailing
cash expenditures, payments by cheques and amount payable transactions will be readily
available.
Cheques disbursements will be prepared by the bookkeeper. Cheques signing authority for
the general operating will be given to the general manager.

3) Pa
Pay
yro
roll
ll proc
proces
essi
sing
ng

Payments will be done according to the time and attendance system. Samson will make
necessary adjustments and prepare the payroll

4.0 MARKET ANALYSIS

ANALYSIS
The hardware business is a large and diverse business which contributes around Ksh. 200
million to the country’s economy in terms of taxation.

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 On a typical day in Kenya over 800,000 people will need products that relate to hardware.
Sales at fully equipped hardware reached up to 5 million in 2013. Sales at a limited serviced
hardware reached Ksh. 230,000 a day in 2015.

Kakamega County is made up of 11 hardware with combined annual revenue of about 3

million. The major hardware in the region are Pramukh Hardware, Nabongo Hardware and

Walias Hardware.
4.1 Market Trend
According to the National Hardware Stores Association, the top 10 rated products found in a
hardware are;

1. Cement
2. Roof
Roofining
g Shee
Sheets ts
3. Roo
Roofi
finng nail
nailss
4. St
Stee
eell bar
bar an
andd rod
rod
5. Doo
Door hinge
nges
6. Fl
Floo
oori
ring
ng file
filess
7. Weleldi
ding
ng ro
rods
ds
8. Pl
Plum
umbibing
ng mate
materi rial
alss
9. Winindo
dow w gla
glass
sseses
10. Barbed windows/ fencing wires

4.2 Market Size

The Kenyan hardware industry includes about 280,000 hardware with combined annual
revenue of 3 billion.

4.3 Market Growth

By November 2015, the number of Kenyans in Kakamega who required hardware products
rose by 1.8% as compared to the same month in 2010. This was due to increase in population
in the region hence there was need for more houses.

4.4 Main Competitor

The following hardwares are located within five kilometers radius of Javah Hardware:

 Pramukh Hardware- This is a full serviced family hardware established in the year
2003. It runs as a sole proprietorship and as 13 employees. Pramukh generates 1.9
million in revenue annually. Prices of most of their commodities are higher as
compared to those at Javah Hardware.
 Nabongo Hardware- This is a sole proprietorship business with 6 employees and
generates 1.2 million in revenue annually.
 Mugo General Stores- It is located within the target market of Kakamega region
but deals with a wider range of products. Its profits range between 1.5-2.0 million

annually.

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4.5 Target Market Segment Strategy
Samson and Samuel Namondo selected the subject area for the hardware to be along the road
primarily because the area was populated and is accessible to the main road. The hardware is
at the region where much of construction works goes on. This will encourage our customers
since it will help to reduce transport costs.

The major employees in the region are Masinde Muliro University and the county
government of Kakamega.

The income rates of the residents of that region can be estimated as shown in the pie chart
below;

Salaries ( monthly)

8%
1s Qr
11%
2nd Qr
3rd Qr
50% 4h Qr

31%

5.0 MARKETING STRATEGY AND POSITIONING

We realized that the hardware business will have to be achieved by doing more than just
providing products at an affordable prices. We will utilize a marketing plan to build customer

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 traffic. We will also strive to win more customers by being productive rather than reactive in
our marketing efforts and stay current with popular industry trends.

5.1 Strengths
 Prime location with easy access
 Exceptional staff with the ‘can do’ attitude


Affordable product prices

5.2 Weakness
 Recruiting and retaining quality employees
 Tight margins will allow little wiggle room for errors

5.3 Opportunities
 Little barriers to entry allow for immediate business opportunity
 Offering additional delivery service

5.4 Threats
 Government mandate (workers’ health, sanitation, fire extinguishers)
 Building and Maintaining sales volume

Rising operating cost
5.5 Positioning Statement
Javah Hardware will be the premier service and product provider in Kakamega region. We
will offer reasonably priced products and services.

5.6 Pricing Strategy

At Javah hardware, cost accounting is important, since the profitability of an individual
product e.g. steel bars varies significantly with sizes hence determine the cost of each bar.

We will take close look of the supplier’s quotation for easy determination of the selling price
of our products.

5.7 Our
Market Program
initial marketing campaign will consist of contacting our customers by use of mobile
phone.

6.0 ORGANIZATION AND MANAGEMENT

6.1 Organizational Structure

Javah hardware expects to hire 6 employees in 2 year time. Samson and Samuel Namondo
will personally select each candidates. They’ve adopted an effective interview process
designed to staff the hardware with highly qualified people for each position. Each applicant

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 will be rated and evaluated according to the pre-defined set of standards designs for each
positions.

6.2 Management Team

The hardware will be owned by Samson and Samuel Namondo. Both are graduates with
degree in Sales and Marketing.

6.3 Managing Team Gaps

Initially, Samson and Samuel will fill many of the management gaps. Over time, they have
plans to hire a sales director, a general manager and a store keeper.

To meet the gap associated in payroll, inventory management and cost accounting, the
Namondo will purchase a Point of Sale System (POS) that simplifies most of the
communication between the members of the staff.

The POS will also acts as a clock and help in preparing payrolls.

6.4 Future Service

Javah hardware has future plans to expand its branches to Mumias and Webuye towns.

It will also provide a wider variety of products to increase the sales and profits. The Javah
hardware is targeting that in 1.5 years, it will have a sales agent who can market the products
and a truck driver to deliver products to our customers.

7.0 FINACIAL PLAN

 Required cost of start up
 Profit and loss

Financial ratios

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 The table below shows the Start-Up Cost:

Table 7.0 Start-Up Costs

Start-Up Expenses Amount

Starting Stock Ksh. 500,000
Rent and Deposit Ksh. 50,000
Single Business Permit Ksh. 500
KRA ETR Machine Ksh. 10,000
Other Minor Requirements Ksh. 140,000
TOTAL Ksh. 700,000

7.1 Source and Use of Funds

Total start-up costs are estimated to be Ksh. 700,000. The majority of the costs are associated
with hardware stock and rent.

Samson and Samuel Namondo will contribute Ksh. 350,000 and request the additional of
Ksh. 350,000 from banks and grants.

The loans obtained from banks should be cleared within a period of three years.

Table 7.1 Sources of Funds

Sources of Funds Amount

Owner ’s
’s and other investments Ksh.350,000

Bank loans Ksh. 300,000

Grants Ksh. 50,000

Total source of funds Ksh. 700,000

Table 7.2 Use of Funds

Expenses Amount
Starting Stock Ksh. 500,000
Rent and Deposit Ksh. 50,000
Single Business Permit Ksh. 500

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 KRA ETR Machine Ksh. 10,000
Other Minor Requirements Ksh. 140,000

TOTAL Ksh. 700,000

7.2 Projections
Projected Profit and Loss demonstrates modest increase in revenue over the three expected
years with adjustments for inflation.

Table 7.3 Pro Forma Profit and Loss

Pro Forma Profit and Loss Year 1 Year 2 Year 3

Income Amount (Ksh) Amount (Ksh) Amount (Ksh)
Sales 2,253,080 3,905,000 3,789,115
Cost of Goods Sold 1,582,100 1,601,300 1,414,200
Gross profit 670,980 2,303,700 2,374,915
Expenses
Accounting 12,000 13,100 14,350
Bad debts 2,300 2,000 19,500
Insurance 1,100 1,200 1,120
Miiscellaneous
M 3,000 3,150 2,890
Permit and License 500 550 500
Rent 50,000 50,000 50,000
Salaries/ wages 18,000 18,000 21,000

Total Expenses 86,900 88,000 109,360

Net Profit 584,080 2,215,700 2,265,555

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