PRESENTED TO:

THE KENYA NATIONAL

EXAMINATION COUNCIL IN
PARTIAL FULLFILMENT FOR THE
AWARD OF CERTIFICATE FOOD
AND BEVERAGES SALES AND
SERVICE.
PRESENTED BY

SITATI’S
WANDABWA NATO MERCY
Email: mnato3274@gmail.com
Phone No:0796658927
Index No: 4011030967
BAKERY
BUSINESS PLAN

COLLEGE
RAILWAY TRAINING INSTITUTE.
SUPERVISOR: MADAM DAINA
 DEDICATION
I dedicate this plan to my beloved family and relatives for their continued support
throughout my entire course in terms of moral and financial support.

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ACKNOWLEDGEMENT.
I appreciate the support offered by Madam Diana the supervisor. My success is
much reflected by her hard work. I also appreciate my friends and classmate for
encouraging me and giving me moral support all throughout my course. Thanks
abundantly.

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DECLARATION
I declare that this plan is my original work and has never been presented to any
examination body for examination purposes and therefore am submitting it for
examination purposes.

NAME

NATO MERCY:

SIGNATRE:

The business plan has been submitted to the Kenya National Examination Council
with my approval as the supervisor for the candidate.

NAME

MADAM DIANA:

SIGNATURE:

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TABLE OF CONTENT
1.0 CHAPTER ONE
1.0 Business Description
1.1 Business name
1.2 Business location and Address
1.3 Form of Ownership
1.4 Types of business
1.5 Product and services
1.6 Justification of the business opportunity
1.7 Industry
1.8 Objectives of the business
1.9 Entry and growth strategy

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2.0 CHAPTER TWO
2.0 Marketing plan
2.1 Potential customers
2.2 Competition
2.3 Market Share
2.4 Pricing and strategy
2.5 Sales tactics
2.6 Methods of promotion and advertisement
2.7 Distribution strategy
3.0 CHAPTER THREE
3.0 Organizational and management plan
3.1 Introduction
3.2 Manager
3.3 Other personnel
3.4 Recruitment, Training and Promotion
3.5 Remuneration and Incentives
3.6 Licenses and Registration
3.7 Support services
4.0 CHAPTER FOUR
4.0 Operational (Production) Plan
4.1 Introduction
4.2 Production Facilities and Capacity
4.3 Production Strategy
4.4. Production, Design and Development
4.5 Production process/service delivery process
4.6 Regulations affecting operation

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 4.7 Internal rules and regulations

5.0 CHAPTER FIVE

5.0 Financial plan
5.1 Pre-operation cost
5.2 Working capital
5.3 a) Cash flow projection for the first year
b) Cash flow projection for the first three years
5.4 Proforma income statement as at 31st December year 1
5.5 Proforma balance sheet for the first year
5.6 Calculation of break-even point
5.7 Calculation of profitability rations
5.8 Desired financing
5.9 Proposed capitalization

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 CHAPTER ONE
1. BUSINESS DESCRIPTION

1.1. BUSINESS NAME

The name of the business will be Sitati’s Bakery. It is located opposite Utawala
Petro Station. Opposite Sitati’s Bakery is a Milky Way shop that is so famous
called Daima. The Bakery has employed a maximum of 10 cooks, the cashier, a
receptionist, two cleaners and a security officer.
BACKGROUND INFROMATION
I am Nato Mercy, 20 years of age. I come from Nairobi County and stay in
Utawala. My home background is Eldoret County. For having completed high
school, I decided to enroll in the Railways Training Institute to pursue a course in
certificate I Food and Beverage Sales and services and did my best.
EDUCATION LEVEL
YEAR INSTITUTION QUALIFICATION
2015-2019 Railway Training Certificate in Food and
Institute Beverage
2011-2015 Moi Girls High School K.C.S.E Certificate
2003-2010 New light Primary K.C.P.E Certificate
2000-2002 Spring Field Kindergarten Level
Kindergarten
For I know am a person with knowledge and interest in the business, I learned for a
year while staying with my uncle who also had his own bakery. I learnt a lot from
my uncle’s bakery and adding to that are the skills I acquired from the Railway
Training Institute as trainee. Since lack of experience will duly cost my business, I
will always be ready to compensate fully with my insurance. Mr. Tembo and Mrs.
Musyoki are my childhood sponsors and have decided to help me grow my
business with each giving me a sum of five Hundred Thousand Shillings. With me
I have a sum of Six Hundred Thousand Shillings as my personal savings and my
bank account with One Million Shillings which I was contributed to by my friends
and relatives thus enabling me to freely start my business.

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1.2 BUSINESS LOCATION
This business is located at Utawala along the Eastern Bypass Thika Highway. This
location is highly marketable since there is the construction of the famous Tatu
City and on the other side is the Jomo Kenyatta International Airport just a
kilometer away. There is also sufficient security since the Administration Police
Camp is located around here and the street lights are well lightened. With the good
form of transportation, my employees will have the pleasure to work without fear
of getting home late. Additional to that The Garden City Mall and the Naivas Sup
will be the source of my ready baked food.

JOMO KENYATTAINTERNATIONAL FROM TOWN

AIRPORT

UTAWALA PETROL STATION

NAIVAS SUPERMARKET
To Thika

TATU CITY SITSTI’S BAKERY

EASTERN BYPASS GARDEN CITY

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 1.3 FORM OF OWNERSHIP
This business will be operated with partnership between Mr. Tembo and Mrs.
Musyoki who have always been by my side anytime I needed them and later
intend to start my very own business after some few years of enough knowledge
and experience.

1.4 TYPE OF BUSINESS

Since the business is a bakery, the main activities will be baking of cakes and
supervision of staffs during the working hours. There will be some soft drinks
to be sold for people who would wish to buy them.

1.5 PRODUCTS AND SERVICES

The main products will be cakes and the services provided will include delivery
of wedding cakes which will be hosted mostly at Garden City square or even
any other occasions.
OTHER SERVICES
On the ground floor of my bakery will be the stores that will enable me keep
and budget for the bakeries shortcomings together with the baking site. The first
floor will accommodate my customers together with the second floor if any.
Main Products
 Birthday cakes
 Wedding cakes
 Anniversary cakes
 Cup cakes
 Pan cakes
 Breads
My services will always get the best and more perfect treatment and also the best
prices will be offered. My customers will not have to bother carrying cash but
rather use credit cards and even pay via M-pesa. My bakery will also have two
days offer and a free delivery which will be an advantage over my competitors.

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1.6 JUSTIFICATION OF THE BUSINESS OPPORTUNITY
Sitati’s bakery will provide the best so as to ensure the long distance travelers have
the best to an extend that they cannot complain about our services. The
surrounding of the bakery will be so attractive for more customers to come in as
we will also give them discounts.
1.7 INDUSTRY
Sitati’s bakery is a service industry. It is a premise of three acres and fenced all
around with an electric fence. Labor required is usually baked and packed well for
the customers to find them ready. In the kitchen area is a specific chef for each
cake type since modern technology is applied.
COMPETITION
With the bakery, the level of competition is low since it’s the only bakery around
that we even supply to the supermarket. Although there were plans to build another
bakery around, the place was replaced with a cyber café thus enabling the bakery
to be highly valuable.
1.8 OBJECTIVES OF THE BUSINESS
The objectives of the business are long term since we want to make sure we are not
having losses or even depending anywhere. The objectives include;
1) Educating the employees every six months before we offer them jobs.
2) Provide unique and more different services to all people who come to our
bakery have them get the best baked foods and creamy as they want.
3) Offer self service activities for those who wish to have the cakes at the
bakery.
1.9 ENTRY AND GROWTH STRATEGY
We as the bakery members have agreed to offer as different types as we can of the
baked foods that are unseen. We plan to grow and expand within two to three
months. Our main competitive advantage is that we are the only upcoming famous
bakery all the way from the airport since we have a well-placed billboard along the
highway. People can also make online booking through the website Sitati’s bakery
kenya@co.ke

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 CHAPTER TWO
2.0 MARKETING PLAN
2.1 POTENTIAL CUSTOMERS
My potential customers will be mainly together with the people who shall be
visiting the garden city. Sitati’s bakery will be highly favoured since people from
out countries who have to travel through Jomo Kenyatta international airport and
also those using eastern bypass will have to contribute a lot to the bakery since
they are my first target. With all this the level of income will be ksh. 40,000 per
month since a lot of customers are adults aged 18 years and above hence can easily
control themselves. The young age won’t be disadvantageous anyway for we shall
still have to carter for their needs. Ty customers will always purchase my goods at
their own pleasure from Monday to Sundays at 8pm.
2.2 COMPETITION
In any business competitions are always expected from different potential
competitors. My business will be located Utawala along Eastern bypass Thika
highway. My potential competitors are the people who opened a cyber café just
alongside my bakery. The cyber café offers many activities with them hence
competing with me. They are so strong since they are partnered with the China
citizens who cook china dishes with then hence making it so competitive with my
bakery. Their weaknesses are that they can’t distribute their dishes anywhere until
somebody just comes in to buy the dishes. They also don’t have enough materials
in the cyber thus not so much famous around there. The Naivas Supermarket is
also y competitor since it may start ordering other baked food from outside thus
my bakery will be so unworthy since it will be having limited customers as many
customers will just shop in the supermarket. Alongside all that, the people at the
Petrol Station have also started selling drinks to people who board buses from far
thus making it difficult for e to sell my products. With all that, I have increased my
workers at the bakery with others working at the drinks shop to be able to attend
the customers faster. I also offer entertainment services and a playground for
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children to enjoy themselves and that keeps my bakery growing since all my
competitors don’t have any of these.

PARAMETER YOUR COMP. A COMP. B COMP. C

BUSINESS
Assets 8 10 5 2
Sales Volume 15 6 6 4
Number of 12 9 8 10
Employees
No. of brands 24 10 8 10
Other specify

With all my competitors, I know we shall conquer since they use man power
whereas my bakery uses the modern technology thus making work easier.
2.3 MARKET SHARE
This is the extent to which I intend to capture the existing market in relation to my
competitors. At present the market size is around 75% which is shared among the
existing few competitors. This market sized is expected to rise as move
developments are coming up especially commercially. Am expecting to capture
350% of the market share by doing the following:
1) Ensuring we offer the best fresh baked foods.
2) Ensuring high hygiene practices to keep customers.
3) Being able to provide a customers baked food on time.

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 Sales

70%

30%

200%

60%

sitati's bakery cyber café Petrol Station Naivas Supermarket

2.4 PRICING STRATEGY

With my pricing strategy at the bakery I shall consider the customers together the
competitors’ prices. My prices for the products will depend on the market price. It
will hence be variable considering the market price. The high value strategy will be
used in calculating prices since it uses medium pricing for the high quality goods.
The profit margin will be hence used to achieve the selling price.
Selling Price= Cost of food × 100%
Cost of food (%)
Good/Service Unit Cost (Kshs.) Profit Margin (%) Selling Price (%)
Cake (Full) 1,800 300% 2,100
Bread 50 20% 70
Cup Cake 20 10% 30
Pan Cake 15 10% 25
Biscuits 10 10% 20

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2.5 SALES TACTICS
Selling tactics will be employed so that we can improve on our sales in the bakery.
I will personally sell my foods with the help of my employees by applying various
forms to perfect our business. Some ways include;
a. Honesty
This will enable each one to trust one another thus goods which are
perishable can be purchased with ease.
b. Cleanliness with Hygiene
Our bakery shall always be clean since it has two cleaners who at any time
are ready to clean the area thus leaving it as clean as possible.
c. Communication
Our customers and employees shall have to maintain etiquette since no
customers shall talk to our employer rudely and expect to be answered well
thus they will all communicate in a well language thus enabling them to be
at service well.
With all this we shall cover a large area in selling our foods and thus having a lot
of customers from within.
2.6 METHODS OF PROMOTION AND ADVERTISING
With our services, we shall have marketing communication tactics to use so as to
make our customers aware of what is located in a certain market place.
1) Sales Promotion
We shall have discount which will be offered on weekends and offers which will
be given on weekdays on a weekly basis. For any bookings done, the sizes will
account for and discount will be offered for such.
Some accompaniments for the cakes such as sauces will be given at customers’
pleasure without credit hence a free service which we will ensure does not bring
down our services thus we won’t encounter losses.
2) Advertisement
Advert will be hanged around the market with one large poster alongside the
highway with a radius of 5km from the bakery. Some neon bulbs shall be used
around the bakery with the bakery’s name written in capital letters together with
offer days. Outside the bakery will be a notice board to also advertise the food on

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offer and the days with discount. Above all that, a speaker shall be set at the
entrance to be able help our customers to our bakery, and with all that
entertainment will be available.
2.7 Distribution Strategy.
The Distribution forms will be the usual take away and plate service since each
customer shall decide on what he or she wants. With the cakes, we shall also have
home delivery for far away customers who have done bookings since we have a
bakery Van with the name NATO SITATI BAKERY VAN written in capital. We
do not experience any problems in delivery as the roads is a super highway with no
traffic jam and hence fast delivery is applied,

CHAPTER THREE
3.0 ORGANIZATIONAL AND MANAGEMENT
In any organization there are requirements which may have policies for the
staff development and also for the company progress.

3.1 Introduction
This is per the chapter will entail of the business ownership and how the business
will run. I shall be the manager since I own the bakery I will also be responsible
for all the bakery operations, development and ensure the bakery laws and
regulations are well complied with.

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 MANAGER

BAKERY SUPERVISOR CASHIER

COOKS WAITERS CLEANERS

STORE KEEPER CASUAL WATCHMAN

3.2 MANAGER
Being the manager, I attained a Certificate in Food and Beverage from the
Railway Training Institute. I have work experience of 2 years. I was working
at the Serena Hotel as a Chef foe one year and later applied to Hilton hotel
and became a restaurant supervisor for another year. I do believe that for the
two years have proved to be hardworking and more mature to tackle
anything. My duties as a manager shall include;
a. Promoting staff welfare
b. Plan training programs for staff
c. Approving and signing staff payment
d. Supervising all bakery activities and ensure customers get their best.

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 3.3OTHER PERSONNEL
In the bakery, I shall have a supervisor who will be in charge of all the
staffs and co-ordinate movement of the bakery. I shall also have a cashier
who will be issuing receipts to the customers after paying before they get
their order. I shall have eight employees with one of them as a supervisor
since I also don’t intend to have many employees. Apart from the eight
chefs, I shall have a watchman who will be highly trained to keep
security, a storekeeper to ensure that whatever the chefs shall need is
provided to them and also two cleaners.to keep the bakery clean always.
All the employees especially the chefs should have at least a certificate in
food and beverage and one year experience or more. The cleaners are
supposed to present the form four leaving certificate together with their
national ID’S. The watchman shall have a merit certificate from the place
of training and should be clearly stamped. With all these I hope I shall
run the bakery smoothly and each member of staff shall cooperate.

3.4RECRUITMENT TRAINING AND PROMOTION

RECRUITMENT
I will conduct the recruitment as the manager through interviews. For
applications we shall advertise our company through social media and
also newspapers. We shall write the details that the employees should
meet before they apply for example education level, age and also marital
status. The advertisements shall be done a month before then
interviewees shall be invited for questioning by the manager and
supervisor. We shall basically aim at the work experience and
educational background qualifications. In the interview we shall test the
interviewer’s skills, attitude and suitability and for the best candidates we
shall reach them on telephone.
TRAINING
For training purposes, we shall be educating our employees for first six
months before they start working. The manager together with the
supervisor shall coordinate this. We shall also take our employees at least
three per two months for seminars so as to be more familiar with baking
different types of cakes and also presenting them. The employees who

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 shall be going for the seminars will be expected to come back and share
the knowledge with others.
PROMOTION
Workers shall be promoted based on their experience and years of
services. For that, we shall promote workers after a period of three years
and this will be done to only those who have shown interest in their
particular sections and their perseverance. The promotion shall always be
done so as the employees may realize that their efforts are valid and also
to create room for other employees.

3.5REMUNERATIONS AND INCENTIVES

The bakery staff shall receive their payments at the end of the month
which shall be given according to the years of experience. The employees
shall be given free transport in the evening with ten o’clock tea for free to
better their stay at the bakery.
EMPLOYEES SALARY SALARY SALARY
CATEGORY YEAR 1 YEAR 2 YEAR 3
Manager 10,000 15,000 20,000
Supervisor 8,000 10,000 15,000
Cashier 8,000 10,000 15,000
Cooks 7,500 8,000 10,000
Waiters 6,500 7,000 8,500
Cleaners 4,500 5,000 5,500
Storekeeper 5,000 5,500 6,000
Watchman 3,000 3,500 5,000
Casuals 4,500 5,000 5,500
Apart from the ten o’clock tea and free transport, there will shall be overtime
money given based on the hours you have worked during the night if customers are
available.
3.6LICENSES AND REGISTRATION
Licenses are always set in all business and therefore my business won’t
be excluded. I shall have a license of Kshs. 7,500 which shall be paid to
the city council and shall be renewable hence providing security to my
employees and customers. Apart from that, I shall register the business
by paying a registration fee of Kshs. 2,500 to the courts since it’s under
the parliament acts. Permits will be obtained from a health officer to be
sure that the foods produced from the bakery are good for human

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 consumption. I shall also have an insurance cover which shall be insured
against any potential risks and accidents that are prone to occur.

3.7SUPPORT SUPERVISORS
This shall be required for money investment and loan borrowing. It shall
be provided by;
Co-operative Bank of Kenya,
P.O. BOX 63,
Nairobi.
Utawala Branch

3.8AUDITOR/ ACCOUNTANTS
The auditor shall be professional and thus required to financially support
the business. Apart from that we shall have an advocate who will ensure
that we have all it takes to do the business and be ready to support. This
will be done by;
Kwengu & Co. Advocates
P.O. BOX 4570-00200
Kenyatta Avenue
Nairobi.
With all this, I hope that the bakery shall be progressing well without any
terminologies.

CHAPTER FOUR

4.0OPERATIONAL (PRODUCTION) PLAN

4.1INTRODUCTION
In the production plan, we shall focus on the various ways such as the
invention and manufacturing of products. In the production service, the
bakery shall have various equipment’s and tools for use

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 4.2PRODUCTION FACILITIES AND CAPACITY
In the bakery, some machinery and equipment shall require. Some
include; Electric cookers and gas cookers for heating together with the
oven which do not cost less shillings than thirty thousand and shall be
supplied by the Naivas Supermarket. We shall also require refrigerators
which shall be used to keep the baked food and prevent them from going
bad. Other tools that we will be required in bakery include utensils and
ice machines. As explained earlier, the machinery shall mainly be
supplied by the Naivas Supermarket. No equipment nor machinery shall
be repaired by the umoja machine repair company that has just been
started alongside Tatu City. All the machinery in the bakery shall be
installed to ensure security dominates.

4.3PRODUCTION STRATEGY
In the bakery, there shall be raw materials that shall incur various
expenses for the bakery to run. Equipment such as cake stands, pans, tins,
spatulas and icing sets should be metallic since they are usually durable
and easy to clean. In a month, raw materials needed shall be brought at
once to avoid shortages. The bakery van shall always transport the raw
materials since no goods should be brought one by one. Per month, the
money spend shall be less than Kshs. 100,000 which doesn’t seem too
much. For the workers, we will get them indirectly for the various works
to be done. We will acquire them by looking at the facial expressions and
fluency in language so that they are able to communicate non-stop to
customers. Thus labor requirement shall be;
3×1,000×2=6,000
Cost production labor per month = Kshs. 6,000
For the production expenses, they will not be that much so all not spend
more.

Electricity – 15,000
Water - 8,000
Telephone – 10,000
33,000
For the production cost, I hope the production,

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 Per week – 100,000
Quarterly – 850,000
Yearly - 1,000,000
1,950,000

4.4PRODUCTON DESIGN AND DEVELOPMENT

For the bakery business, the unique thing will be that all the baking’s and
cooking’s are done in underground building thus the customers will be
curious to know where the baking’s are done. In designing my bakery,
the gypsum builds shall do it which will enable me develop my goods
and services. Though the designing is a bit expensive, I am ready to
spend because the level of technology applied will always be modern and
therefore electricity is one thing that will be needed more. The modern
technology is the best since it’s faster and effective to use. With the
electricity being the very important thing, I shall second with a generator
for any inconveniences that shall incur.

4.5PRODUCTION PROCESS/ ERVICE DELIVERY PROCESS

In production process, we will be using the research process first so as to
be sure with white’s things we will produce. We shall also have
interviews with various customers who will foe sure tell us the tastes of
the baked foods and if they are good or not. Some external factors that
are likely to affect the production include; competition, technological
changes and the environment around. To minimize all these from
occurring;
1. Employees shall have freedom to movement so as to report any new
development seen outside.
2. All the workers shall be trained on effective communication skills.
3. All employees should remember they are equal thus no underrating one
another.

4.6REGULATIONS AFFECTING OPERATIONS.

To avoid issues and problems with the government law, we shall
compromise with various regulations. We shall pay taxes like;
 Income tax
 Payroll tax
 Property tax
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For the approvals and compliances, the cost is estimated thus we will be ready for
any amount mentioned.
4.7INTERNAL RULES AND REGULATIONS
With the rules and regulations, we will have a dress code of white and
black chef clothes for all workers in the kitchen with men having trousers
and lady’s skirts. For others like the cleaners and the watchmen, they will
have navy blue skirts/trousers and sweaters with a sky blue shirt/blouse
with each having a logo of the bakery and the employees work station.
Time keeping will also be checked as all workers will be required as
from 5:30am to late 10:00pm unless otherwise. With all this, we will
always maintain discipline for each other and all our customers.

CHAPTER FIVE
5.0 FINANCIAL PLAN
This shows financial requirement of a business. These includes; pre-operational
costs, purchase of the operating equipment, working capital, cash flows, balance
sheet and profit and loss accounts.
5.1 PRE-OPERATIONAL COST
These are costs incurred before the start of a business
ITEM (Kshs.) COST(S)
Registration 5,000
License 25,000
Rent 10,000
Insurance 15,000
Installations 10,000
Consultation fees 20,000
Renovation 20,000
Stationeries 60,000
Telephone 25,000
Others 15,000
Totals 205,000

5.1 WORKING CAPITAL

This is the money required for the daily operations.

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Working capital= current assets-current liabilities
Working capital for the first three years
ITEM YEAR 1 YEAR 2 YEAR 3
Stock of raw material 50,000 35,000 30,000
Work in progress 15,000 12,000 11,000
Stock of finished goods 45,000 40,000 38,000
Closing stock 5,500 7,500 15,000
Debtors 6,000 8,000 10,000
Cash in hand 8,000 4,000 8,000
Cash in bank 7,500 6,000 6,500
137,000 112,500 118,500
Less current liabilities
Creditors 18,000 13,500 14,000
Loan repayment (1 year) 15,000 15,000 12,000
Unpaid expenses 20,000 25,000 23,000
53,000 53,000 49,000
=137,000 112,500 118,500
-53,000 -53,000 -49,000
84,000 59,500 69,500
Working capital= A-B Kshs. 84,000 Kshs.59,500 Kshs. 69,500

Working capital= Current Assets-Current Liabilities

=(137,500+112,500+118,500)-(53,000+53,500+49,000)
=Kshs. 368,500-Kshs. 155,500 =Kshs. 213,000

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5.3 CASH FLOW PROJECTION FOR THE FIRST YEAR

CASH FLOW PROJECTION FOR THE FIRST THREE YEARS

ITEM YEAR 1(KSHS.) YEAR 2 (5%) YEAR 3 (10%)
Beginning cash 482,500 250,000 20,000
Cash sales 222,000 185,000 132,000
Debtors 406,500 145,000 126,000
Total cash inflow(A) 1,111,000 580,000 468,00
Expenses
Purchases 90,600 18,000 10,000
Rent 89,500 40,000 8,000
Salaries/wages 77,100 50,000 30,000
Electricity bill 84,000 8,000 12,000

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 Water bill 61,500 10,000 45,000
Insurance 78,000 15,000 20,000
Loan repayment 57,000 6,000 21,000
Interest on loan 82,000 13,000 8,500
Maintenance & repair 98,000 27,000 18,00
Telephone 58,000 40,000 13,000
Postage 78,000 26,000 28,000
Stationery & printing 56,000 40,000 17,000
Transportation 48,000 32,000 15,000
Drawings 53,000 20,000 21,500
Miscellaneous 46,000 22,000 15,000
Total cash flow(B) 1,056,700 367,000 283,500
Net cash = (A-B) 54,300 213,000 174,500

Net cash =A-B

5.4 PROFORMA INCOME STATEMENT AS AT 31ST DEC YEAR 1
ITEM YEAR 1 YEAR 2 YEAR 3
Sales 930,500 250,000 200,000
(less purchase of stock) 130,500 180,000 130,000
Gross profit (A) 1,061,000 430,000 330,000
Expenses
Rent 60,000 10,000 10,000
Salaries/wages 80,000 18,000 24,000
Electricity bill 57,000 30,000 8,000
Water bill 90,000 8,000 14,000
Insurance 30,000 20,000 35,000
Loan repayment 40,000 35,000 15,000
Interest on loan 36,000 32,000 8,000
Maintenance & repair 66,000 6,000 18,000
Telephone 91,000 24,000 20,000
Postage 20,000 24,000 25,000
Stationary & printing 28,000 30,000 32,000
Transportation 57,000 8,000 30,000
Drawings 40,000 12,000 15,000
Miscellaneous 30,000 7,500 10,000
Total expenses(B) 725,000 264,500 264,000
Profit before tax 336,000 165,500 66,000

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 Provision for tax 199,168 373,568 293,568
Net profit after tax 1,045,632 1,961,232 1,541,232

Net profit before tax = Gross Profit-Total expenses

5.5 PROFORMA BALANCE SHEET FOR THE FIRST YEAR

Proforma balance sheet As at opening As at end year 1
Fixed assets (Kshs.) (Kshs)
Motor vehicle 10,000 15,000
Machinery & equipment 12,000 8,000
Furniture & fittings 11,000 9,000
Accumulated depreciation (%) 8,000 10,000
Current assets
Debtors 22,500 18,000
Rates prepayment 4,000 3,000
Cash @bank 6,000 9,000
Cash @hand 8,000 10,000
Closing stock 12,000 7,000
Insurance prepayment 8,000 5,000
Current liabilities
Creditors 10,000 13,000
Sundry 13,000 9,000
Net assets
Financed by;
Capital 10,500 45,000
Net profit 30,000 90,000
Less drawings 60,000 25,000
319,500 276,000

Assets = Capital + liabilities

= (30,000+90,000) +(10,000+13,000+13,00+9,000)
= Kshs. 165,000
5.6 CALCULATION OF BREAK EVEN POINT
Fixed costs Amount (Kshs)
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 Licenses 200,000
Rent 15,00
Insurance 18,000
Salaries 60,000
Goodwill 70,000
Depreciation 18,000
Loan repayment 100,000
Total fixed costs 481,000

Variable cost Amount (Kshs.)

Electricity bill 5,500
Water bill 5,000
Advertising costs 6,500
Recruitment cost 7,000
Allowances 8,500
Miscellaneous 3,500
Total variable costs Kshs. 36,000

Contribution margin= total sales-total variables ×100

Total sales
=1,821,000-36,000 ×100
1,821,000
=1,821,000-1,98
= Kshs. 1,820,998.02
Break level=fixed cost
Contribution margin%
=481,000
1,820,998
=0.264%

5.7 CALCULATION ON PROFITABILITY RATIOS

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 a) Gross profit percentage
= Gross profit ×100
Sales
=1,821,000 ×100
1,380,500
= 131.91%
b) Return on equity
=Net profit after tax ×100
Owner’s contribution
= 1,045,632 ×100
400,000
= 261.4%
c) Return on investment
= net profit tax ×100
Total investment
= 392,100 ×100
215,000
= 182.37%
5.8 DESIRED FINANCING
Description Amount in (Kshs.)
Pre-optional 750,000
Initial(working capital) 300,000
Total 1,050,000

5.9 PROPOSED CAPITALIZATION

ITEM AMOUNT IN (KSHS.)
Equity 45,000
Bank loan 60,000
Total 105,000

REFERENCE:

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  Entrepreneurship text book
 Class notes
 Google internet

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