MERU FRESH PRODUCE STORES

NJURI NCHEKE PLAZA, NJURI NCHEKE STREET, MERU

EMAIL:murefreshproduce@gmail.com

BUSINESS PLAN

PRESENTER: BRENDAH KANANA KIMATHI

REG NO. AIIQ/01955/2015

THIS IS PRESENTED TO THE TECHNICAL UNIVERSITY OF KENYA AS A

REQUIREMNTS FOR THE ACQUIRING A DEGREE IN INFORMATION SCIENCE

DATE PRESENTED: JULY 11 2018.

DECLARATION.

I declare that this is my original work and has not been copied from any source.

Name:

Reg no.

Date:

Supervisor: Madam Wambui King’ori Signature:

Date

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DEDICATION

I dedicate this work to all young people and small business owners in Kenya.

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ACKNOWLEDGEMENT.

I thank God for guidance and strength. I appreciate my classmates, family and friends for their
support.

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TABLE OF CONTENTS PAGE.

CHAPTER ONE: BUSINESS DESCRIPTION

Business Sponsors 6
Business name 6
Business location and address 6
Form of business ownership 6
Type of business 6
Products
Justification of business opportunity 7
Industry 7
Business goals 7
Entry and growth strategy 7
CHAPTER TWO: MARKETING PLAN
Customers 8
Market share 8
Competitors 8
Method of promotion 9
Pricing strategy 9
Sale tactics 9
Distribution strategy 9
CHAPTER THREE: ORGANIZATION AND MANAGEMENT PLAN
Business manager 11
Other personnel 11
Recruitment, training and promotion 12
Remuneration and incentives 13
Licenses, permits and by-laws 13
Support services 14

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CHAPTER FOUR: PRODUCTION
Production facilities and capacity 15
Production strategy 16
Production process 17
Regulations affecting operation 18
CHAPTER FIVE: FINANCIAL PLAN
Pre-operational costs 19
Working capital 19
Projected cash flow statement 20
Pro-forma income statement 21
Pro-forma balance sheet 21
Calculating, break-even analysis 22
Profitability ratios 23
Desired financing 24
Proposed capitalization 24
CHAPTER SIX: RISK MANAGEMENT
Risks 25

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EXECUTIVE SUMMARY
My business will sell fresh farm produce directly from farmers to institutions that require food
products in bulk. It will be located in Meru and I will be the sole proprietor. I will employ
several young people who will be qualified to help me manage the business. My business
objectives are to provide employment for myself and other young people in the county, To
become a stop shop for all produce and to ensure that farmers sell their produce at fair prices. I
will require five employees in my company. I will ensure that they are well trained and
motivated. I will get a business license from the Meru County government. I will require support
services for example, power, internet and water. I will local radio stations and the county
newspaper to market my products. I will transport my client’s produce for them as an after sale
service.

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1.0 CHAPTER ONE: BUSINESS DESCRIPTION.

1.1 BUSINESS SPONSORS.

I will be the owner of the business and at the time of the start of my business I will have acquire
a degree in information science from The Technical University Of Kenya. I will also have
worked for one year so as to acquire the skills to manage and office and work well with people. I
have several skills that will enable me manage my business they include: I am a natural leader, I
have good computer skills, I understand Meru and Isiolo counties in terms of food farming and
sales and I have good communication skills.

1.2 BUSINESS NAME.

My business will be called Meru Fresh Produce Stores. It will be located in NjuriNcheke Plaza,
Meru. I will sell fresh farm produce straight from the farmers to large organizations for example,
schools and hospitals. I chose this name because it is easy to remember and my business will be
located in Meru Town.

1.3 BUSINESS LOCATION AND ADDRESS.

My business will be located in Meru Town at the NjuriNcheke Plaza. My business email address
will be merufreshproduce@gmail.com. My office telephone number will be +254787358094. I
chose Meru as my business location because it is closer to the farmers I will buy produce from.
Buying farm produce from Meru is also very cheap compared to neighboring towns. I am also
very familiar with Meru since I grew up there.

1.4 FORM OF BUSINESS OWNERSHIP.

My business will be a sole-proprietorship. I will be both owner and business manager. I will be
involved in everyday operations at the business. The advantage of this is that I will be the sole
owner of my business and thus collect all the profit. I will also be able to make decisions and run
my business as I see fit.

1.5 TYPE OF BUSINESS.

My business will be in pre-start up stage and will commence in January, 2020.

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1.6 PRODUCTS

I will sell fresh farmer produce directly from customers to my clients. The produce will include:
Carrots, cabbages, potatoes, onions, green beans, potatoes and fresh maize. The will be sold in
quantities required by customers.

1.7 JUSTIFICATION OF THE BUSINESS OPPORTUNITY

This business opportunity is justified since:

 It will make profit

 It will be the only one stop shop for all fresh produce in Meru
 I have the skills that are required to run this business successfully.

1.8 INDURSTRY

My business belongs to the agriculture industry. Meru is part of the Kenyan highlands and thus
agriculture is very rampant. Over the years farmers in Meru County have moved towards
commercial fresh produce farming and therefore need a market for their produce. So far
verylittle use of technology has been applied to fresh produce farming in Meru County.

1.9 BUSINESS GOALS

My main business goal is to provide fresh produce to all my clients at a fair price. My objectives
will be to: Provide employment for myself and other young people, to ensure that farmers sell
their produce at a price that benefits and encourages them, To provide a one stop shop for all
fresh produce In Meru and to ensure that my clients get the best possible products and services in
the agricultural market.

1.10 ENTRY AND GROWTH STRATERGY

I plan on creating awareness about my business to farmers by attending public barazas,

agricultural shows, farmer’s co-operatives’ meetings and talking about my business there. For
clients, I plan on advertising on the local newspaper and radio stations and applying for tenders.

In five years after the start of my business I plan on extending to the counties neighboring Meru
County, which are: Laikipia, Isiolo, Kitui, TharakaNithi and Nyeri Counties.

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2.0 CHAPTER TWO: MARKETING PLAN

2.1 CUSTOMERS

My customers will be all the private and public institutions that require food in bulk. Customers
for example, schools, hotels and hospitals require fresh produce daily. The quantities that will be
supplied will be in accordance to an agreement signed at the beginning of the business
partnership or the requirements given in a tender notice.

The mode of payment will be via mobile money for example, M-Pesa and also direct transfers or
deposits in to my company’s bank account.

2.2 MARKET SHARE

20

60
15

The market area I will operate in is entire Meru County. I will have 5% of the market share as
shown above

2.3 COMPETITORS

Farmers: Farmers who sell their good directly to institutions hold the largest market share at
60%. They sell produce at cheap prices but they do not provide transport for the goods to their
customers.

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Brokers: They are the middlemen between farmers and all buyers of farm produce. They offer
very low prices to the farmers and use dubious scales to weigh produce. They hold 20% of the
market share.

Institutions: There are some institutions who buy produce directly from the farmers and
transport it to their premises themselves. They however have to go to different farmers to buy
different produce. They hold 15% of the market share.

2.4 METHODS OF PROMOTION.

I plan on creating awareness about my business to farmers by attending public barazas,

agricultural shows, farmer’s co-operatives’ meetings and talking about my business there. For
clients, I plan on advertising on the local newspaper and radio stations and applying for tenders.

I will also offer my customers free transport for the goods they will have bought.

2.5 PRICING STRATERGY

I will pricing my goods using the following factors: different seasons of produce , The demand
of the produce, The cost of acquiring Produce From the farmers, the amount of profit I want to
make and the amount of produce a client wants.

2.6 SALE TACTICS

I will offer my customers a 10% discounts on good above Ksh 500,000 Purchased in one month.
Once my customers have bought goods, they will be transported to their premises for free.

2.7 DISTRIBUTION STRATEGY

The following will be my distribution channel:

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 Customer orders produce
and deposits down payment.

Goods are bought from

farmer.

Goods are delivered to

customer.

Customer completes
payment

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3.0 CHAPTER THREE: ORGANIZATIONAL AND MANAGEMENT PLAN.
3.1 BUSINESS MANAGER.

I will be the business manager in Meru Fresh Produce Stores. I will start this business one year
after finishing my degree, this will have allowed me one year of employment so that I can gain
experience on how to manage people and a business. I will not have had any experience in
entrepreneurship since this will be my first business venture.

My duties in my company will include: employing the best people available for a job position,
supervising the employees, Evaluating the business to make sure that it on cause with the set
goals and objectives, approving business transactions, meeting existing and potential clients,
meeting suppliers, putting up advertisements and ensuring the provision of quality products.

Our organizational chart will look like this:

BUSINESS
MANAGER.

OFFICE OFFICE
SECRETARY ACCOUNTANT

DRIVER 1 DRIVER 2 DRIVER 3

As the office manager I will be in charge of supervising all employees and assigning them duties
and responsibilities.

3.2 OTHER PERSONELL

Office secretary.

He/she will be in charge of manning the office when the office manager is not available. The
office secretary will make sure that the client and supplier appointments are kept and well filed.
The office secretary will be in charge of keeping records of all transactions done in the company.
He/she will also make sure that the office is clean and neat at all times. He/she will welcome
guests to the office and make sure they are comfortable.

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He/she will have a diploma in office management or records management. He/she must have
good computer skills and a good command in spoken and written English and Kiswahili. No
experience is required for this job but job applicants with experience will be given priority in
consideration.

Office accountant.

He/ she will be responsible for all financial transactions in the company. The office accountant
will keep records of all financial transactions in the company.

He/she must have Diploma in economics and finance or any other related course. He/ she must
have good computer skills and a good command of spoken and written English and Kiswahili.
He/ she must have at least one year of working experience.

Drivers.

They will be in charge of ferrying goods from farmer and suppliers to clients. They will also
ensure that office vehicles are in good condition at all times.

Each driver must have a form four certificate and at least five years of work experience driving a
commercial truck.

3.3 RECRUITMENT, TRAINING AND PROMOTION

All the job positions available in the company will be advertised in Meru County newspaper so
as to reach as many people as possible. All the applications sent within the stipulated time will be
examined and those who will have qualified will be informed so as they can attend interviews.
After the interviews have been conducted, the most qualified applicants who can fit well into the
company will be offered employment in the company.

The office manager will conduct a training on new employees on how to perform their duties and
responsibilities in the company.

All employees will be evaluated at the end of every year. After three years, the employees whose
performance will have improved will be promoted in the company. Also, employees who will
pursue higher education during their stay in the company will be promoted upon the completion
of the education.

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3.4 REMUNERATION AND INCENTIVES.

Job title Basic salary Total monthly Total annual

(kshs) salary salary
1. Office secretary 30,000 30,000 360,000
2. Office accountant 32,000 32,000 384,000
3. Driver 25,000 25,000 300,000

The employees of my company will be paid overtime for every hour spent working before 8 am
in the morning and after 4 o’clock in the evening at the rateof Ksh 500 per hour.

The non-financial incentives given to the employees will be a 21 days paid leave every year,
good working conditions and an office party at the end of the year.

3.5 LICENSES, PERMITS AND BY-LAWS.

Licenses and permits

These are legal documents required by one so as to be able to operate a business. I will acquire a
small business license from the Meru County government so as to be able to run my business.

By-laws

These are rules and regulations set by the county so as to govern business operations. They
include:

 Waste from the premises should be disposed off correctly to avoid

environmental pollution.
 All licenses should be renewed annually.
 There should be no noise from the premises that will be heard from more than
20 meters.

3.6 SUPPORT SERVICES.

These are the services that would be required so as to make my functional and successful.

Network.

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My company will require office Wi-Fi so as to enable efficient working by use of internet. I plan
getting Wi-Fi from Faiba.

Security.

My company will require security so as to ensure that the premise is safe and that unauthorized
people do not access the business. I plan on getting security from Meru G4S security firm.

Insurance.

My company will obtain insurance cover from Madison insurance, Meru. This will ensure that
the liability from accidents and any disaster are transferred from the company to the insurer.

Legal.

My company will source legal advice and representation during the signing of contracts and
during any legal disputes that might arise from

Power.

My company will get power connection from Kenya Power And Lighting Company, Meru. This
will enable good working conditions and automation of office processes through the use of
computers.

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4.0 CHAPTER FOUR: OPERATION PLAN.

4.1 OPERATIONAL FACILITIES & CAPACITY

My production process will require computers, a printer, a Wi-Fi router, Lorries and furniture so
as to follow up on good and services offered by my company.

Facility.
Machines/tools/equipment No. Cost per Total cost Source.
required unit
Computer 2 25,000 50,000 Newwick
technologies,Meru.
Printer 1 12,000 12,000 Newwick
technologies,
Meru.
Wi-Fi router 1 5,000 5,000 Faiba
Technologies.
Total 67,000
Furniture & fittings
Office table 3 15,000 45,000 Imani furniture.
Office chairs 3 10,000 30,000 Imani furniture.
Visitors’ chairs 4 6,000 24,000 Imani furniture.
Lounge chair 1 16,000 16,000 Imani furniture.
Conference table and chairs 1 40,000 40,000 Imani furniture.
Total 155,000
Others
Lorry 2 1,500,000 3,000,000 Hino
Total 3,000,000
Grand total 3,222,000

My business premises will be at the NjuriNcheke Towers in Meru town. I plan on renting an
office space with three rooms, a reception and assigned three parking spaces. One office will be
used as the manager’s office, the second one as an accounts office and the third one as a
conference and break room.

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The office will be maintained by the office secretary and renovated once every three years.

4.2 OPERATIONAL STRATERGY.

I will use the following strategies so as to increase production in my company: I will attend
agricultural show in Meru so as to identify farmers with the best farming techniques and buy
fresh produce in bulk from them. I will also offer fair prices to my customers and ensure that
they are satisfied. I will advertise in local radio stations and do one-to-one marketing to large
organizations for example schools, hospitals and Meru prison.

The following the process that will be followed by my company during operations: When a
client makes an order to the manager through the office secretary, the client will make a down
payment for the goods to the office accountant. The company will contact a farmer with the
produce that the client needs. When the farmer sells the produce to the company, it will be
delivered to the client by the company driver and the client will complete payment.

Cost of materials per month.

Item Amount ( ksh)

Farm produce 650,000
Office supplies 3,000
Refreshments 5,000
Total 658,000

Cost of labor per month.

Item Amount (ksh)

Employees 137,000
Security 50,000
Casual labor 8,400
Total 195,400

Overhead costs.

Item Amount (ksh)

Electricity 8,000
Water 1,000
Wi-Fi 10,000
Insurance premium 15,000

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 Fuel 60,000
Total 94,000

Total cost of production per month.

Item Amount (ksh)

Cost of materials 658,000
Cost of labor 195,400
Overhead costs 94,000
Total costs 947,400

4.3 OPERATIONAL PROCESS.

The operational process of my company will have the following phases:
Phase one: Client order and payment of down payment.
A client will place an order by calling the office or visiting the office premises physically or by
visiting the company’s website. The client will then be informed of the cost of the produce they
require and the down payment to be made. When the client deposits the down payment into the
company’s account this ends phase one.
Phase two: Purchasing of produce from farmer.
When a client’s payment has been confirmed, the company will contact a farmer from which the
produce is to be bought. The company will buy the farmer’s produce and send a company lorry
to collect the produce.
Phase three: Delivery of goods to customer.
The fresh produce will be delivered to the client by the company driver and the client will
confirm that the goods ordered are the goods that have been delivered.
Phase four: Completion of payment.
Once the client has confirmed the produce sent, they will complete their payment by depositing
the remaining cost of product to the company’s account. The company will then send the client a
receipt for the good they bought.
4.4 REGULATIONS AFFECTING OPERATION.
Internal rules.
They ensure the smooth operation of a business. They will include:
Reporting to work on time
Keeping the premises clean

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 Reporting of all customercomplains to the manager
Wearing company uniform during work hours.
External rules.
By-laws
Waste from the premises should be disposed off correctly to avoid environmental pollution.
All licenses should be renewed annually.
There should be no noise from the premises that will be heard from more than 20 meters.

5.0 CHAPTER FIVE: FINANCIAL PLAN.

5.1 PRE-OPERATIONAL COSTS.

Item Cost
Business registration 1150
Trading licenses and permits 10,500
Rent+ rent deposit 60,000
Insurance policy 17,000
Machines, equipment, tools and vehicles 3,222,000
Stock 650,000
Electricity 8,000
Water 1,000
Internet installation 10,000
Total costs 3,979,650

5.2 WORKING CAPITAL.

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 Item Amount (ksh)
Cash in bank 500,000
Cash at hand 60,000
Stock 650,000
Liability: loan 500,000
Total working capital 710,000

5.3 PROJECTED CASH FLOW STATEMENT.

Mnth
Item Jan Feb Mar April May June July Aug Sept Oct Nov Dec Total
Cash inflow
Opening balance 0 172,5 642,25 1,094,2 1,428, 1,634, 1,779, 1,874, 1,921, 1,970, 2,003, 1,996, 16,419,
00 0 75 892 925 347 843 390 773 561 553 309
Cash sales 1,250,0 1,800 2,000, 2,000,0 2,000, 2,000, 2,000, 2,000, 2,000, 2,000, 2,000, 2,500, 23,550,
00 ,000 000 00 000 000 000 000 000 000 000 000 000
Total cash inflow 1,250,0 1,972 2,642, 3,094,2 3,428, 3,634, 3,779, 3,874, 3,921, 3,970, 4,003, 4,496, 40,069,
00 ,500 250 75 892 925 347 843 390 773 561 553 309
Cash outflow
Cash purchases 650,000 700,0 720,00 720,000 720,00 720,00 720,00 720,00 720,00 720,00 720,00 720,00 8,550,0
00 0 0 0 0 0 0 0 0 0 00
Salaries 195,000 195,0 195,00 195,000 195,00 195,00 195,00 195,00 195,00 195,00 195,00 195,00 2,340,0
00 0 0 0 0 0 0 0 0 0 00
Rent 30,000 30,00 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 360,000
0
Water 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,0000 1,000 12,000
Electricity 8,000 8,000 8,000 8,000 8,000 8,000 8,000 8,000 8,000 8,000 8,000 8,000 96,000
Transport 60,000 62,00 65,000 68,000 72,000 75,000 82,000 83,000 85,000 87,000 90,000 93,000 922,000
0
Stationery 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 36,000
Loan repayment 50,000 50,00 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 600,000
0
Repairs 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 24,000
Advertising 4,000 5,000 6,000 7,000 8,000 9,000 10,000 11,000 12,000 13,000 14,000 15,000 114,000

Taxes 74,100 275,2 467,97 612,383 704,96 762,57 803,50 823,45 844,61 858,21 894,68 1,013, 3,997,7
50 5 7 8 4 3 7 2 3 866 40
Total cash 1,077,1 1,330 1,547, 1,665,3 1,793, 1,855, 1,904, 1,926, 1,950, 1,967, 2,007, 2,130, 21,157,
00 ,250 975 83 967 578 504 453 617 212 168 866 073
outflow
Net cash 172,500 642,2 1,094, 1,428,8 1,634, 1,779, 1,874, 1,921, 1,970, 2,003, 1,996, 2,365, 17,914,
50 275 92 925 347 843 390 773 561 553 687 223
Cumulative cash 1,327,1 3,302 4,190, 4,759,6 5,222, 5,490, 5,683, 5,801, 5,872, 5,937, 6,010, 6,627, 60,226,
00 ,750 225 58 859 503 851 296 163 985 629 419 438
flow

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5.4 PRO-FORMA INCOME STATEMENT

Item Year 1
Sales 23,550,000
Less cost of goods sold 15,000,000
Gross Profit 13,325,800
Expenses
Salary 2,340,000
Rent 360,000
Water 12,000
Electricity 96,000
Advertising 114,000
Stationary 36,000
Transport 922,000
Loan repayment 600,000
Repairs 24,000
Total profit before tax 13,325,800
Tax 3,997,740
Net profit after tax 9,328,060

5.5 PRO-FORMA BALANCE SHEET.

Assets At start End of Year 1

Current assets
Cash 1,500,000 7,000,000
Debtors 1,000,000 400,000
Stock finished 0 23,550,000
Total current assets 2,500,000 30,950,000
Fixed assets
Machine and equipment 67,000 65,000
Depreciation 0 3,000
Vehicles 3,000,000 2,950,000
Furniture and fittings 155,000 152,000
Depreciation 0 60,000
Total fixed assets 3,222,000 3,159,000
Total assets 5,722,000 34,109,000
Liabilities
Bank loan 3,000,000 2,400,000
Owner’s equity 100% 100%
Net profits retained 0 9,328,000
Total liabilities and equity 3,000,000 11,728,000

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5.6 CALCULATING BREAK-EVEN ANALYSIS

Total contribution margin = sales- total variable costs.

Total variable costs is cash flow are11,368,800

Sales are 23,550,000

23,550,000 – 11,368,800 = 12,181,200

Total contribution margin = 12,181,200

Contribution margin percentage= contribution margin (100/sales)

12,181,200(100/23,550,000) = 51.7 %

Determine fixed costs

Salaries 2,340,000

Rent 360,000

Water 12,000

Electricity 96,000

Loan repayment 600,000

Repairs 24,000

Stationary 36,000

Total fixed costs = 3,468,000

Calculate break-even level of sales in one year

Break-even level = fixed costs/ contribution margin %

3,468,000/51.7 %= 67,079

Break-even level = 67,079 ksh

Break-even (level of production at B.E.P) = Contribution margin/ fixed costs

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12,181.200/3,468,000 = 3.5

Break-even= 3.5

5.7 PROFITABILITY RATIOS

Gross profit ratio = (Gross profit ×100 ¿ ÷Sales

(15,000,000× 100)÷ 23,550,000 = 63.7

Net profit ratio = (net profit before tax×100) ÷ sales

(13,325,800×100)÷ 23,550,000 =56.6

Return on equity = (Net profit after tax× 100) ÷ Owner’s equity

(9,328,060× 100)÷ 100%= 9,328,060

Return on investment = Net profit after tax× 100/ total investment

9,328,060× 100/ 5,722,000= 163

5.8 DESIRED FINANCING.

Item Amount (Ksh)

Pre-operational costs 757,000
Working capital 710,00
Fixed assets 3,222,000
Total desired( start-up) financing 4,689,000

5.9 PROPOSED CAPITALISATION

Source Amount
Personal savings 1,722,000
Friends/ Relatives contribution 1,000,000
Bank loan 3,000,000
Total investment 5,722,000

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6.0 RISK MANAGEMENT

6.1 RISKS

Financial risks: Starting the business will be a risk since I will use personal savings and bank
loans.

Product risk: The sources for my products will determine whether or not my business will be
successful. Bad products may lead to the decline of my business.

Market risk: Getting clients for my products is a risks since I might not get as many customers
as I have anticipated.

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