BUSINESS PROJECT.

BUSINESS NAME: AVIATORS TIRE PUNCTURE SOLUTIONS

TITLE: AVIATORS TYRE PUNCTURE SOLUTIONS.

PRESENTER: WAMBUGU ZACHARIA MUGWE

INDEX NUMBER: 4081020178

INSTITUTION: EAST AFRICAN SCHOOL OF AVIATION.

SUPERVISER: Z MWANIKI

BUSINESS PROJECT SUBMITTED TO KENYA NATIONAL EXAMINATIONS COUNCIL

IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR COMPLETION OF A
DIPLOMA IN AERONAUTICAL ENGINEERING (AIRFRAME AND ENGINES OPTION).

NOV/DEC 2021

1
 DECLARATION

Declaration by the candidate:

I, Zacharia Mugwe, INDEX NUMBER :4081020151 hereby declares that this business plan
write up is my original work and has not before been presented by any persons for either
certificate, diploma, degree or any other award.

Name ………………………………….

Reg. No …………………………………….

Signature……………………………………

Date………………………………………….

Declaration by the supervisor

This business project has been submitted to Kenya National Examinations Council after
supervision and approval of my supervisor:

Name…………………………………….

Signature………………………………

Date…………………………………….

2
 DEDICATION

This business plan is a dedication to my beloved parents Mr. and Mrs. Wambugu, my beloved
brother John W, and sisters Ann, Peris and Leah W.

3
 ACKNOWLEDGEMENT

I would like to acknowledge the Spirit for helping me come up with innovative ideas about the
whole plan

I also acknowledge the help and support of my supervisor Mr.: Z M waniki who has remained in
touch with me to make the presentation successful. Thank you for your kindness love and
patience.

Not forgetting my dear parents, classmates, friends and all others who have teamed up with me
to cultivate this success, you are highly appreciated.

4
 LIST OF TABLES

Table 3.1 competitor analysis by SWOT analysis………………………………………….……19

Table 4.1 a table of renumerations and incentives…………………………………….…………24

Table 5.1 a summary of general equipment required……………………………………………26

Table 5.2 a table of additional equipment required in the workshop….……………………...….26

Table 5.3 a table of a production strategy…………………….………………………………….28

Table 5.4 a table of production cost……………………………………………………………...28

Table 6.1 pre operational costs table……………………………………………………….……31

Table 6.2 the balance sheet………………………………………………………………...…….31

Table 6.3 cash flows table……………………………………………….……………….………32

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 LIST OF FIGURES

Figure 1.1 business logo……………………………………………………………………….….1

Figure 3.1 a pie chart for competition before and after entry…………………………………....18

Figure 3.2 a bar graph of competitor analysis before entry…………………………………...…19

Figure 3.3 a bar graph of competitor analysis after entry…………………………………….….19

Figure 4.1 hierarchical business arrangement…………………………………………………....23

Figure 5.1 a general shop layout structure……………………………………………………….27

6
 Table of contents

DECLARATION……………………………………………………………….…………………2

DEDICATION…………………………………………………………….………………………3

ACKNOWLEDGEMENT………………………………………………………………………...4

Table of contents………………………………………………………………………………….7

CHAPTER 1……………………………………………………………………….…………….11

EXECUTIVE SUMMARY……………………………………………………………………...11

1.0 Introduction………………………………………………………………………………….11

1.1 business description…………………………………………………...…………………….11

1.2 marketing plans……………………………………………………...……………………….11

1.3 organization and management plan …………………………………………………………11

1.4 production and operation plan……………………………………………………………….11

1.5 financial plan…………………………………………………………………………………12

CHAPTER 2…………………………………………………………………………………….14

BUSINESS DESCRIPTION………………………………………………………………….…14

2.0 business name……………………………………………………………………………….14

2.1 background of the owner………………………………………………………………….…14

2.2 location and address………………………………………………………………………….14

2.3 form and type of business ownership……………………………………………………...…15

2.4 products and services………………………………………………………………………...15

2.5 justification of the opportunity……………………………………………………………….15

2.6 industry…………………………………………………………………………………. ….16

2.7 goals of the business…………………………………………………………………...…….16

2.8 entry and growth strategy…………………………………………………………….………16

2.8.1 entry……………………………………………………………………….………16

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 2.8.2 growth…………………………………………………………………………...16

2.9 role of the owner………………………………………………………………………….…16

CHAPTER 3……………………………………………………………….………………….…17

MARKETING PLAN……………………………………………………………………………17

3.0 introduction…………………………………………………………………………………17

3.1 customers…………………………………………………………………………….………17

3.2 market share and size………………………………………………………………...………17

3.3 competitors……………………………………………………………………….………….17

3.4 methods of promotion and advertisement……………………………………….………….20

3.5 pricing strategies……………………………………………………………….…………….20

3.6 distribution strategies………………………………………………………………………...21

CHAPTER 4 …………………………………………………………………………………….22

ORGANIZATION AND MANAGEMENT PLAN……………………………….……………22

4.0 introduction…………………………………………………………………….…………….22

4.1 management team……………………………………………………………………………22

4.1.0 manager…………………………………………………………………...……………22

4.1.0.0 duties……………………………………………………………………………22

4.1.1 technicians………………………………………………………...……………………22

4.1.1.0 qualifications……………………………………………………………………22

4.1.1.1 duties……………………………………………………………………………22

4.3 recruitment, training and promotion…………………………………………………………23

4.31 recruitment……………………………………………………………….…………….23

4.32 training………………………………………………………………….………………24

4.33 promotions…………………………………………...…………………………………24

4.4 renumerations and incentives……………………………………………...…………………24

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4.5 licenses permits and by-laws ……………………………………………………………….24

4.51 licenses…………………………………………………………………………………24

4.52 by laws………………………………………………………………………….…….25

4.6 business support services……………………………………………………………………25

4.61 bank details………………………………………………………………………………25

4.62 insurance services………………………………………………………….……………25

4.63 legal services………………………………………………………….…………………25

CHAPTER 5………………………………………………….…………………………………26

OPERATION/ PRODUCTION PLAN………………………………………………….………26

5.0 introduction………………………………………………………………………….………26

5.1 plant facilities and equipment……………………………………….………………………28

5.2 production strategy……………………………………………………………………...……28

5.3 production process…………………………………………………………………...………28

5.4 regulations affecting production…………………………………………………….………29

CHAPTER 6…………………………………………………………………………………….30

FINANCIAL PLAN……………………………………………………………………...………30

6.0 Introduction……………………………………………………………………………….…30

6.1 assumptions……………………………………………………………………………….…30

6.2 pre operational costs…………………………………………………………………………30

6.3 balance sheet …………………………………………………………………………...……31

6.4 cash flows………………………………………………………………………………….…32

6.5 calculation of break-even point………………………………………………………………33

6.6 sources of capital…………………………………………….………………………………34

REFERENCE………………………………………………………………………………….…35

List of reference………………………………………………………………………….………35

9
Appendix 1…………………………………………………………………………………….…36

Appendix 2………………………………………………………………….……………………37

10
 CHAPTER 1

EXECUTIVE SUMMARY
1.0 Introduction

This chapter will highlight that will make up AVIATORS TYRE PUNTURE SOLUTIONS
business proposal. It will also contain the marketing plans, organizational plans, production plans
and the financial plans.

1.1 Business description

The business name will be AVIATORS TYRE PUNCTURE SOLUTIONS. It will be owned by
Zacharia Mugwe, a student in the final year at the East African School of Aviation. It will be a
sole proprietorship business located at Wilson airport along Karen Road. It will offer tire
puncture repair services.

1.2 Marketing plans

It will offer tire puncture repair services for airport service vehicles and passenger cars within
the airport.

Its main customers will be airline operators and airport visitors. Wilson airport is one of the
busiest airports in East Africa due to its location in the country’s capital and the wide range
accessibility area. There will be a large and clear signboard enroute to attract customers.

Its main competitors will be mkamba wheels and airline maintenance companies, but they have
some weaknesses in coping with modern technology and poor customer relations.

1.3 Organization plan and management plan

The businesss will be managed by one manager who will be the owner of the business. There
will also be some technicians to help in carrying out daily activities for the smooth running of the
business.

The manager will also recruit and be in charge of employee welfare.

1.4 production and operation plan

Since the business will specialize in service provision, high standard operational tools and
equipment including modern jacks, spanners and air pressure pumps will be utilized.

There will also be a computer to keep track of all operations.

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1.5 Financial plan

To start the business, a capital of about KSH 450,900 will be required. The owner will raise
about KSH 155,000, borrow KSH 13,500 from friends and family members and lend the rest
from other money lending institutions like the bank.

The break-even point will be at KSH:1,350,000 when providing about 10 services per day.

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DEFINITION OF TERMS

Chocks – some special apparatus placed behind the wheels of a body to prevent movement when
parked or being serviced.

Tire demounter- a special tool used for extracting a rim from a tire.

13
 CHAPER 2

BUSINESS DESCRIPTION.
2.0 Business name

The name of the business will be AVIATORS PUNCTURE REPAIR SOLUTIONS. Most
airports are generally full of activities which include dropping and picking passengers and other
personnel working around the airport.

All these persons mostly use vehicles to travel in and out of the airport. Other vehicles are also
used as mobile service units around the airport and others to service the aircrafts.

Since a puncture is one of the most devastating moments a driver can experience, and also
considering that no one would risk driving without a serviceable spare tire, the name of the
business will automatically direct persons who require the service to the service center.

2.1 Background of the owner

The owner of the business will be Zacharia Mugwe. This is a student pursuing a diploma in
aeronautical engineering at the East African School of Aviation.

The future owner has worked for sometime as an intern in the aviation industry and was
stationed in the wheel bay department. He has worked on wheels and tires for some time and has
requisite knowledge to address any puncture hurdles.

2.2 Location and address

The business will be located at Wilson airport along Karen Road. It will be located in an open
area of leased land enough to accommodate our customers.

The address will be:

AVIATORS PUNCTURE REPAIR SOLUTIONS,

P.O BOX 3182-005,

EMBAKASI.

EMAIL; ZACPUNCTURESOLUTIONS@GMAIL.COM

FACEBOOK: ZACPUNCTURESOLUTIONS254

TEL:0796607590

14
Below is the expected business location:

15
2.3 Form and type of business ownership

The business will be a sole proprietary business expected to offer services with regard to tire
punctures. This is because the business will be cheaper to start and also easier to manage.

I have chosen the service industry because it has a high demand and also a sizeable number of
populations require the service to continue with their respective operations.

2.4 Products and services

The business will offer service on tire puncture repair. It will additionally help drivers balance
their car tire pressures. Also, due to availability of compressed gases, air filters will also be
cleaned off dust in this station.

Target customers will be personal drivers around the airport, airline operators matatu operators
and workers within the airport or industries in its vicinity.

The business will be objected to offer fast and reliable services to customers including offering
wheel spanner and lifting jacks to those who could have misplaced theirs.

The business will also sell wheel caps and in future tires and rims.

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2.5 Justification of opportunity

The title AVIATORS TIRE PUNCTURE has been specifically chosen to create a sense of
aviation activities that most of the persons around Wilson engage themselves in. The title will
give the customer a sense of business belonging to address his/her need.

The country’s population is growing rapidly and transport is becoming a major service required
by the community. The sector is actually expected to continue growing in the coming years.

This has led to the rise in use of road transport and the number of vehicles both personal and
private is rising. Car tire punctures are common and since a vehicle will not operate for long with
an unserviceable one, which is also against road regulations, thus arises the need for puncture
repair centers.

Additionally, some find it tedious to do a wheel change and thus look for a nearest service
station. Therefore, I find this as a good opportunity to invest in as starting will be easy and also
offer a quick return.

2.6 Industry

The business will mainly offer service to customers in the transport industry. Due to increased
economic activities, this sector has grown appreciably for the last few years. Many persons and
organizations are buying vehicles or boarding aircrafts to carry on with their daily activities. To
cater for breakdowns, this service is therefore essential.

The transport sector is growing and is on a high demand now and in future.

2.7 Goals of the business

The chief goal of the business will be to get a market share in the transport industry. It will focus
on profit maximization by fast quality services at affordable prices.

The business will also be objected in creating employment to youth leaving technical schools in
the country.

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2.8 Entry and growth strategy

2.8.1 Entry

Since the business is a direct investment, the best method will be a direct setting up. In this case,
the owner will obtain the required resources, look for open space and set up a new venture.

This is also known as greenfield entry strategy. The business is new; hence it will have to
connect itself with its customers especially through advertising.

2.8.2 Growth

Since transport in both road and air is growing, it is expected that the service will be required in
other places even outside the country’s capital, The business will be looking forward to open
other branches in other estates and busy cities like Kisumu and Nakuru.

2.9 Role of the owner

The owner will be the manager of the business.

He will be in charge of coordinating activities, undertaking special tasks and also do market
research.

He will also hire new employees and be responsible for their welfare and well-being. He will
also be expected to raise enough capital to start and run the business.

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 CHAPTER 3

MARKETING PLAN0
3.0 Introduction

This chapter will cover the following elements: customers, advertising methods, market share
and size, competitors, pricing strategies, sales tactics and distribution strategies.

3.1 Customers

The main customers of the business will be airport staff, visitors and general public. Wilson
airport is quite busy and also located in a busy economic area. Neighboring industries,
institutions, restaurants and residential places will be a good harbor for customers.

Since it is a universal service, the range of customers will be unlimited.

3.2 Market share and size

Considering the large number of industries in this region, residential places and also the busy
Langata Road, the number of customers expected to be netted is high.

There is expected competition especially from local Airline maintenance departments and
mkamba wheels. below is a market analysis before and after entry.

19
3.3 Competitors

The main expected competitors will be local airline maintenance departments and mkamba
wheels repair. Below is the competition analysis before entry

FIGURE 3.1

BELOW IS A BAR GRAPH OF COMPETITION ANALYSIS BEFORE ENTRY

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 FIGURE 3.2

BELOW IS THE COMPETITOR SWOT ANALYSIS:

21
MKAMBA WHEELS LOCAL DEPARTMENTS AVIATORS
Strengths Strengths Strengths
 Has a spares shop  they use modern  will offer online
 Offers services on tools payment
credit  are known by most  will offer services at
 Repute workers reduced cost
 they are less costly  will offer digital
 they have spares payment
 will use modern tools
 will be located in an
easily accessible site.
Weaknesses Weaknesses Weaknesses
 has poor customer  they are located too  Not yet repute
relation skills deep from the  Cannot offer service on
 does not offer digital public access credit
payment  not specialized  Has no spares
 is slow due to use of 
old tools
 closed most of the
times
Opportunities Opportunities Opportunities
  Government is  Government has
constructing an promised to offer 3
access road in. years of not being
 taxed
 Proximity to the main
road

Threats Threats Threats
 Airport authority is  Upcoming  Land license needed
claiming land competitors  Existing players
 Is not yet licensed  competition
 Court issues
TABLE 3.1

BELOW ARE THE BAR GRAPHS FOR COMPETITION AFTER ENTRY

22
TABLE 3.3

23
3.4 Methods of promotion and advertisement

The business will use signboards, stickers and posters to advertise. There will also be an E-
marketing platform. The SIGNBOARD will be mostly preferred as it is less costly and more
effective. These will be easily read and also flashing LEDs will attract customers.

The business will offer after sale services like free wheel pressure balancing.

3.5 Pricing strategies

To get into the market and poach customers easily, the business will use two pricing strategies

a. Competitive pricing- in this case the business will offer services at a less cheap cost to the
customers than the existing competitors,
b. Penetration pricing- in this case the business will start its operations at low charges to the
first customers and then increase the prices steadily with time.

The cost of service will depend on extent of damage or service required. A simple rubber
patching will cost from as low as 200 to 350 for a large patch.

Rim leaks will also cost 200 to correct and pressure KSH:100.

Payment will be made available through cash and mpesa. Credit services will not be allowed.

24
 CHAPTER 4

ORGANIZATION AND MANAGEMENT PLAN.

4.0 Introduction

This chapter will discuss the management team, other personnel their qualifications, recruitment
and renumeration.

4.1 Management team

The writer will be the owner and manager of the business. There will also be one technician to
help in the business.

The owner will be responsible for the whole capital contribution and management responsibility.
The rest of the team will be hired externally as per the qualifications below:

4.1.0 Manager

4.1.0.0 Duties

 organize the team on the work to be done

 be liable for any expenses and capital required to support the business
 paying the rest of the workers
 respond to the appropriate legal responsibilities

25
 4.1.1 Technician

The business will have one technician with the following qualifications and responsibilities:

4.1.1.0 Qualifications

 at least a certificate in mechanical maintenance

 have knowledge in ICT
 have a driving license
 have at least 6 months experience
 committed and loyal to service
 have good customer relations

4.1.1.1 Duties

 carry out repair work in the shop

 fill in work and job cards
 cleaning the repair area
 take charge of shop equipment and apparatus
 be in control of shop when manager is not around.

He/She will report directly to the manager

26
Below is the expected organizational structure

MANAGER

TECHNICIAN
FIGURE 4.1

27
4.2 Recruitment, training and promotion.

4.2.0 Recruitment

The main method to recruit the workers will be poaching from local garages and workshops

The business will also try to reach out for qualified attaches who have successfully completed
school and placement through online platforms.

Recruitment will be the managers responsibility. The manager will also perform interviews and
assess the progress of the new workers.

4.2.1 Training

Upon recruitment, the manager will be in charge of making the recruits aware of the business
environment. He will tour them around the business area and inform them on the key areas and
procedures.

He will also issue the standard code of conduct expected of them. Continued training will be
offered on new technology, computer applications and operation of new equipment.

4.2.2 Promotion
The business will be planning to start other branches and those workers who will show loyalty
and perform extemporary well will be made in charge of new stations under the manager.
They will be given training and short courses e.g., on team management
Their salaries will also be raised.

28
4.3 Renumerations and incentives
The technician will be entitled a salary of sh:9000 per month, which will rise by 5.8%
semiannually. There will also be an overtime incentive of sh:150 per hour.
The business will also cater for worker insurance services.
The owner will remain with 60% of the profit ploughed back

Worker Position Salary in ksh Nhif in ksh

1 Technician 9000 500
TABLE 4.1

4.4 Licenses, permits and by laws

4.4.1 Licenses
The business will be registered under the ministry of trade and will obtain the trading license
from the city county government.
The license will cost sh:12,000 per year
4.4.2 Permit
The business will also obtain a business permit at an annual cost of ksh:8,000
4.4.3 By laws

The business will have to abide by the county government by laws as pertains to environmental
pollution.
It will have to abide by all laws provided by NEMA

29
4.5 Business support services.
4.5.1 Bank details
The business will conduct its banking services with
EQUITY BANK
EMBAKASI BRANCH
P.O BOX 00123
NAIROBI, KENYA
This bank is chosen for its availability in most areas and also for the fact that most people have
advanced to equitel mode of service payment.
There are also agents countrywide as far as the bank is concerned.

4.5.2 Insurance services

The business will be covered by I&M insurance services to insure the business and its property.
The employees will be covered against accidents and injuries.
The estimated cost will be sh:1,400 per year
4.5.3 Legal services
The business will work with goodhope advocates for the purpose of legal requirements. The
firm is known for its competency and reliability in legal cases and has portrayed an outstanding
performance for the last 15 years.
Its headquarters are in Mwiki and sub offices all around the country.

30
 CHAPTER 5
OPERATION/PRODUCTION PLAN.
5.0 Introduction
This chapter will talk about the plant, facilities and equipment, the production strategy,
production process and regulations to govern operations.
5.1 Plant, facilities and equipment
The following equipment will be required to set up the business:

EQUIPMENT NUMBER COST PER ITEM TOTAL (KSH)

(KSH)
Computers 1 16,500 16,500
Hydraulic jacks 1 17,000 17,000
lift jacks 3 1,000 3,000
Tire demounter 2 1200 2,400
Pressure pump 1 25,000 25,000
Wheel chocks 6 150 900
Patch needles 2 200 400
GRAND TOTAL _ _ 65,200
TABLE 5.1

31
 For customer satisfaction and efficiency, the following will also be provided

ITEM NUMBER COST PER ITEM TOTAL (KSH)

(KSH)
Chairs 4 400 1,600
Desk 2 700 1,400
Wheel Spanners 4 470 2,350
GRAND TOTAL _ _ 5,350
TABLE 5.2

The computer will be maintained weekly by the technician, wiping dust and updating software’s.
The jacks will also be serviced cleaned as per schedule.
The pump will be cleaned daily but accumulated water will be drained after two weeks due to
compression of atmospheric water. In case further maintenance services will be required,
external service providers will be hired.

32
Below is a sketch of the projected shop

FIGURE 5.1

There will be plans to expand the front part of the shop to have a spares shop and also a car wash
behind.

33
5.2 Production strategy
Incoming customers will be received and directed to the allocated parking slots. After
consultation and agreement, the work will commence.

If we can take the example of the service of three medium patch repairs,

TABLE 5.3

And below is their respective production cost:

PRODUCTION ITEM NUMBER USED COST PER UNIT IN TOTAL COST IN

KSH KSH
RUBBER PATCH 3 25 75
FUEL _ _ 20
WHEEL CAP 1 180 180
TOTAL _ _ 275
PRODUCTION COST
TABLE 5.4

Therefore, the total profit is:

TOTAL PROFIT=SERVICE COST – PRODUCTION COST
TOTAL PROFIT=KSH (1550-275)
TOTAL PROFIT=KSH 1,275
After service completion and payment, the customer will be released.

34
Some of the running cost will include:

 compressor petrol
 rubber patches
All material needed will be stocked in store.
Necessary hands-on skills will be delivered by the technician e.g., in fixing wheels, mounting
and dismantling.
Since it is a service industry, operation will not be hampered by technology
Records and receipting will be made for customers.

35
5.3 Regulations affecting production
5.3.1 Fuel prices
Fuel prices which are managed by the national government through EPRA, may fluctuate from
time to time. Since the business will be relying on petrol to operate air compressors, the price
fluctuations will affect the cost of production from time to time.
5.3.2 Environmental
Also, regulations by NEMA will have to be followed

36
 CHAPTER 6

FINANCIAL PLAN.
6.0 Introduction

This part will help determine the financial feasibility of the business.it will calculate in terms of
monetary value the projected amount of money which will be required to start and run the
business.

It shall contain assumptions operational costs, the balance sheet and a whole financial year
projected cash flow.

6.1 Assumptions

 The annual land and space lease remains 5%.

 The service rate rise is greater than 8% in the first financial year.
 The permit and license charges remain unaltered.
 Worker salary will remain constant

37
6.2 pre-operational costs

These will help calculate the amount of cash required just to open the business with its required
resources all catered for.

Below are the pre operational costs

SERVICE COST IN
KSH
Land 300000
Air compressor 25000
Service tools 19750
Office equipment 3000
Computer 16500
Electrical installations and 8300
painting
Rubber patch stock 3000
Overalls 1800
Wheel chocks 900
Brooms and bucket 1000
License and permit 20000
Insurance 1400
Tire demounter 2400
Total 403,050

Therefore, the total preoperational cost will be ksh:403,050.

38
6.3 Balance sheet

Below is a prepared balance sheet for the business as projected to be at start.

TABLE 6.4

As seen from a simple survey of the balance sheet, a good capital amount will be borrowed from
the bank and terms loans from credit saccos and friends

39
6.4 Cash flows

Below is the projected cash flow for the first financial year.

Cash flow table.

40
 6.5 Calculation of break-even

Calculation of break-even point:

BEP=operating expenses / (1-cost of sales/total sales)

= KSH [424050/ (1- 300/2000)]

= KSH:498,882.35

Break-even point per units =break even point in Ksh/cost per unit service

=498,882.35/250

= 1,995.6

Therefore, business will break even after about 1,996 services approximately.

41
6.6 profitability ratios

Gross profit

This is calculated as the difference between total revenue and the cost of production.

If we consider a single service where:

Revenue= ksh:1150

Production cost= ksh:275

Then,

Gross profit = revenue – cost of production

= ksh (1150-275)

= ksh 875

Assuming 10 services per day then:

Gross profit = ksh (875*10)

= ksh 8750

For a whole month;

Gross profit = ksh (8750*30)

=ksh 262,500

And annually;

Gross profit = ksh (262500*12)

= ksh 3150000

42
Current ratios

This is the ratio of current assets and current liabilities.

From the balance sheet:

Current assets = ksh 158800

Current liabilities = ksh 200000

Therefore:

Current ratios = (158800/200000)

= 0.794

Net working capital ratio

This is a ratio of the difference between current assets and current liabilities, and the total assets

From the balance sheet:

Current assets = ksh 158800

Current liabilities = ksh 200000

Total assets = ksh 205450

Therefore;

Net working capital ratio = ([current assets – current liabilities]/total assets)

= (158800-200000)/205450

= -0.2

43
Cash ratio

This is a ratio of cash at hand and current liabilities.

From the balance sheet:

Cash at hand = ksh 155000

Current liabilities = ksh 200000

Therefore;

Cash ratio = cash at hand /current liabilities

= 155000/200000

= 0.775

Profit margin

This is a ratio of net income and the sales made

Considering one service:

Net income = ksh 1550

Sales = 1250

Therefore;

Profit margin = 1550/1250

= 1.24

44
Gross profit margin

It is a ratio of the difference between revenue and cost of goods, and the revenue.

For a single service

Revenue = ksh 1550

Cost of goods = ksh 275

Therefore;

Gross profit margin = ([revenue – cost of goods]/revenue) *100

= ([1550-275]/1550) *100

= 82.23%

45
 6.7 Sources of capital

The total capital required to start the business will be around Ksh:424,050

The owner will contribute about Ksh:155,000

He will lend about Ksh:200,000 from the bank

The rest will be borrowed from friends and family members.

Below is a pie chart representation:

46
 REFERENCE

List of reference

Sowell, Thomas (2007) basic economics. A citizen’s guide to economy. Cambridge.

Kleindorfer, Paul R (DEC 2007) sustainable operations management. Production and operations
management. 482-492.

Wind. Y (1982) production policy. Concepts, methods and strategy.

Drucker P. (1985) innovation and entrepreneurship. London Heinemann.

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APPENDIX 1

AUTOMATIC TIRE DEMOUNTER

48
APPENDIX 2

FLAT TIRE

49
BUSINESS LOGO

50