CHEDA BAKERY.

P.O.BOX 395,
ELDORET.
PRESENTED BY: ELIZABETH KARISA

INDEX NO : 359

COURSE:CERTIFICATE IN INFORMATION COMMUNICATION

TECHNOLOGY

COURSE CODE : 1920

CENTRE CODE:207001

CENTRE: THIKA TECHNICAL TRAINING INSTITUTE

PRESENTED TO: KENYA NATIONAL EXAMINATION COUNCIL IN

PARTIAL FULFILMENT FOR THE AWARD OF

CERTIFICATE IN BUSINESS MANGEMENT

SUPERVISOR: MR GITARI

THIS BUSINESS PLAN IS PRESENTED TO THE KENYA NATIONAL EXAMINATION

COUNCIL FOR PARTIAL FULFILMENT OF THE AWARD OF CERTIFICATE IN
BUSINESS MANAGMENT

EXAM SERIES: NOV 2016

i
DECLARATION
I declare that this is my original work and it has never been presented for marking in any of
institution before.

Name: TABITHA KALOKI MBULI

SIGNATURE: …………………………DATE……………………………….

The business plan has been submitted with my approval as a supervisor.

NAME: MR GITARI

SIGNATURE……………………DATE………………………………..

ii
DEDICATION
I dedication to God for giving me strength and live also to the entire class for their support during the
compilation of this work.

iii
ACKNOWLEDGEMENT
I acknowledge the helpful support of my parents, brothers and sisters and supervisor Mr. Gitari who
has been of helpful.

iv
TABLE OF CONTENTS
DECLARATION .................................................................................................................................................i

DEDICATION................................................................................................................................................... ii

ACKNOWLEDGEMENT .................................................................................................................................. iii

CHAPTER ONE

1.0 SUMMARY .................................................................................................................................... 1

1.1 BUSINESS DESCRIPTION...................................................................................................................... 1

1.2 MARKETING PLAN............................................................................................................................... 1

1.3 ORGANIZATION AND MANAGEMENT PLAN ....................................................................................... 1

1.4OPERATION AND PRODUCTION PLAN ................................................................................................. 1

1.5 FINANCIAL PLAN ................................................................................................................................. 1

CHARPTER TWO ............................................................................................................................................ 3

2.0 BUSINESS DESCRIPTION...................................................................................................................... 3

2.1 BACKGROUND OF THE OWNER .......................................................................................................... 3

2.2 BUSINESS NAME ................................................................................................................................. 3

2.3 THE BUSINESS LOCATION AND ADDRESS ........................................................................................... 4

2.4 THE FORM OF THE BUSINESS ............................................................................................................. 5

2.5 THE TYPE OF THE BUSINESS................................................................................................................ 5

2.6 PRODUCT AND SERVICE...................................................................................................................... 5

2.7 JUSTIFACTION OF OPPORTUNITY ....................................................................................................... 6

2.8 THE INDUSTRY .................................................................................................................................... 6

2.9 THE GOALS AND OBJECTIVES OF THE BUSINESS ................................................................................ 6

2.9.1 GOALS .......................................................................................................................................... 6

2.9.2 OBJECTIVE .................................................................................................................................... 6

2.10 ENTRY AND GROWTH STRATEGY ..................................................................................................... 7

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 2.10.1 ENTRY PLAN ............................................................................................................................... 7

2.10.2 GROWTH PLAN .......................................................................................................................... 7

CHAPTER 3 .................................................................................................................................................... 8

3.0 MARKETING PLAN............................................................................................................................... 8

3.1 CUSTOMERS........................................................................................................................................ 8

3.1.1 INSTITUTIONS .............................................................................................................................. 8

3.1.2 COMMERCIAL CONSUMERS ........................................................................................................ 8

3.2 MARKET SHARE................................................................................................................................... 8

3.3 COMPETITION ..................................................................................................................................... 9

3.4 PRICING STRATEGIES ........................................................................................................................ 10

3.5 PRICING STRATEGY ........................................................................................................................... 10

3.6 SALE TACTICS .................................................................................................................................... 11

3.7 DISTRIBUTION STRATEGY ................................................................................................................. 11

CHAPTER FOUR ........................................................................................................................................... 12

4.0 ORGANIZATION PLAN AND MANAGEMENT ..................................................................................... 12

4.1MANAGEMENT TEAM ....................................................................................................................... 12

4.1.1 GENERAL MANAGER .................................................................................................................. 12

4.1.2 SUPERVISOR............................................................................................................................... 12

4.2 OTHIS PERSONNEL ............................................................................................................................ 13

4.3 RECRUITMENT, TRAINING AND PROMOTION ............................................................................ 13

4.3.1 RECRUITMENT ........................................................................................................................... 13

4.3.2 TRAINING ................................................................................................................................... 14

4.3.3PROMOTIONS ............................................................................................................................. 14

4.4 RENUMERATIONS/ INCENTIVES ....................................................................................................... 14

4.5 LICENCE, PERMITS AND BY-LAWS..................................................................................................... 14

4.5.1 LICENCE...................................................................................................................................... 15

4.5.2 PERMIT....................................................................................................................................... 15
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 4.6 SUPPORT SERVICES ........................................................................................................................... 15

4.6.1 BANKING .................................................................................................................................... 15

4.6.2 INSURANCE SERVICE .................................................................................................................. 15

CHAPTER 5 .................................................................................................................................................. 16

5.0 OPERATION/PRODUCTION PLAN...................................................................................................... 16

5.1 PRODUCTION FACILITIES AND CAPITAL ............................................................................................ 16

5.1.1 BAKERY LAYOUT ........................................................................................................................ 18

5.2 PRODUCTION STRATEGY .................................................................................................................. 19

5.3 PRODUCTION PROCESS................................................................................................................... 20

5.4 FACTORS AFFECTING OPERATION .................................................................................................... 22

5.4.1 HEALTH REGULATIONS .............................................................................................................. 22

5.4.2 LOCAL GOVERNMENT ACT ........................................................................................................ 22

5.4.3 ENVIROMENTAL REGULETIONS ................................................................................................. 22

6.0 FINANCIAL PLAN ............................................................................................................................... 23

6.1 PRE-OPERATIONAL COST .................................................................................................................. 23

6.2 PROFORMA BALANCE HEET.............................................................................................................. 24

6.3 WORKING CAPITAL ........................................................................................................................... 25

6.4. CASH FLOW PROJECTION ................................................................................................................ 26

6.4.1 CASH FLOW PROJECTION FOR THE YEAR 2013 ......................................................................... 26

6.4.2 CASH FLOW PROJECTION FOR THE YEAR 2014 ......................................................................... 27

6.4.3 CASH FLOW PROJECTION FOR THE YEAR 2015 ......................................................................... 28

6.5 PROFORMA INCOME STATEMENT ................................................................................................... 29

6.6 BREAK EVEN ANALYSIS ..................................................................................................................... 30

6.7 DESIRED FINANCING ......................................................................................................................... 30

6.8 CAPITALIZATION ............................................................................................................................... 30

6.9 PROFITABILITY RATIOS...................................................................................................................... 31

CHAPTER Six…………………………………………………………………………………………………………………………………………….31
vii
7.0 RISK MANAGEMENT ......................................................................................................................... 32

viii
CHAPTER ONE
1.0SUMMARY

1.1 BUSINESS DESCRIPTION

The proposed business will be registered under the name CHEDA BAKERY. The business will be
located in Eldoret town along Eldoret- Iten road.

The business will be making cakes and loaves of bread. It will operate as a sole proprietor who will
be managed by one person that is Daisy Cherono Sigei. The business will be known in to the market
by advertising through posters, mass media and magazines.

1.2 MARKETING PLAN

Bakery services will be provided by individual customers and institutions. The business will
target a population of 50000 customers. Due to the competition with this businesses the products
will be sold through direct and indirect distribution.

1.3 ORGANIZATION AND MANAGEMENT PLAN

The business will be operating under the management of nine personnel who are qualified in
various disciplines and with at least some experience in bakery. The manager being the sole
proprietor and operator of the business will train its employees on how to attract customers.

They will promote employees based on hard work efficiency in service delivery and will be
entitled to salary increment. The salary increment will depend on the sales.

1.4OPERATION AND PRODUCTION PLAN

Machines and equipment that will be used in the bakery is of low rate of depreciation hence are
long lasting. These products will be of high quality and affordable prices. The bakery materials
will be purchased and cakes, breads displayed for customers to buy.

1.5 FINANCIAL PLAN

The required capital to be invested into the business will be Ksh 500,000. This will be 200,000
from owner’s equity and 300,000 from bank loan. Also the profits made in the course of the
business

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 CHARPTER TWO
2.0 BUSINESS DESCRIPTION

2.1 BACKGROUND OF THE OWNER

The owner of the business is Daisy Cherono Sigei. The business is meant to deal with making of
cakes, breads and different kinds of snacks.

The owner took her studies at Thika technical Institute where she took a certificate in Bussiness
Management. She intends to operate as a sole proprietor to improve on the personal strength and
the success of the business. She is 22 years old, address number 395 Eldoret.

2.2 BUSINESS NAME

The business is intended to start will given the name CHEDA BAKERY. CHE means Cherono
and DA means Daisy which are the names of the owner.

Intended products at Bakery Proposed products in shops helves

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2.3 THE BUSINESS LOCATION AND ADDRESS

The business will be located at Eldoret along Eldoret-Iten road. The entrepreneur chose to locate
business firm here because the area size is broad hence the population capacity in the area is able
and will contribute indirectly to the success of the business. The roads are accessible where the
entrepreneur can have the ability in transporting her goods and other products without delay or
many problems. Water and electricity is also available to all times in order for the various
activities and operations of the business to continue.

The issues of communication are also good since the entrepreneur can easily converse with all
her consumers at all times. This brings an opportunity for the flow of goods and services and also
being flexible enough to all her consumers.

The entrepreneur also aims at improving the production of goods in the area this is to bring in the
supply of goods easily hence improving on her marketing skills for managing workers
communicating well and also customer care.

The entrepreneur chose this location of business because there is a police station hence there is
enough security for the business. The following is the business address and contacts

CHEDA BAKERY,

P.O BOX 395,

ELDORET.

Email: daisysigei96.ds

Website: www.daisysigei.com

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 ELDORET TOWN

LAW COURTS

JERUSALEM ROAD

AIRSTRIP

CHEDA

BAKERY

ROCK CENTRE

MUNYAKA ROAD

2.4 THE FORM OF THE BUSINESS

The business will be sole proprietorship. This is where the business is owned and managed by
one person who is Daisy Cherono Sigei.

This kind of business is simple and also needs few legal formalities to begin hence not expensive.

One can operate nearly all kinds of business under this form; also become the owner of small
scale or large scale enterprise. Being a sole proprietor encourages her to have chances of
creativity. Since one can be able to utilize the necessary and available resources also making

4
 quality in the business. An entrepreneur is much flexible since there are chances from one state to
the other. Ability for encouraging business expansion hence there is requirement for little capital
also necessary managerial skills in managing the market for the goods and services as well as
employees.

A sole proprietor is determined and reasonable to the success of the business for the making of
the profit decision making is easier since decides alone.

2.5 THE TYPE OF THE BUSINESS

The business is CHEDA bakery where the services is to be offered to all customers giving them
the opportunity to continue purchasing their products in high quality for the sole proprietor to
earn more profits hence giving customers to have chance of what they need to meet their
satisfaction.

Entrepreneur will employ other personnel to assist on the business. This is to give her a chance in
achieving her goals also to make entrepreneur personal saving first to be utilized hence
considering the resource factors such as finances. This is to start and run the business labour, raw
materials, equipment and machinery. The items can be converted to a state that can be readily
usable by the customers also an entrepreneur can acquire loan to expand the business. The
entrepreneur can also consider the target group in which the business is aimed at in relation to
expectations strength and weakness considering the skills, knowledge and financial resources
hence is suppose to look for opportunities that may arise from new technology and be able to
calculate business risks before financing and offer additional assistance to improve the business
and meet its objective.

2.6 PRODUCT AND SERVICE

The intended business will make cakes and loaves of bread. The business will operate 24 hours a
day thus enable high productivity and giving the customers a chance of coming and their goods
available at all time.

The services are to be offered to all customers giving them an opportunity to continue coming
and purchasing their products like cakes colored with different colors with the likes and
preferences of the customers for better results. She makes them more attractive to them also for
good presentation.

The business will start with ksh 500,000/=. This is to help the business in progressing slowly by
slowly buying ingredients to add the products and improving the business and giving a chance
the sole proprietor to earn more and having profit also attracting more customers to the business
hence able to operate under highly competitive market condition.

2.7 JUSTIFACTION OF OPPORTUNITY

The demand of cakes is very high especially among the people living within the area of Rock
Centre and Eldoret town. Also competitors who operate the same kind of business are few This

5
 makes the demand high giving the sole proprietor an opportunity to increase the products and
earn more profits.

The sole proprietor is aware of the likes and dislikes of the people and had to provide the
required products required and the need to satisfy all his customers to continue purchasing the
products and make more sales.

The sole proprietors by making quality products will help in the livelihood of the people hence
contributing the business products to the community also utilize available resources in the area.

2.8 THE INDUSTRY

The business will be under hospitality industry which will provide product of favorable and
reasonable prices to all customers available .The sole proprietor will purchase machines such as
ovens mixer to speed up production. This will help in improving the sale and making quality
products also to compete with other competitors.

2.9 THE GOALS AND OBJECTIVES OF THE BUSINESS

2.9.1 GOALS
The business aims to provide quality and affordable products and services to people around who
have interest in the job and to penetrate in the market

2.9.2 OBJECTIVE
i) To meet the need and demands of the customers through provision of quality products.

ii) To create job or employment opportunity to people around especially the unemployed.

iii) To make use of available resources

2.10 ENTRY AND GROWTH STRATEGY

The sole proprietor eyes for the opportunity that may arise as to consider for well trained
personnel to improve the business by making quality products. The sole proprietor will do the
assessment of what people need for that particular product or service.

2.10.1 ENTRY PLAN

The proprietor may also have a plan of what the customers so as to satisfy them fully. This will
help to improve sales and also create awareness of the business to start and collect relevant
information from different people and supplier who have an experience of such kind of business.

2.10.2 GROWTH PLAN

There must also be a personal contact with different people who often inform of what people are
lacking or may give a business idea from their own observation hence improving the growth of
the business. Also entrepreneur may describe the people needs and problems by giving in or
write articles to show.
6
CHAPTER 3
3.0 MARKETING PLAN

3.1 CUSTOMERS
They are people who come to buy goods and services to satisfy their needs. The entrepreneur will
be selling the products to both individuals and commercial customers.

3.1.1 INSTITUTIONS
The products will be sold to individual customers such as students from different institutions,
school children, hawkers and other customers who will come to purchase products.

3.1.2 COMMERCIAL CONSUMERS

Commercial consumers being the targeted customers by the intended business will buy the
products so as the entrepreneur to make profits. The consumers of this nature include retail shops
such as Baraka shop, Kongasis shop and classic shop. Wholesalers targeted by the business are
like Khetia Wholesalers who will buy such products in large quantities and sell them.

3.2 MARKET SHARE

The market of these products is also full of competitors which deal with the same products in the
market. The average population which needs or expected to buy the products is about 25,000.
The entrepreneur will carry out a market survey within Eldoret Municipality so as to get the
population and target a particular segment to service. The approximate population is about
500,000 of the total number of customers’ population. The number of customers targeted is
calculated in percentage as shown below:

A B C

S A L E 2 5 , 0 0 0 2 0 , 0 0 0

MARKET SHARE 2 0 % 3 5 %

After penetration to the market

A B C D

S A L E S 2 5 , 0 0 0 2 0 , 0 0 0 2 0 , 0 0 0

MARKET SHARE 1 9 % 3 4 % 3 4 %

7
Pie chart

D 25,000

20,000 C

20,000

To win more customers the proprietor need to advertise his products and provide discounts to attract
more customers and also to give way to new products.

3.3 COMPETITION
The main competitors that the business will get are Tosti Bakery and Bakers Yard. The
competitors are indirect ways that deal with bread and cakes.

The competitors’ strength in their business is they provide cakes and breads. They also have
enough equipment for making products such as ovens for baking cakes and mixers for the
ingredients. They are also well known within the town in that they started their business earlier
so they have built on a strong brand and majority of the customers know them.

They also buy their materials in bulk so they have quality products since they have enough
equipment for making large quantity of products they are capable of having enough stock for
their consumption.

Their weakness is that they do not offer credit stock to their potential customers. They also do
not have skilled workers to cope up with the challenges.

3.4 PRICING STRATEGIES

The prices of the products will be determined and compared with other competitors.

The proprietor believes the prices will be accepted for they will be pocket friendly and affordable
than the one for the competitors whose prices are high.

The proprietor intends to maintain and increase the market share in the face of the competitors by
attending trade shows and exhibitions whereby knowledge will be gained in selling of cakes and
loaves of bread.

8
 The business owner will conduct sales promotion by offering after sale services like transport.
This will be offered to potential customers who will buy goods in large quantities products hence
providing with transportation.

The proprietor will also offer trade discounts. This will be given to customers who will be having
regular purchase of the products. The proprietor will offer free samples during occasions like
Christmas. The owner will also train employees on safe tactics, increasing employees’ salaries
who work hard and those following the business rules and regulations.

The proprietor will advertise her products using the following means:

1. Through personal contacts. This will be done orally with different people both in schools and
colleges.

2. Promotions

It is a way designed to stimulate sales mainly by use of incentives.

3. By use of vehicles

This is done by moving around the town and encouraging sale of products and this can also be
replicated in rural areas.

4. Posters

Customers will be directed to the location where the products, prices and addresses will be printed
and stacked along the roads.

3.5 PRICING STRATEGY

The method of calculating selling price depends on cost of raw materials. The price in the market
and all expenses required in order to be known. If it will be possible for the owner credit and
discounts or not and to make sure that profit is made.

3.6 SALE TACTICS

The product will be sold through distributors and owner will provide after sale services by
transporting goods or products from Eldoret to where they are as well as giving discount to those
customers who buy products in bulk.

3.7 DISTRIBUTION STRATEGY

The proprietor aims to use both direct and indirect channels of distribution. Distribution is whereby
the product owner sale the products in bulk to the wholesalers who distribute them to retailers who in
return sell them to their customers. The reason why the business owner has chosen the indirect
channel of distribution is because the name of the of the business will be recognized by other
customers through the wholesaler who will then sell product to the retailers then to the customers.

9
CHAPTER FOUR
4.0 ORGANIZATION PLAN AND MANAGEMENT
General Manager

Accountant Supervisor

4.1MANAGEMENT TEAM

4.1.1 GENERAL MANAGER

Duties and responsibilities

i) In charge of all the duties and plans of the business

ii) Responsible in training employees

iii) She employs and dismisses employees

Qualification

iv) Must be a Kenyan citizen

v) Should be aged between 20-25 years

vi) Must have an experience of at least four years in business management.

4.1.2 SUPERVISOR
Duties and responsibilities

i) Train the employees on job

ii) Should be directly responsible for the employees

iii) Should supervise the work of employees’ basis.

Qualification

i) Must be a Kenyan citizen

ii) Should be a hardworking, trustworthy and honest

10
 iii) Should be aged between 23-30 years

iv) Should be able to communicate in Kiswahili and English

4.2 OTHIS PERSONNEL

T i t l e Number Q u a l i f i c a t i o n D u t i e s

Accountant 1 K e n y a n c i t i z e n Prepare the budget

Pass with c+ in KCSE Maintaining the payroll system

CPA level II and above

Head Waiter 2 K C S E C p l a n Training personnel on the job

Honesty and good conduct to customers Prepare the duty roste r

Security officer 3 Conversant in English and Kiswahili Direct customers on whise to park

Direct customers whise to keep luggage

4.3RECRUITMENT, TRAINING AND PROMOTION

4.3.1 RECRUITMENT
The recruitment team will depend on job experience and qualification. It will be done by manager
and supervisor. Job vacancies will be advertised through posters which will be distributed in
different institutions such as colleges and universities.

4.3.2 TRAINING
The owner will train the employees within the premise at times send them to vocational training
centres during off-peak and also seminars in which they will get the knowledge of selling the product
and services and how to run the business.

4.3.3PROMOTIONS
The promotion of staff members will depend on how long one has served in the business, the hard
work, educational level, punctuality, trustworthy and obedience of the rules and regulations of the
business.

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4.4 RENUMERATIONS/ INCENTIVES
Remuneration means wages and salaries given to employees. The owners of CHEDA BAKERY
intend to employ personnel and pay them for the work they do. The table below shows the salaries,
allowances, gross pay and net pay of the employees:

J o b t i t l e Number of official Basic salary Medical allowance Gross pa y Deduction T o t a l

N.S.S.F Net pay

General manager 1 1 9 0 0 0 1 0 0 0 2 0 0 0 0 1 0 0 0 1 9 0 0 0

Accountant 1 1 0 0 0 0 3 0 0 1 0 3 0 0 5 0 0 9 8 0 0

supervisor 1 1 1 0 0 0 5 0 0 1 1 5 0 0 5 0 0 1 1 0 0 0

Head Waiter 2 9 0 0 0 5 0 0 9 5 0 0 5 0 0 9 0 0 0

Head security 2 5 0 0 0 2 0 0 1 0 4 0 0 1 5 0 1 0 1 0 0

TOTAL 7 5 8 6 0 0

4.5 LICENCE, PERMITS AND BY-LAWS

This is important legal document required before the operation of the business. The business has to
acquire the following:

4.5.1 LICENCE
It is an official document which allows somebody to do something within limited time.

4.5.2 PERMIT
It is an official document which allows somebody to do something to happen within a limited time.
The business will require a single business permit which will be acquired in Eldoret Municipal
council.

The reason for acquiring all this documents is for security purposes. It helps one to run the business
without any fear. These are rules to be followed only by CHEDA BAKERY business.

4.6 SUPPORT SERVICES

The business require support services to carry own safely.

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4.6.1 BANKING
The bank should be open to help in keeping the finances of the business which is fixed account. The
branch is in Eldoret town and another one in Iten town.

4.6.2 INSURANCE SERVICE

The enterprise will insure its property against fire and this may cost approximately ksh 20,000/=.

13
CHAPTER 5

5.0 OPERATION/PRODUCTION PLAN

Bakery will have facilities and equipments for the business. The proposed business will ensure that
they run the business well and have enough equipment.

5.1 PRODUCTION FACILITIES AND CAPITAL

The following are equipments and production facilities quantity, unit cost, total cost and supply of
CHEDA BAKERY.

LARGE EQUIPMENT

Equipment and machinery Number of equipment s i z e Unit cost Total cost S u p p l i e r

O v e n s 1 l a r g e 3 0 , 0 0 0 3 0 , 0 0 0 Lalet Supermarket

Weight scale 1 Medium size 8 3 0 0 8 3 0 0 Lalet supermarket

Bread slicer 1 l a r g e 3 0 , 0 0 0 3 0 , 0 0 0 Tuskys supermarket

TOTAL COSTS 6 8 3 0 0

14
SMALL EQUIPMENT

E q u i p m e n t Number of equipment s i z e s Unit cost T o t a l Supplier

S i e v e s 5 m e d i u m 2 0 0 1 0 0 0 Lalet Supermarket

Dough cutter 6 l a r g e 5 0 0 0 3 0 , 0 0 0 Lalet Supermarket

Pastry knife 5 m e d i u m 5 0 0 2 5 0 0 Lalet Supermarket

Bakery tins 1 0 m e d i u m 1 0 0 0 1 0 0 0 0 Lalet Supermarket

T a b l e s 5 m e d i u m 5 0 0 2 5 0 0 Lalet Supermarket

Sweet spoons 5 s m a l l 2 5 0 1 2 5 0 Lalet Supermarket

Tea spoons 5 s m a l l 2 5 0 1 2 5 0 Tuskys supermarket

Dough mixer 4 m e d i u m 2 0 0 0 8 0 0 0 Tuskys supermarket

Sweet fork 5 s m a l l 2 5 0 1 2 5 0 Lalet Supermarket

C h a i r s 5 m e d i u m 2 5 0 0 1 2 5 0 0 Lalet Supermarket

T O T A L 7 0 , 2 5 0

15
 5.1.1 BAKERY LAYOUT
Entrance Security
Parking Bay
office

Reception

Receiving area
General
Manager Display

Store for goods

Accounts Store for
Office Housekeeping

Bakery or Kitchen
Exit

Garbage
Gents Sink
Ladies collection Emergency door

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5.2 PRODUCTION STRATEGY
m a t e r i a l Q u a n t i t y U n i t c o s t T o t a l s

S u g a r 1 5 0 k g s 1 0 0 1 5 0 0 0

W h e a t f l o o r 1 8 0 k g s 1 2 0 2 1 0 0 0

V a n i l l a 2 0 l i t r e s 1 0 0 2 0 0 0

F r u i t s 2 0 k g s 1 0 0 2 0 0 0

C r o m a 2 0 k g s 1 2 0 2 , 4 0 0

F o o d c o l o u r 5 0 0 2 0 1 0 0 0 0

F l a v o u r i n g s 6 k g s 5 0 3 0 0

C r e a m 5 0 l i t r e s 1 0 0 5 0 0 0

M i l k 1 0 0 l i t r e s 3 0 3 0 0 0

S a l t 2 k g 3 0 6 0

Y e a s t 2 k g 1 0 0 2 0 0

T o t a l 6 1 , 5 6 0

LABOUR REQUIREMENTS

W a g e s a n d s a l a r i e s 6 0 0 0 0

S t a f f m e a l s 3 0 0 0

N a t i o n a l i n s u r a n c e 5 0 0

U n i f o r m s 5 0 0 0

N . S . S . F 1 0 0 0

T e l e p h o n e 1 5 0 0

T O T A L 6 9 , 5 0 0

17
OVERHEADS

E x p e n s e s A m o u n t

E l e c t r i c i t y 2 0 0 0

W a t e r b i l l s 5 0 0

P a c k a g i n g 1 0 0 0

T r a n s p o r t 5 0 0 0

I n s u r a n c e 4 0 0 0

T o t a l 5 0 0 0

Total production cost= Food cost+ Labour cost+ Overheads

136,060= 61560+69500+5000

5.3 PRODUCTION PROCESS

Production of cakes

Fruit cake

i) Cream the fat and sugar until it is soften fluffy

ii) Gradually add the beaten eggs, mix well

iii) Fold the sieved flour, baking powder, dried fruit, and chopped chisries then combined
lightly.

iv) Place in lightly greased tin

v) Place the almonds on top, bake at 1700c

vi) Test by inserting a tin needle or skewer in the center of the cake ,it should come out clean

COCONUT cakes

i) Cream the margarine and the sugar in a bowl until soft and fluffy

ii) Slowly add the well beaten eggs mixing continuously and beating really well between
each other

18
iii) Add 100g wahed and dried mixed fruit

iv) Bake in a hot at 2200c for 13_20 minutes

COCUNUT EGGS

i) SIEVE THE FLOUR BAKING BARDER AND SALT to

ii) Use 50g desiccated coconut 3_4 of vanilla essence

iii) Cream the margarine and sugar in a bowl until soft fluffy

iv) Slowly add the well beaten eggs mixing continuously and beating really well
between each addition

v) Divide in to 8-12 lightly greased cake tines

vi) Bake in a hot oven at 2200c for 15-20 minutes

CAKE MAKING PROCEDURE

Fat blended with costar

sugar

Colors essence or
flavor

Add gradually

Beaten liquid eggs stabilize the mixture with little flour

Add carefully

Sieved flour

Add other ingredients according to the recipe

Nuts Dried food Milk

Orange or lemon peel Crystallized fruit

19
5.4 FACTORS AFFECTING OPERATION
These are the government regulation or government acts which the entrepreneur has to
adhere to. The business owner has to ensure a proper follow up of the regulation for the
proper running of the business

5.4.1 HEALTH REGULATIONS

The hygienic standards of the establishment shall be kept to the standards. Food handling
certificate which certifies hygienic condition shall be acquired.

5.4.2 LOCAL GOVERNMENT ACT

The municipal council has to know the kind of business to be started and its location.
They will give the proposed site for this business and where to deposit the refuse

5.4.3 ENVIROMENTAL REGULETIONS

These are regulations that the government manages the environment and it entails waste
materials disposal and regulations. Waste materials will be recycled and those that cannot
be recycled the enterprise will ensure proper means of disposal.

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6.0 FINANCIAL PLAN
This chapter entails all the matters pertaining to the establishment and operation of the business
enterprise. This includes capital required, sources of finance, expenses, inputs and all the other
financial related matters. Financial plan represents the estimates of the business at the beginning
and the future operations of the business in quantitative terms. This will act as a central measure as
well as the evaluation of the business activities in relation to the set goal and objectives.

6.1 PRE-OPERATIONAL COST

F i n a n c i a l a s s u m p t i o n

D e t a i l s c o s t s

E q u i p m e n t 2 0 9 , 5 7 0 . 0 0

R a w m a t e r i a l s 1 4 9 , 8 0 0 . 0 0

Licenses/permits 2 , 5 0 0 . 0 0

Electricity deposit 2 , 0 0 0 . 0 0

R e n t 8 , 0 0 0 . 0 0

Registration fee 2 , 0 0 0 . 0 0

G o o d w i l l 4 0 , 0 0 0 . 0 0

S t a f f u n i f o r m 7 , 9 0 0 . 0 0

S t a t i o n e r y 4 0 0 . 0 0

I n s u r a n c e s 1 , 5 0 0 . 0 0

F u r n i t u r e 2 2 , 4 0 0 . 0 0

A d v e r t i s e m e n t 5 , 4 0 0 . 0 0

T o t a l 4 5 1 , 4 7 0 . 0 0

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6.2 PROFORMA BALANCE SHEET

I t e m s Start year 1 opening date 31st Dec 2013 End year 1 closing date 31st Dec 2014 End of 2nd year closing date 31st Dec 2015

A s s e t s
F i x e d a s s e t s
Machinery and equipment 5 8 , 9 6 0 5 5 , 8 5 0 5 6 , 9 5 0
Accumulated depreciation 2% (1,179)57781 (1,117)54,733 (1,139)55,811
Furniture and fittings 1 3 , 4 0 0 1 3 , 2 0 0 1 3 , 5 0 0
V e h i c l e s a t c o s t 1 0 0 , 0 0 0 1 5 0 , 0 0 0 2 0 0 , 0 0 0
D e p r e c i a t i o n 2 % (2,000)98,000 (3,000)147,000 (4,000)196,000
Total fixed assets 1 6 8 , 9 1 3 2 1 4 , 6 6 9 2 6 5 , 0 4 1

C u r r e n t a s s e t s
C a s h d e b t o r s 3 0 , 0 0 0 2 9 , 0 0 0
Stock of finihed goods 7 0 , 0 0 0 5 0 , 0 0 0
Stock of raw materials 5 3 0 , 0 0 0 3 8 0 , 0 0 0 3 5 0 , 0 0 0
C a s h i n b a n k 4 5 0 , 0 0 0 2 8 0 , 0 0 0 3 0 0 , 0 0 0
Total current assets 7 8 0 , 0 0 0 7 3 0 , 0 0 0 7 2 9 , 0 0 0
T o t a l a s s e t s 1 , 1 4 8 , 9 1 3 9 4 4 , 6 6 9 9 9 4 , 0 4 1

L i a b i l i t i e s
Long term liabilities
B a n k l o a n 9 1 8 , 9 1 3 7 9 4 , 6 6 9 5 9 3 , 5 4 1
Equity from friends 2 0 0 , 0 0 0 1 0 0 , 0 0 0 3 5 0 , 0 0 0
Total long term liabilitie s 1 , 1 1 8 , 9 1 3 8 9 4 , 6 6 9 9 4 3 , 5 4 1

Current liabilities
C r e d i t o r s 2 0 , 0 0 0 3 0 , 0 0 0 2 5 , 5 0 0
Tax and insurance 1 0 , 0 0 0 2 0 , 0 0 0 2 5 , 0 0 0
Total current liabilities 3 0 , 0 0 0 5 0 , 0 0 0 5 0 , 5 0 0
T o t al l i abi lit i e s 1 , 1 4 8 , 9 1 3 9 4 4 , 6 6 9 9 9 4 , 0 4 1

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6.3 WORKING CAPITAL

This refers to the money used on the basis of business for its operations to go on.
I t e m s Amount(monthly) T o t a l f o r a y e a r

R e n t 9 0 0 900 x 12 =108,000

A i r t i m e 1 , 0 0 0 1,000 x 12 =12,000

A d v e r t i s i n g 1 , 5 0 0 1,500 x 12 =18,000

P u r c h a s e s 3 0 , 0 0 0 30,000 x 12 = 360,000

T r a n s p o r t 5 , 0 0 0 5,000 x 12 = 60,000

M a i n t e n a n c e 2 , 0 0 0 2,000 x 12 = 24,000

E l e c t r i c i t y 3 , 5 0 0 3,500 x 12 = 42,000

W a t e r s u p p l y 2 , 5 0 0 2,500 x 12 = 30,000

S a l a r i e s 4 3 , 0 0 0 43,000 x 12 = 516,000

Miscellaneou s 5 , 0 0 0 5,000 x 12 = 60,000

T o t a l 1 , 2 3 0 , 0 0 0

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6.4. CASH FLOW PROJECTION

6.4.1 CASH FLOW PROJECTION FOR THE YEAR 2013

Particular Cash sale Cash flow debtor Capital introduced Transport Bank loan T o t a l

Month Receipts

J a n 110 ,5 0 0 50,000 91,300 8 , 0 0 0 200,000 459,800

F e b 110 ,0 0 0 150,00 91,300 8 , 0 0 0 1 0 6 , 0 0 1,287,000

M a r c h 120 ,1 1 0 250,000 91,300 8 , 0 0 0 104,000 573,410

A p r i l 130 ,0 1 0 200,000 96,200 8 , 0 0 0 9 6 , 2 0 0 530,410

M a y 105,1100 2 0 0 , 0 0 0 91,300 8 , 0 0 0 102,650 507,060

J u n e 120 ,5 0 0 150,000 92,300 8 , 0 0 0 0 110,600 481,400

J u l y 160 ,0 0 0 50,000 42,000 8 , 0 0 0 114.500 374,500

August 105 ,0 1 3 100,000 8 , 0 0 0 8 , 0 0 0 120,000 341,013

S e p 9 5 , 0 3 5 200,000 1 3 0, 50 0 8 , 0 0 0 124,000 557,535

O c t o b e r 116 ,0 5 2 150,000 1 4 0, 50 0 8 , 0 0 0 130,000 544,552

N o v 123, 022 200,000 91,300 8 , 0 0 0 136,000 558,322

D e c 1 5 , 0 2 2 130,000 91,300 8 , 0 0 0 200,000 1,266,022

T o t a l 254 ,0 9 6 1,578,000 1,057,300 9 6 , 0 0 0 1,344,150 6,215,503

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6.4.2 CASH FLOW PROJECTION FOR THE YEAR 2014
Particular transport insurance Repair and maintance License permit stationary electricity r e n t Total

Month

J a n 5,600 20,400 - 1,800 2 , 4 00 9 5 0 8 , 0 0 0 39,150

F e b 3,200 - - 2,300 1 , 2 00 8 4 0 8 , 0 0 0 15,540

M a r c h 4,100 - 1 , 2 0 0 1,680 8 , 0 0 0 1 , 0 2 0 8 , 0 0 0 16,800

A p r i l 3,800 - 2 , 8 0 0 1,740 1 , 4 00 5 0 0 8 , 0 0 0 18,240

M a y 3,400 7,800 - 4,200 1 , 0 50 7 5 0 8 , 0 0 0 25,200

J u n e 4,000 - - 5,400 2 , 1 60 7 0 0 9 , 5 0 0 21,760

J u l y 9,600 - 6 , 2 0 0 6,100 4 , 2 5 0 1 , 1 3 0 9 , 5 0 0 36,780

August 9,300 - - 6,400 3 , 2 0 0 1 , 0 4 0 9 , 5 0 0 29,440

September 10,600 14,300 4 , 6 5 0 7,200 2 , 6 0 0 1 , 6 0 0 9 , 5 0 0 50,450

October 14,600 - - 7,800 2 , 3 4 0 1 , 8 0 0 9 , 5 0 0 36,040

November 12,200 - - 10,300 3 , 4 0 0 1 , 7 5 0 9 , 5 0 0 37,150

December 6,450 - 10,840 11,400 3 , 9 0 0 2 , 4 0 0 9 , 5 0 0 44,130

T o t a l 96,850 42,500 2 5 , 3 3 0 66,320 28,700 14,480 106,500 380,680

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6.4.3 CASH FLOW PROJECTION FOR THE YEAR 2015
Particular Purchase Salary R en t Insurance License/ Electricity Postage Advertisement Telephone Stationary Total cash flow

Month permit

J a n 197,20 0 104,99 5 9,500 5,200 5,600 9 5 0 3 5 0 8 , 4 0 0 1 , 8 0 0 2 , 4 0 0 336,395

F e b 153,40 0 104,99 5 9,500 4,300 3,200 8 4 0 3 3 0 7 , 2 0 0 2 , 3 0 0 1 , 2 0 0 287,265
March 150,60 0 104,99 5 9,500 6,300 4,100 1 , 0 2 0 4 3 0 3 , 1 0 0 1 , 6 8 0 8 0 0 282,425
Ap ri l 136,40 0 104,99 5 9,500 3,900 3,800 5 0 0 3 8 0 2 , 5 0 0 1 , 7 4 0 1 , 4 0 0 265,115
M a y 163,20 0 104,99 5 9500 3,200 3,400 7 5 0 7 5 0 - 4 , 2 0 0 1 , 0 5 0 291,045
J u n e 164,20 0 104,99 5 9,500 5,300 4,000 7 0 0 2 6 0 1 0 , 5 0 0 5 , 4 0 0 7 0 0 305,555
J u l y 182,40 0 104,99 5 9,500 9,400 6,400 6 5 0 1,230 - 6 , 1 0 0 4 , 2 5 0 324,925
Au gust 174,30 0 104,99 5 9,500 8,400 7,100 7 4 0 8 7 0 4 , 8 0 0 6 , 4 0 0 3 , 2 0 0 320,305
S e p 153,20 0 104,99 5 9,500 6,300 10,600 9 2 0 1,400 9 , 6 0 0 7 , 2 0 0 2 , 6 0 0 306,315
O c t 143,20 0 104,99 5 9,500 7,200 7,600 6 2 0 3,400 6 , 4 0 0 7 , 8 0 0 2 , 3 4 0 293,055
N o v 193,20 0 104,99 5 9,500 8,700 8,600 7 0 0 2,400 1 5 , 2 0 0 10,300 3 , 4 0 0 357,195
D e c 196,30 0 104,99 5 9,500 6,650 5,300 8 5 0 4,800 1 2 , 8 0 0 11,400 3 , 9 0 0 356,495
T o t a l 2,007,800 1,259,940 114,000 74,750 69,700 9 , 2 4 0 16,600 8 0 , 5 0 0 66,320 27,240 3,726,090
Cash flow

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6.5 PROFORMA INCOME STATEMENT
I t e m Y e a r 1 Y e a r 2 Y e a r 3

S a l e s 1 , 2 2 0 , 0 0 0 1 , 4 6 0 , 0 0 0 1 , 8 0 0 , 0 0 0

Cost of sales ( 5 3 8 , 0 0 0 ) ( 6 5 0 , 0 0 8 ( 8 0 0 , 0 0 0 )

Gross profit 6 8 2 , 0 0 0 8 1 0 , 0 0 0 1 , 0 0 0 , 0 0 0

E x p e n s e s

Salaries and wages 3 1 6 , 0 0 0 3 1 6 , 0 0 0 3 1 6 , 0 0 0

W a t e r b i l l s 2 0 , 0 0 0 2 0 , 0 0 0 2 0 , 0 0 0

Repair/maintenances 2 4 , 0 0 0 2 4 , 0 0 0 2 4 , 0 0 0

R e n t 7 8 , 0 0 0 7 8 , 0 0 0 7 8 , 0 0 0

Advertisement 1 0 , 0 0 0 1 0 , 0 0 0 1 0 , 0 0 0

L i c e n s e 5 , 0 0 0 5 , 0 0 0 5 , 0 0 0

T r a n s p o r t 4 9 , 0 0 0 4 9 , 0 0 0 4 9 , 0 0 0

Electricity bills 1 5 , 0 0 0 1 5 , 0 0 0 1 5 , 0 0 0

A i r t i m e 1 2 , 0 0 0 1 2 , 0 0 0 1 2 , 0 0 0

Miscellaneous 1 5 , 0 0 0 1 5 , 0 0 0 1 5 , 0 0 0

Total expenses 5 4 4 , 0 0 0 5 4 4 , 0 0 0 5 4 4 , 0 0 0

Net profit before tax 1 3 8 , 0 0 0 2 6 6 , 0 0 0 4 5 6 , 0 0 0

Provision for tax 10% 1 3 , 8 0 0 2 6 , 6 0 0 4 5 , 6 0 0

Net profit after tax 1 2 4 , 2 0 0 2 3 9 , 4 0 0 4 1 0 , 4 0 0

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6.6 BREAK EVEN ANALYSIS
The break even analysis for year one

F i x e d c o s t A m o u n t

R e n t 7 8 0 0 0

T e l e p h o n e 1 0 0 0 0

W a g e s a n d s a l a r i e s 3 1 6 , 0 0 0

W a t e r s u p p l y 2 0 0 0 0

E l e c t r i c i t y 1 0 0 0 0

T r a n s p o r t 4 9 0 0 0

T o t a l f i x e d c o s t 4 8 3 , 0 0 0

a) Contribution margin

Total sales-Variable cost

1,220,000- 551,490= 668,060

b) Contribution margin percentage

Total sales- Variable cost

Total sales

1,220- 551, 940= 0.548

1,220,000

c) Break even analysis

Fixed cost

Contribution margin

483,000 = 0.395

121, 999

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BREAK EVEN ANALYSIS FOR YEAR 2
F i x e d c o s t A m o u n t

R e n t 7 8 0 0 0

T e l e p h o n e 1 0 0 0 0

W a g e s a n d s a l a r i e s 3 1 6 , 0 0 0

W a t e r s u p p l y 2 0 0 0 0

E l e c t r i c i t y 1 0 0 0 0

T r a n s p o r t 4 9 0 0 0

T o t a l f i x e d c o s t 4 8 3 , 0 0 0

V a r i a b l e c o s t A m o u n t

P u r c h a s e 5 5 1 , 9 4 0

E l e c t r i c i t y 5 5 1 , 9 4 0

Contribution margin

Total sales-Variable cost

1,460- 551,490= 908,060

a) Contribution margin percentage

Total sales- Variable cost

Total sales

1,460,000- 551, 940= 0.62

1,460,000

b) Break even analysis

Fixed cost

Contribution margin

483,000 = 0.395

1,459,999

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 6.7 DESIRED FINANCING
I t e m A m o u n t

P r e - o p e r a t i o n a l c o s t 2 9 8 , 0 0 0

W o r k i n g c a p i t a l 1 , 2 3 0 , 0 0 0

F i x e d a s s e t s 1 6 3 , 9 1 3

T o t a l d e s i r e d c a p i t a l 1 , 6 9 7 , 6 6 3

6.8 CAPITALIZATION
I t e m A m o u n t

P e r s o n a l s a v i n g s 5 0 0 , 0 0 0

F r i e n d s a n d r e l a t i v e s 2 0 0 , 0 0 0

T o t a l d e s i r e d c a p i t a l 7 0 0 , 0 0 0

6.9 PROFITABILITY RATIOS

The profitability ratio for the first of the operation will be shown as below:

a) Gross profit ratio

Gross profit 682,000 = 0.559

Total sales 1,220,000

b) Return on equity

Net profit before tax 138,000 = 0.276

Owners equity 500,000

c) Return on investment

Net profit before tax + interest = 138,000 + 1000 = 0.198

Total investment 700,000

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CHAPTER SIX
7.0 RISK MANAGEMENT
After establishing the context the next step in the process of managing risk is to identify potential risks. Risks
are about events that, when triggered, cause problems or benefits. Hence, risk identification can start with
the source of our problems and those of our competitors.

Source analysis-risk sources may be internal to the system that is the target of risk management.

Examples of risk sources are; stakeholders of a project, employees of a company or the weather over an
airport.

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