BUSINESS PLAN

PLAN TITLE: ANFRAID LOGITECH ENTERPRISE

P.O BOX 2049-00100,

Mombasa
PRESENTED TO:KENYA NATIONAL EXAMINATION COUNCIL IN PARTIAL
FULFILLMENT FOR THE AWARD OF CERTIFICATE IN
INFORMATION COMMUNICATION TECHNOLOGY

PRESENTED BY: EZEKIEL MWANZIA MUTHIANI

INDEX NO: 1061220346

COURSE CODE: 1920/107

DEPARTMENT: INFORMATION COMMUNICATION TECHNOLOGY

CENTRE: KENYA COAST NATIONAL POLYTECHNIC

SUPERVISOR: MADAM SUSAN

SERIES: NOVEMBER

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 DECLARATION
This business plan is my original work and has never been presented by anybody for the award
of Certificate in Information Communication Technology in any Institution. I therefore submit it
to the Kenya National Examination Council.

NAME EZEKIEL MWANZIA MUTHIANI

DATE………………….
SIGN…………………….

SUPERVISOR: MADAM SUSAN

DATE…………………….

SIGN…………………….

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 DEDICATION
I dedicate this plan to my parents who supported through the entire project,
I also deeply dedicate it to my supervisor, Madam Susan who supported me. God bless you all.

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 ACKNOWLEDGEMENT
I wish to thank my class members for their support. First, I want to thank my dear parents for
their financial support which has made me to reach this far. Not to forget to pass my heartfelt
gratitude to the entrepreneur department and more so to my supervisor Madam Susan for her
great support, may god bless you.

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 TABLE OF CONTENTS
DECLARATION .......................................................................................................................... ii

DEDICATION ............................................................................................................................. iii

ACKNOWLEDGEMENT .......................................................................................................... iv

EXECUTIVE SUMMARY .......................................................................................................... x

CHAPTER ONE ........................................................................................................................... x

1.0 BUSINESS DESCRIPTION .............................................................................................. x

CHAPTER TWO .......................................................................................................................... x

2.0 MARKETING PLAN ......................................................................................................... x

CHAPTER THREE...................................................................................................................... x

3.0 ORGANIZATION AND MANAGEMENT PLAN ......................................................... x

CHAPTER FOUR ........................................................................................................................ x

4.0 OPERATIONAL PLAN ..................................................................................................... x

CHAPTER FIVE .......................................................................................................................... x

5.0 FINANCIAL PLAN ............................................................................................................ x

CHAPTER ONE ........................................................................................................................... 1

1.0 BUSINESS DESCRIPTION .............................................................................................. 1

1.2 FORMS OF BUSINESS OWNERSHIP ........................................................................... 2

1.3 PRODUCTS AND SERVICES .......................................................................................... 3

1.3.1 PRODUCTS ................................................................................................................. 3

1.3.2 SERVICES ................................................................................................................... 3

1.5 ENTRY AND GROWTH STRATEGY ............................................................................ 4

1.5.1 ENTRY STRATEGY .................................................................................................. 4

1.6 GOALS AND OBJECTIVES OF THE BUSINESS ........................................................ 4

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 1.6.1 GOALS OF THE BUSINESS ..................................................................................... 4

1.6.2 OBJECTIVES OF THE BUSINESS.......................................................................... 5

CHAPTER TWO .......................................................................................................................... 6

2.0 MARKETING PLAN ......................................................................................................... 6

2.1 CUSTOMERS ..................................................................................................................... 6

2.2 MARKET SHARE ............................................................................................................. 6

2.3 COMPETITORS .................................................................................................................. 9

2.4 PRICING STRATEGY ...................................................................................................... 9

2.5 SALES TACTICS ............................................................................................................. 10

2.6 METHODS ADVERTISEMENT AND PROMOTION ............................................... 10

2.6.1 ADVERTISEMENT METHODS ............................................................................ 10

2.6.2 PROMOTION METHOD ........................................................................................ 11

2.7 DISTRIBUTION STRATEGY ........................................................................................ 11

CHAPTER THREE.................................................................................................................... 12

3.0 ORGANIZATION AND MANAGEMENT PLAN............................................ 12

3.1 MANAGERS QUALIFICATIONS AND DUTIES AND RESPONSIBILITIES ....... 13

3.1.1QUALIFICATIONS ................................................................................................... 13

3.1.2 DUTIES AND RESPONSIBILITIES ...................................................................... 13

3.2. OTHER PERSONNEL, NUMBER, QUALIFICATION, DUTIES AND

RESPONSIBILITIES AND AMOUNT OF SALARY TO BE PAID ................................ 13

3.3 RECRUITMENT, LOGITECH ENTERPRISE AND PROMOTION ...................... 15

3.3.1 RECRUITMENT ....................................................................................................... 15

3.3.2 LOGITECH ENTERPRISE ..................................................................................... 15

3.3.3 PROMOTION ............................................................................................................ 16

3.4 REMUNERATION AND INCENTIVES ....................................................................... 16

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 3.4.1 REMUNERATION ................................................................................................... 16

3.4.2 INCENTIVES ............................................................................................................ 16

3.5 LICENSE, PERMITS AND BY-LAWS ......................................................................... 17

3.5.1 LICENSE .................................................................................................................... 17

3.5.2 PERMITS ................................................................................................................... 17

3.5.3 BY-LAWS................................................................................................................... 17

3.6 SUPPORT SERVICES ..................................................................................................... 17

3.6.1 ELECTRICITY SERVICES .................................................................................... 17

3.6.2 INSURANCE SERVICES ........................................................................................ 17

3.6.3 SECURITY SERVICES ............................................................................................ 18

3.6.4 BANKING SERVICES ............................................................................................. 18

3.6.5 CLEANING SERVICES ........................................................................................... 18

3.6.6 LEGAL SERVICES .................................................................................................. 18

CHAPTER FOUR ...................................................................................................................... 19

4.0 OPERATIONAL PLAN ................................................................................................... 19

4.1 PRODUCTS, SERVICE AND DESIGN AND DEVELOPMENT .............................. 19

4.1.1 PRODUCTS ............................................................................................................... 19

4.1.3 DESIGN ...................................................................................................................... 19

4.2 OPERATIONAL FACILITY AND CAPACITY .......................................................... 19

4.3 OPERATIONAL PROCESS ........................................................................................... 20

CHAPTER FIVE ........................................................................................................................ 21

5.0 FINANCIAL PLAN .......................................................................................................... 21

5.1 PRE-OPERATIONAL COSTS ....................................................................................... 21

5.2 ESTIMATION OF WORKING CAPITAL ................................................................... 22

5.3 PROJECTED CASH FLOW STATEMENT................................................................. 22

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 5.3.1 PROFORMA CASH FLOW PROJECTION FOR THE 1ST YEAR 2022 ........... 23

5.3.2 PROFORMA CASH FLOW PROJECTION FOR THE 2ND YEAR 2023 .......... 24

5.3.3 PROFORMA CASH FLOW PROJECTION FOR THE 3RD YEAR 2024 .......... 25

5.4 PROFORMA CASH FLOW PROJECTION FOR THE FIRST THREE YEARS ... 26

5.5.0 PROFORMA INCOME STATEMENT FOR THE 1ST YEAR 2022.................... 28

5.5.1 PROFORMA INCOME STATEMENT FOR THE 2ND YEAR 2023 ......................... 29

5.5.2 PROFORMA INCOME STATEMENT FOR THE 3RD YEAR 2024 ......................... 30

5.6 PROFORMA INCOME STATEMENT FOR THE FIRST THREE YEARS ................... 32

5.7 PROFORMA BALANCE SHEET ..................................................................................... 32

5.8 BREAK-EVEN ANALYSIS ............................................................................................ 34

5.9. PROFITABILITY RATIOS .......................................................................................... 35

5.9.1 GROSS PROFIT PERCENTAGE ............................................................................... 35

5.9.2 Return on Equity .......................................................................................................... 35

5.9.3 Return on Sales ............................................................................................................ 36

5.10 DESIRED FINANCING .................................................................................................... 36

5.11 PROPOSED CAPITALIZATION .................................................................................... 36

5.12 BREAK-EVEN ANALYSIS .............................................................................................. 36

5.13 PROFITABILITY RATIOS .............................................................................................. 38

5.13.1 Gross Profit Percentage ............................................................................................. 38

5.13.2 Return on Equity ........................................................................................................ 38

5.13.3 Return on Sales .......................................................................................................... 38

5.14 BREAK-EVEN ANALYSIS .............................................................................................. 38

5.15 PROFITABILITY RATIOS .............................................................................................. 40

5.15.1 Gross Profit Percentage ............................................................................................. 40

5.15.2 Return on Equity ........................................................................................................ 40

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 5.15.3 Return on Sales .......................................................................................................... 40

5.16 BREAK-EVEN ANALYSIS ................................................................................................ 40

5.17 PROFITABILITY RATIOS .............................................................................................. 42

5.17.1 Gross Profit Percentage ............................................................................................. 42

5.17.2 Return on Equity ........................................................................................................ 42

5.17.3 Return on Sales .......................................................................................................... 42

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EXECUTIVE SUMMARY

CHAPTER ONE
1.0 BUSINESS DESCRIPTION
Under business description the following are the sub-chapters: business name, forms of business
ownership, services, justification of business opportunity, entry and growth strategy and goals and
objectives of the business.

CHAPTER TWO
2.0 MARKETING PLAN
The following parties will be involved under marketing plan: customers, market share,
competitors, pricing strategy, sales tactics, methods of advertisement and promotion and
distribution strategy.

CHAPTER THREE
3.0 ORGANIZATION AND MANAGEMENT PLAN
Management refers to the process of carrying out activities that ensure successful attainment of set
goals by an organization. It is through organizing that the management earns its framework within
it operates and always tends to give a form of structure to the organization. The Anfraid Logitech
Enterprise will adopt organization chart in which authority flows from the managers to the trainees.

CHAPTER FOUR
4.0 OPERATIONAL PLAN
The products the business will use to facilitate the services being offered will always be in good
functioning condition at all the time to enable effective and efficient provision of services in the
organization for satisfaction of customers’ needs and wants.

CHAPTER FIVE
5.0 FINANCIAL PLAN
This chapter will deal with all the financial plan to be put into practice and aimed at the
achievements of Anfraid Logitech Enterprise goals and objectives. It shows the business potential
and capabilities geared towards profitability. The plan shows the financial requirements that
include the operational cost, working capital required, projected cash flow, Profoma profit and loss

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account and Profoma balance sheet. It clearly shows the breakdown level of services and
determines the expected profitability ratios of the business.

xi
 CHAPTER ONE
1.0 BUSINESS DESCRIPTION
Under business description the following are the sub-chapters: business name, forms of business
ownership, services, justification of business opportunity, entry and growth strategy and goals
and objectives of the business.

1.1 BUSINESS NAME

The name of the business will be “”. Anfarid meaning “Dream”. The word Anfarid its popular
among the members of the society this will enable customers to easily locate the business. The
reason for choosing this business is to have an excellent profitability and growth rate. It will be
located in Mwembe Tayari, Tononoka, Lebanon in Mombasa County which is 50 meters from the
main road i.e. moi road. The area is well secured due the presence of Mvita Police Station, the area
is densely populated, there is electricity which is very much required in logitech Enterprise service
and the roads are well tarmacked.

The business address is as follows:

ANFARID LOGITECH ENTERPRISE,

P.O Box 2049-00100,

MOMBASA.

Tel: - 072-0797-635/078-0867-959

E-mail: Anfraidlog10@gmail.com

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BUSINESS MISSION
Anfarid Logitech Enterprise Centre is to determine what our customers hope to achieve and
dedicate our Logitech enterprise and development to the fulfillment of those goals.

1.2 FORMS OF BUSINESS OWNERSHIP

The form of the business ownership will be partnership because it is being owned by john kimani
and I.

Advantages of Partnership

i. Two heads are better than one

ii. Your business is easy to establish and start-up costs are
low
iii. More capital is available

iv. You’ll have greater borrowing capacity

v. There is opportunity for income splitting, an advantage of particular importance due to
resultant tax savings
vi. Partners’ business affairs are private

Duties and Responsibilities of the Manager

a) Deploy a wide variety of Logitech Enterprise methods.
b) Monitor and evaluate Logitech Enterprise program’s effectiveness, success.
c) Providing opportunities for ongoing development.
d) Resolve any specific problems and tailor Logitech Enterprise programs as necessary.
e) Maintain a keen understanding of Logitech Enterprise trends, developments and best
practices

Characteristics of Employees
a) A trainer is a strategic thinker
b) Is well-versed in the instructional design process.
c) Trainer is a Project Manager
d) Trainer is an Evaluator
e) Trainer is a Facilitator of Change and Learning

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1.3 PRODUCTS AND SERVICES
1.3.1 PRODUCTS
The following are the products the business will have;
1. Printer
2. Computer cables
3. Computer networks
4. Tracking devise
5. Computers and palmtops devices
6. E-software
7. CCTV Camera
8. Wi-Fi router

9. Network web
10. CPU
11. monitors

1.3.2 SERVICES
These are the services the business will offer as a Logitech Enterprise center;

i. Trouble shooting computers

ii. Tracking lost devises
iii. Monitoring electronic devices
iv. Selling computers gadgets
v. Selling computer peripherals
vi. Outlook E-mail scheduling software
vii. Networking Technology

1.4 JUSTIFICATION OF BUSINESS OPPORTUNITY

The site will be chosen due to the following reasons.

• Availability of clean water

• Availability of electricity which is very much required in a Logitech Enterprise center for
operation of computers.

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 • Good infrastructure i.e. tarmacs roads which facilitates easy transport.
• Dense population in the area.

• Presence of police station within the area enhancing proper security

1.5 ENTRY AND GROWTH STRATEGY

1.5.1 ENTRY STRATEGY
The business would wish to commence our business in the year 2022 and our business will be
small scale due to small amount of capital. Our business capital will cost Kshs. 700,000. Loan
from bank Kshs. 500,000, creditors Kshs. 40,000, our own savings Kshs. 350,000. The following
are some of the means the business will use to attract more customers as compared to our
competitors;

• Online advertisement
• Word of mouth
• Start a contest
• Offer discounts
• Print and distribute flyers

1.5.2 GROWTH STRATEGY

In the first year the business will offer its services and in the second third year the business will
be expanded in the following areas lebanon , likoni , nyali and posta.

1.6 GOALS AND OBJECTIVES OF THE BUSINESS

1.6.1 GOALS OF THE BUSINESS
The following are the goals that are leading to start the business;
i. To offer service guarantees.
ii. To promote Logitech Enterprise services
iii. To continually adapt ongoing change in the business environment.
iv. To link my Logitech Enterprise and development to business strategy by understating what
my customers hope to achieve and dedicating Logitech Enterprise and development to the
fulfillment of those goals.
v. To maximize the profits.

vi. Improve the living standards of the locals through creation of job opportunities.

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1.6.2 OBJECTIVES OF THE BUSINESS
The following are the objectives that are leading to start the business.

i. To meet the Logitech Enterprise needs of computer users by way of skill assessment
ii. To retain new and current clients
iii. To monitor outcomes of clients after 30-day period to track new employment or Logitech
related improvements.
iv. To adjust the Logitech Enterprise program as needed and according to outcomes.
v. To continue to assess my own staff’s Logitech Enterprise skill level and effectiveness.

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 CHAPTER TWO
2.0 MARKETING PLAN
The following parties will be involved under marketing plan: customers, market share,
competitors, pricing strategy, sales tactics, methods of advertisement and promotion and
distribution strategy.

2.1 CUSTOMERS
The preliminary research conducted by the business indicates that the potential customers shall be
classified into two categories. All shall be essential for the existence and expansion of the
business as they shall be most contributors of the business profit and these are:

i. Institutional Customers- means any educational, religious or social organization such as

school, church, nursing home, hospital or other institutional user.
ii. Domestic Customers- means customers who are primarily for residential purpose.

2.2 MARKET SHARE

The population approximation of the area is 50,000 customers since there are three competitors
within the area of the business.
The share of the customers will be:
Year One
Anfraid 5000 → 100%, 25000 →?

× 100%
= 50%
Sunside 50000 → 100%, 3000 →?
× 100%
= 6%

Techcity × 100%
=30%

Webtech × 100%
=14%

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 Sales

14%
ANFRAID
SUNSIDE
50%
TECHCIT
30%
Y
WEBTECH

6%

Year Two

Anfraid 5000 → 100%, 30000 →?

× 100%
= 60%
Sunside 50000 → 100%, 5000 →?
× 100%
= 10%

Techcity × 100%
=20%

Webtech × 100%
=10%

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 Sales

10%

ANFRAID
20%
SUNSIDE
TECHCIT
60% Y
WEBTECH
10%

Year Three

Anfraid 5000 → 100%, 30000 →?

× 100%
= 60%
Sunside 50000 → 100%, 5000 →?
× 100%
= 10%

Techcity × 100%
=18%

Webtech × 100%
=12%

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 Sales

12%

ANFRAID
18% SUNSIDE
TECHCIT
60% Y
WEBTECH
10%

2.3 COMPETITORS
The business will experience less competition since well-equipped equipment’s offering all
services are expensive and only a few can afford to be there, and the present ones in the area
offers low quality services to the customers due to the following reasons.
NAME OF COMPETITORS WEAK AREAS STRONG AREAS

Anfraid Logitech Enterprise Small classes Employ qualify trained employees

Center
Techcity Logitech Enterprise Have only one personnel Opens earlier and closes late
Center
Webtech Logitech Enterprise Have only five clients Focus on high quality logitech
Center Enterprise
Sunside Logitech Enterprise Lack of equipment’s Flexible logitech Enterprise
Center schedule
Our business observes all these facts consciously making us believe that ours is the best and
therefore will be able to outdo the others.

2.4 PRICING STRATEGY

Below are some of the pricing strategy that the business will use when setting prices to the
services:

i. Cost-plus pricing – simply calculating your costs and adding a mark-up.

ii. Competitive pricing – setting a price based on what the competition charges.

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 iii. Value-based pricing – setting a price based on how much the customer believes what you
are offering is worth.
iv. Price skimming - setting a high price and lowering it as the market evolves.

2.5 SALES TACTICS

Anfraid logitech Enterprise is set to make use of the following sales tactics to attract clients;

i. Introduce our Logitech Enterprise center by sending introductory letters alongside our
brochure to schools.
ii. Print out fliers and business cards and strategically drop them in offices, libraries, public
facilities and train stations et al.
iii. Use friends and family to spread word about our logitech Enterprise center iv. Post
information about our logitech Enterprise center and the services we offer on bulletin boards
in places like schools, libraries.
v. Place a small or classified advertisement in the newspaper, or local publication about our
logitech Enterprise center and the services we offer
vi. Leverage on referral networks such as agencies that will attract clients who would need
our services.
vii. Advertise our logitech Enterprise center in relevant entertainment magazines, newspapers,
TV and radio stations.
viii. Attend relevant expos, seminars, and business fairs et al to market our services
ix. Encourage the use of word of mouth marketing from loyal and satisfied clients.
x. Join local chambers of commerce and industry and other relevant groups to market our
services.

2.6 METHODS ADVERTISEMENT AND PROMOTION

2.6.1 ADVERTISEMENT METHODS
Here are the platforms the business will intend leveraging on to advertise Anfraid Computer
Logitech Enterprise Center;

i. Install our billboards in strategic locations all around Pipeline.

ii. Distribute our fliers and handbills in target areas.
iii. Advertise our business in relevant education cum ICT magazines, local newspaper, local
TV and radio stations.

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 iv. Encourage our loyal clients to help us use Word of Mouth mode of advertisement
(referrals).
v. Ensure that all our staff members wear our customized clothes; all our official cars are
customized and well branded.

2.6.2 PROMOTION METHOD

Here are the platforms the business will intend leveraging on to promote Anfraid Logitech
Enterprise
Center;

i. Promote our business online via our official website

ii. Sponsor relevant community programs
iii. Leverage on the internet and social media platforms like Instagram, Facebook, twitter, et
al to promote our brand.

2.7 DISTRIBUTION STRATEGY

Anfraid logitech Enterprise delivery method will be:

Producer Consumer

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 CHAPTER THREE
3.0 ORGANIZATION AND MANAGEMENT PLAN
Management refers to the process of carrying out activities that ensure successful attainment of
set goals by an organization. It is through organizing that the management earns its framework
within it operates and always tends to give a form of structure to the organization. The Anfraid
logitech Enterprise will adopt organization chart in which authority flows from the managers to
the trainees.
ORGANIZATION STRUC TURE

Managing Director

Assistant Managing Director Assistant Mana ging Director

Department Manager

Assistant Department Manager

Accounts Department

Accountant

Subordinate Staff

Secretar Driver Cleaner Security Guard

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3.1 MANAGERS QUALIFICATIONS AND DUTIES AND RESPONSIBILITIES
The manager of the business will have the entrepreneurial skills, managerial skills and other
related skills related to the field.

3.1.1QUALIFICATIONS
i. Should be a diploma holder in information communications technology (ICT) from a
recognized institution.
ii. Have the ability to relate well with people and clients as well.
iii. Should have work experience in similar business at least 3 years’ experience.
iv. Should be creative and innovative.
v. Should have fluent speech.

3.1.2 DUTIES AND RESPONSIBILITIES

i. Should be responsible for obligating duties to the proposed staff members.
ii. Has a duty to make decision.
iii. To ensure maximum utilization of available resources, make profit and maintain business
viability. iv. Create conducive working environment and be able to mobilize employees for
efficient work.
v. Control cash flow within the business.

3.2. OTHER PERSONNEL, NUMBER, QUALIFICATION, DUTIES AND

RESPONSIBILITIES AND AMOUNT OF SALARY TO BE PAID
OTHER QUANTITY QUALIFICATION DUTIES AND AMOUN
PERSONNEL RESPONSIBILITIES T OF
SALARY
TO BE
PAID

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ACCOUNTANT 1 A holder in K.A.T.C - Preparing financial 8000
II from a recognized documents such as invoices, bills,
institution. and accounts payable and receivable.
- Minimum - Completing purchase orders.
experience of about
- Managing payroll.
one year.
- Completing financial reports
- Trustworthy on a regular basis and providing
and honest.
information to the finance team.
- Completing bank
reconciliations.
SECRETARY 1 - At least 2 - Help install and support of all 7000
years of experience ICT hardware and software.
providing information
- Conduct electrical safety
communications
checks on computer equipment.
technology (ICT) and
administrative - Monitor and maintain
support in a logitech Enterprise and networks.
development context.
- Troubleshoot and repair of
- Certificate in hardware, operating systems and
information applications
technology or a
relevant field - Maintain and troubleshoot all
network and computer related issues;
required.
- Fluency in
English.

DRIVER 1 Should be a holder of Should take the accessories faster 5000

driving license when wanted somewhere. They will
make the work easier and time
consuming

CLEANER 1 - Punctual, - Emptying waste bins 4000

reliable and
- Sweeping floors with brushes
trustworthy.
or dust control mops.
- Able to
- Mopping floors with wet or
manage time
damp mops.
effectively.
- Ability to
work both alone and
in a team.

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 GUARD 1 - should have trained - Protecting/offering security to the 4000
with KK guards. premises.

3.3 RECRUITMENT, LOGITECH ENTERPRISE AND PROMOTION

The following procedures will be considered in the recruitment, logitech Enterprise and
promotion of staffs:

3.3.1 RECRUITMENT
For the business to recruit the trainers for more skills of work the business will have different
types of process to look and follow up:

• The process of advertisement will be used through radios which are also cost effective and
can be afforded by almost everyone.
• The applicant will be required to bring their certificates, national identification card for high
chances to be chosen.
• The assessment will be done only depending on the level of skills and if he/she is qualified
for the work.
• Successful trainers will be shortlisted for an interview.
• Successful trainers will be required to report to the company for an interview.
• Five of those who have applied have qualified for the post.
• I hereby welcome you to our company.

3.3.2 LOGITECH ENTERPRISE

The business will provide logitech Enterprise to both employees who are the new and the old.
Due to the change of the technology from time to time, the employees will need some necessary
skills and knowledge which they are lacking and through the provision of logitech Enterprise they
will have the skills and knowledge to enable them perform their duties effectively for the
achievements of organizational goals and objectives.

The methods the business will use to promote Logitech Enterprise include:

• Conference - Anfraid logitech Enterprise will conduct conferences to the new and old
conferences.
• Field trip – Anfraid logitech Enterprise will provide field trip.

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 • Seminars – Anfraid logitech Enterprise will provide seminars to the employees in order to
acquire relevant skills.
• Retreat – Anfraid logitech Enterprise will provide retreat.
• Bench Marking – Anfraid logitech Enterprise will take the employees to other companies
in order to get more skills on the work.

3.3.3 PROMOTION
The following are the factors the business will consider to promote the employees from one level
to another:

• Qualification – promotion of work will be done depending on the qualification of studying

to make the work easier and run accordingly.
• Performance – how they perform their work in the company will increase their chances of
promoting them.
• Experience – this will depend on how long they have work, hence will increase their
chances.
• Honesty – being honest to your boss will add you an advantage to be in the next level.
• Discipline – the respect you have should also add you an advantage.

3.4 REMUNERATION AND INCENTIVES

3.4.1 REMUNERATION
Below are the factors the business will consider to determine certain amount of money for the
payments of the employees:

i. Economic status of the country ii.

According to level of education
iii. Experience

iv. The salary allocation

v. Income generation

3.4.2 INCENTIVES
The factors the business will provide to motivate the employees so as to increase their morale in
performing the activities for the achievement or organizational goals and objectives are as
follows: i. Giving them bonuses. ii. Providing lunch to them. iii. Providing free transportation. iv.

16
Any accident arising will be totally taken care of by the business and compensation will be made
necessary without failure.
v. Giving them allowances.

3.5 LICENSE, PERMITS AND BY-LAWS

3.5.1 LICENSE
A license is an official document which gives you permission to do, use, or own something.
Reasons for acquiring it is to identify the business and make sure we are accountable for our
actions: To protect the public health and safety and to keep track of our finances for tax purposes.
It will be issued by the county government and it will cost Kshs. 3000. The business license will
be annually reliable; the renewal cost will be Kshs. 2000 for a duration of five months.

3.5.2 PERMITS
Permits are a particular type of license that regulates public safety. The business will have a
permit so that it can run smoothly without any problem and it will obtain from the county
government. This will be at a cost of Kshs. 7000 and will be annually reliable, the renewal cost
will be Kshs.
3000 for a duration of one year.

3.5.3 BY-LAWS
The following are the by-laws the business will have:

• Employment Act Cap 226

• Public Health Act Cap 249
• Trade Licensing Cap 449

• Work under minimal supervision

• Regulation of wages and condition of employment Act Cap 229
• Taxation policies Act Cap 236
• Opening early and closing late

3.6 SUPPORT SERVICES

3.6.1 ELECTRICITY SERVICES
The business will need adequate electricity in order to perform all the activities in the
organization and these service will be from Kenya Power and Lightening at a cost of 2000.

3.6.2 INSURANCE SERVICES

The business will get its insurance cover from kengen Insurance Company at a cost of 3500.
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3.6.3 SECURITY SERVICES
The business will get security services from Texas Company in order to provide security in the
organization at a cost of Kshs. 10,000.

3.6.4 BANKING SERVICES

The proposed business will open an account with Co-operative Bank Kenyatta Road Branch.
Each employee will receive their payment through M-pesa once their accounts will be credited.

3.6.5 CLEANING SERVICES

The business will need cleaners in the company in order to ensure the organization is clean which
will be obtained from NASCO Company. The amount will be paid at the end of every month and
will cost Kshs. 4000.

3.6.6 LEGAL SERVICES

The business will get legal services from H.O and Mimba Company Advocates who will handle
all legal matters of the business on behalf of Anfraid logitech Enterprise at a cost of Kshs.
5000.

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 CHAPTER FOUR
4.0 OPERATIONAL PLAN
4.1 PRODUCTS, SERVICE AND DESIGN AND DEVELOPMENT
4.1.1 PRODUCTS
The products the business will use to facilitate the services being offered will always be in good
functioning condition at all the time to enable effective and efficient provision of services in the
organization for satisfaction of customers’ needs and wants.

4.1.2 SERVICE
The organization will be providing services that are of quality and less time will be spend in
giving out the services to the customers for their satisfaction.

4.1.3 DESIGN
We will make sure that our services will be offered in a unique way. We will always update our
company as per the new technology to improve on service development, we will do all this to
improve on logitech Enterprise services.

4.2 OPERATIONAL FACILITY AND CAPACITY

1st table presenting operational facilities and capacity
FACILITY CAPACITY AMOUNT (Kshs)

CCTV 1 100,000

Rent 2 10,000

Accessories 15 60,000

TOTAL 170,000

2nd table presenting overhead expenses

OVERHEAD EXPENSES AMOUNT (Kshs)

Electricity 1000

Salary 28,000

License 2000

19
Loan payment 400,000

TOTAL 431,000

4.3 OPERATIONAL PROCESS

The business will follow up the listed procedure for smooth running of the activities:

i. Blowing out the dust from machines.

ii. Making the availability of the necessary stationeries at all time so as to keep the provision
of the services effective and efficient. iii. By ensuring good working condition of the
equipment’s used in providing services to the customer’s satisfaction of needs and wants.

iii. .

20
 CHAPTER FIVE
5.0 FINANCIAL PLAN
This chapter will deal with all the financial plan to be put into practice and aimed at the
achievements of Anfraid Logitech Enterprise goals and objectives. It shows the business potential
and capabilities geared towards profitability. The plan shows the financial requirements that
include the operational cost, working capital required, projected cash flow, proforma profit and
loss account and proforma balance sheet. It clearly shows the breakdown level of services and
determines the expected profitability ratios of the business. It shows the proposed capitalization
and the desired financing for the Anfraid logitech Enterprise .

The business is intended to start its operation on 1st January 2022 with a capital of Kshs. 620,000.

The capital will be raised as follows:

• Laon from Co-operative Bank Kshs. 400,000
• Own savings Kshs. 200,000

• Creditors Kshs. 20,000

5.1 PRE-OPERATIONAL COSTS
ITEMS AMOUNT (Kshs)

Insurance 5000

Rent deposit for 3 months 15000

Electricity installation 25000

Telephone installation 2000

License and permits 7000

Furniture’s 200000

Water installation 20000

Renovation of building 45000

Transport 60000

CCTV 100000

21
Accessories 60000

TOTAL 539000

5.2 ESTIMATION OF WORKING CAPITAL

This is the remaining amount of capital after meeting the pre-operational cost.

Working capital = Total amount of capital – Pre-operational Cost

= 620,000- 539,000

= Kshs. 81,000

5.3 PROJECTED CASH FLOW STATEMENT

A cash flow in any business plan exist in order to justify and help the business anticipates where
there will be surplus and deficits of the funds hence taking the necessary measures.

22
 5.3.1 PROFORMA CASH FLOW PROJECTION FOR THE 1ST YEAR 2022
DETAILS JAN FEB MARCH APR MAY JUN JUL AUG SEP OCT NOV DEC TOTAL

Opening cash 81000 66800 112000 152090 186850 220580 248700 290800 325100 363890 364250 415290 81000

Sales 130000 132500 132600 132700 132800 132900 140000 140100 140700 150900 160000 161000 1686200

Total cash inflow 211000 199300 244600 284790 319650 353480 388700 430900 465800 514790 524250 576290 1767200

EXPENSES

License 2500 - - - - - - 2500 2500 - 2500 2500 12500

Insurance 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 24000

Salaries 28000 28000 28000 28000 28000 28000 28000 28000 28000 28000 28000 28000 336000

Loan repayment 20000 20000 20000 20000 20000 20000 20000 20000 20000 20000 20000 20000 240000

Electricity 600 600 600 600 600 600 600 600 600 600 600 600 7200

Water 200 400 400 400 400 400 400 400 400 400 400 400 4600

Transport 12000 12300 12500 12900 13000 13500 12000 12300 12400 12500 12400 12900 150700

Rent 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 60000

Telephone 900 1000 1010 1040 1070 1080 900 1000 1010 1040 1060 1080 12190

Purchases 15000 15000 20000 25000 26000 26000 26000 26000 27000 28000 29000 30000 293000

Advertisement 5000 - - - - 5200 - 5000 - - 5000 5200 25400

Maintenance 50000 - - - - - - - - 50000 - - 100000

Miscellaneous 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000 36000

Total cash outflow 144200 87300 92510 97940 99070 104780 97900 105800 101910 150540 108960 110680 1301590

Net cash 66800 112000 152090 186850 220580 248700 290800 325100 363890 364250 415290 465610 465610
5.3.2 PROFORMA CASH FLOW PROJECTION FOR THE 2ND YEAR
2023
DETAILS JAN FEB MARCH APR MAY JUN JUL AUG SEP OCT NOV DEC TOTAL

Opening cash 465610 469210 484800 490860 554510 586600 648360 705360 746950 750050 811200 841400 465610

Sales 90000 101000 150000 152150 152000 152300 152400 152500 152600 152700 152800 170000 1730650
Total cash 555610 570210 634800 643010 706710 738960 800760 857860 899550 902750 964000 1011400 2196260
inflow
EXPENSES
License 2500 - - - 2500 - - 2500 2500 - 2500 2500 15000
Insurance 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 24000

Salaries 28000 28000 28000 28000 28000 28000 28000 28000 28000 28000 28000 28000 336000

Loan - - - - 20000 - - 20000 - - 20000 20000 80000

repayment
Electricity 1500 1500 1500 1500 1500 1500 1500 1500 1500 1500 1500 1500 18000
Water 400 400 400 400 400 400 400 400 400 400 400 400 4800
Transport 13000 13500 14000 14500 15000 15500 13000 13500 14000 14500 15000 15500 171000

Rent 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 60000

Telephone 1000 1010 1040 1100 1150 1200 1000 1010 1100 1150 1200 1300 13260

Purchases 30000 31000 32000 33000 34000 34000 34000 34000 35000 36000 37000 38000 408000

Advertisement - - 7000 - 7500 - 7500 - 7000 - 7000 7500 43500

Maintenance - - 50000 - - - - - 50000 - - 50000 150000
Miscellaneous 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000 36000

Total cash 86400 85410 143940 88500 120050 90600 95400 110910 149500 91550 122600 174700 1359560
outflow
Net cash 469210 484800 490860 554510 586660 648360 705360 746950 750050 811200 841400 836700 836700

25
5.3.3 PROFORMA CASH FLOW PROJECTION FOR THE 3RD YEAR
2024
DETAILS JAN FEB MARCH APR MAY JUN JUL AUG SEP OCT NOV DEC TOTAL
Opening cash 836700 839500 853250 867450 875600 927900 968750 970450 1031200 1064000 1072150 1107250 836700

Sales 100000 110000 112000 160000 162200 162300 162400 162500 162600 170000 170500 170900 1805400

Total cash 936700 949500 965250 1027450 1037800 1090200 1131150 1132950 1193800 1234000 1242650 1278150 2642100
inflow

EXPENSES

License 2500 - - 2500 - - 2500 2500 - - 2500 2500 15000

Insurance 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 24000

Salaries 28000 28000 28000 28000 28000 28000 28000 28000 28000 28000 28000 28000 336000

Loan - - - - - 20000 - - 20000 - 20000 20000 80000

repayment
Electricity 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 24000

Water 600 600 600 600 600 600 600 600 600 600 600 600 7200

Transport 15000 15500 16000 16500 17000 17500 15000 15500 16000 16500 17000 17500 195000

Rent 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 60000

Telephone 1100 1150 1200 1250 1300 1350 1100 1150 1200 1250 1300 1350 14700

Purchases 38000 39000 40000 41000 42000 42000 42000 42000 43000 44000 45000 46000 504000

Advertisement - - - - 9000 - 9500 - 9000 9500 9000 9500 55500

Maintenance - - - 50000 - - 50000 - - 50000 - 50000 200000
Miscellaneous 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000 36000

Total cash 97200 96250 97800 151850 109900 121450 160700 101750 129800 161850 135400 187450 1551400
outflow

Net cash 839500 853250 867450 875600 927900 968750 970450 1031200 1064000 1072150 1107250 1090700 1090700
5.4 PROFORMA CASH FLOW PROJECTION FOR THE FIRST THREE
YEARS
DETAILS 2022 2023 2024

Opening cash 81000 465610 836700

Sales 1686200 1730650 1805400

Total cash inflow 1767200 2196260 2642100

EXPENSES

License 12500 15000 15000

Insurance 24000 24000 24000

Salaries 336000 336000 336000

Loan repayment 240000 80000 80000

Electricity 7200 18000 24000

Water 4600 4800 7200

Transport 150700 171000 195000

Rent 60000 60000 60000

Telephone 12190 13260 14700

Purchases 293000 408000 504000

Advertisement 25400 43500 55500

Maintenance 100000 150000 200000

Miscellaneous 36000 36000 36000

Total cash outflow 1301590 1359560 1551400

Net cash 465610 836700 1090700

27
 5.5.0 PROFORMA INCOME STATEMENT FOR THE 1ST YEAR 2022
DETAILS JAN FEB MARCH APR MAY JUN JUL AUG SEP OCT NOV DEC TOTAL
Sales 130000 132500 132600 132700 132800 132900 140000 140100 140700 150900 160000 161000 1686200
Purchases 15000 15000 20000 25000 26000 26000 26000 26000 27000 28000 29000 30000 293000
Total cash 115000 117500 112600 107700 106800 106900 114000 114100 113700 122900 131000 131000 1393200
inflow
EXPENSES
License 2500 - - - - - - 2500 2500 - 2500 2500 12500
Insurance 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 24000
Salaries 28000 28000 28000 28000 28000 28000 28000 28000 28000 28000 28000 28000 336000
Electricity 600 600 600 600 600 600 600 600 600 600 600 600 7200
Water 200 400 400 400 400 400 400 400 400 400 400 400 4600
Transport 12000 12300 12500 12900 13000 13500 12000 12300 12400 12500 12400 12900 150700
Rent 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 60000
Telephone 900 1000 1010 1040 1070 1080 900 1000 1010 1040 1060 1080 12190
Advertisement 5000 - - - - 5200 - 5000 - - 5000 5200 25400
Maintenance 50000 - - - - - - - - 50000 - - 100000
Miscellaneous 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000 36000
Total 109200 52300 52510 52940 53070 58780 51900 59800 54910 102540 59960 60680 768590
Net cash 5800 65200 60090 54760 53730 48120 62100 54300 58790 20360 71040 70320 624610
Net profit B/d - 5800 71000 131090 185850 239580 287700 349800 404100 462890 483250 554290
Net profit C/d 5800 71000 131090 185850 239580 287700 349800 404100 462890 483250 554290 624610 624610

28
 5.5.1 PROFORMA INCOME STATEMENT FOR THE 2ND YEAR 2023
DETAILS JAN FEB MARCH APR MAY JUN JUL AUG SEP OCT NOV DEC TOTAL
Sales 90000 101000 150000 152150 152200 152300 152400 152500 152600 152700 152800 170000 1730650
Purchases 30000 31000 32000 33000 34000 34000 34000 34000 35000 36000 37000 38000 408000
Total cash 60000 70000 118000 119150 118200 118300 118400 118500 117600 116700 115800 132000 1322650
inflow
EXPENSES
License 2500 - - - 2500 - - 2500 2500 - 2500 2500 15000
Insurance 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 24000
Salaries 28000 28000 28000 28000 28000 28000 28000 28000 28000 28000 28000 28000 336000
Electricity 1500 1500 1500 1500 1500 1500 1500 1500 1500 1500 1500 1500 18000
Water 400 400 400 400 400 400 400 400 400 400 400 400 4800
Transport 13000 13500 14000 14500 15000 15500 13000 13500 14000 14500 15000 15500 171000
Rent 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 60000
Telephone 1000 1010 1040 1100 1150 1200 1000 1010 1100 1150 1200 1300 13260
Advertisement - - 7000 - 7500 - 7500 - 7000 - 7000 7500 43500
Maintenance - - 50000 - - - - - 50000 - - 50000 150000
Miscellaneous 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000 36000
Total cash 56400 54410 111940 55500 66050 56600 61400 56910 114500 55550 65600 116700 871560
outflow
Net cash 3600 15590 6060 63650 52150 61700 57000 61590 3100 61150 50200 15300 1075700
Net profit B/d 624610 628210 643800 649860 713510 765660 827360 884360 945950 949050 1010200 1060400

29
Net profit C/d 628210 643800 649860 713510 765660 827360 884360 945950 949050 1010200 1060400 1075700 1075700

5.5.2 PROFORMA INCOME STATEMENT FOR THE 3RD YEAR 2024

DETAILS JAN FEB MARCH APR MAY JUN JUL AUG SEP OCT NOV DEC TOTAL
Sales 100000 110000 112000 160000 162200 162300 162400 162500 162600 170000 170500 170900 1805400
Purchases 38000 39000 40000 41000 42000 42000 42000 42000 43000 44000 45000 46000 504000
Total cash 62000 71000 72000 119000 120200 120300 120400 120500 119600 126000 125500 124900 1301400
inflow
EXPENSES
License 2500 - - 2500 - - 2500 2500 - - 2500 2500 15000
Insurance 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 24000
Salaries 28000 28000 28000 28000 28000 28000 28000 28000 28000 28000 28000 28000 336000
Electricity 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 24000
Water 600 600 600 600 600 600 600 600 600 600 600 600 7200
Transport 15000 15500 16000 16500 17000 17500 15000 15500 16000 16500 17000 17500 195000
Rent 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 60000
Telephone 1100 1150 1200 1250 1300 1350 1100 1150 1200 1250 1300 1350 14700
Advertisement - - - - 9000 - 9500 - 9000 9500 9000 9500 55500
Maintenance - - - 50000 - - 50000 - - 50000 - 50000 200000
Miscellaneous 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000 36000
Total cash 59200 57250 57800 110850 67900 59450 118700 59750 66800 117850 70400 121450 967400
outflow
Net cash 2800 13750 14200 8150 52300 60850 1700 60750 52800 8150 55100 3450 1409700

30
1075700 1078500 1092250 1106450 1114600 1166900 1227750 1229450 1290200 1343000 1351150 1406250
1078500 1092250 1106450 114600 1166900 1227750 1229450 1290200 1343000 1351150 1406250 1409700 1409700

31
5.6 PROFORMA INCOME STATEMENT FOR THE FIRST THREE YEARS
DETAILS 2022 2023 2024

Sales 1686200 1730650 1805400

Purchases 293000 408000 504000

Gross profit 1393200 1322650 1301400

EXPENSES

License 12500 15000 15000

Insurance 24000 24000 24000

Salaries 336000 336000 336000

Electricity 7200 18000 24000

Water 4600 4800 7200

Transport 150700 171000 195000

Rent 60000 60000 60000

Telephone 12190 13260 14700

Advertisement 25400 43500 55500

Maintenance 100000 150000 200000

Miscellaneous 36000 36000 36000

TOTAL EXPENSES 768590 871560 967400

Net profit 624610 1075700 1409700

5.7 PROFORMA BALANCE SHEET

Anfraid logitech Enterprise (capital)

32
BALANCE SHEET AS AT 1ST JANUARY 2022
Fixed Assets
Furniture’s 200,000
Accessories 60,000 260,000
Fixed Assets

Furniture’s 200,000 200,000

Current Assets

Accessories 60,000
License 7,000
Opening Cash 81,000 148,000
Electricity installation 25,000
Telephone installation 2,000
Water installation 20,000 195,000
Capital and Liabilities

Savings (opening capital) 200,000

Loan 400,000
Creditors 20,000
Capital and Liabilities

Savings (opening capital) 200,000 200,000

Liabilities

Loan 400,000
Creditors 20,000 420,000
620,000

BALANCE SHEET AS AT 31ST DECEMBER 2022

33
5.8 BREAK-EVEN ANALYSIS
It is the point where the business will never be making profit or loss i.e. Total Revenue =
Total Expenditure.

TOTAL VARIABLE COSTS

ITEMS AMOUNT (Kshs)

Purchases 293,000

Electricity 7,200

Transport 150,700

Telephone 12,190

Advertisement 25,400

Water 4,600

Rent 60,000

Maintenance 100,000

TOTAL 653,090

i. Total Margin Contribution

= Sales — Total Variable Costs = 1,686,200 — 653,090 = Kshs. 1,033,110 ii.

Contribution Margin Percentage

𝐶𝑜𝑛𝑡𝑟𝑖𝑏𝑢𝑡𝑖𝑜𝑛 𝑀𝑎𝑟𝑔𝑖𝑛
= × 100
𝑆𝑎𝑙𝑒𝑠

= × 100
= 61%

34
iii. Total Fixed Costs
ITEMS AMOUNT (Kshs.)

Salaries 336,000

Insurance 24,000

Loan repayment 240,000

Miscellaneous 36,000

TOTAL 636,000

iv. Break-even Point

= Total Fixed Cost × 100

Contribution Margin

= × 100
=Kshs 1042622

5.9. PROFITABILITY RATIOS

5.9.1 GROSS PROFIT PERCENTAGE
Gross Profit
× 100
𝑆𝑎𝑙𝑒𝑠

× 100
= 83%
5.9.2 Return on Equity
𝑁𝑒𝑡 𝑃𝑟𝑜𝑓𝑖𝑡
× 100
𝐶𝑎𝑝𝑖𝑡𝑎𝑙 𝐸𝑚𝑝𝑙𝑜𝑦𝑒𝑑 + 𝑛𝑒𝑡 𝑝𝑟𝑜𝑓𝑖𝑡

× 100

=50%
35
5.9.3 Return on Sales
𝑁𝑒𝑡 𝑃𝑟𝑜𝑓𝑖𝑡
× 100
𝑆𝑎𝑙𝑒𝑠

× 100
=37%

5.10 DESIRED FINANCING

= Pre-operational cost + working capital
= 539,000 + 81,000 = Kshs. 620,000

5.11 PROPOSED CAPITALIZATION

Savings = Kshs. 200,000

Loan from Equity = Kshs. 400,000

Creditors = Kshs. 20,000

TOTAL = Kshs. 620,000 BALANCE SHEET AS AT 31ST

DECEMBER 2023

5.12 BREAK-EVEN ANALYSIS

It is the point where the business will never be making profit or loss i.e. Total Revenue = Total
Expenditure.

TOTAL VARIABLE COSTS

ITEMS AMOUNT (Kshs)

Purchases 408,000

Electricity 18,000

Transport 171,000

Telephone 13,260

Advertisement 43,500

Water 4,800

36
Rent 60,000

Maintenance 150,000

TOTAL 868,560

i. Total Margin Contribution

= Sales -Total Variable Costs = 1,730650 - 868560 = Kshs 862090 ii.

Contribution Margin Percentage

𝐶𝑜𝑛𝑡𝑟𝑖𝑏𝑢𝑡𝑖𝑜𝑛 𝑀𝑎𝑟𝑔𝑖𝑛
= × 100
𝑆𝑎𝑙𝑒𝑠

= × 100
= 50%

iii. Total Fixed Costs

ITEMS AMOUNT (Kshs.)

Salaries 336,000

Insurance 24,000

Loan repayment 80,000

Miscellaneous 36,000

TOTAL 476,000

iv. Break-even Point

= Total Fixed Cost × 100

Contribution Margin

= × 100

37
=Kshs 952000

5.13 PROFITABILITY RATIOS

5.13.1 Gross Profit Percentage
Gross Profit
× 100
𝑆𝑎𝑙𝑒𝑠

× 100

= 76%
5.13.2 Return on Equity
𝑁𝑒𝑡 𝑃𝑟𝑜𝑓𝑖𝑡
× 100
𝐶𝑎𝑝𝑖𝑡𝑎𝑙 𝐸𝑚𝑝𝑙𝑜𝑦𝑒𝑑 + 𝑛𝑒𝑡 𝑝𝑟𝑜𝑓𝑖𝑡

× 100

=63%

5.13.3 Return on Sales

𝑁𝑒𝑡 𝑃𝑟𝑜𝑓𝑖𝑡
× 100
𝑆𝑎𝑙𝑒𝑠

× 100

=62%

BALANCE SHEET AS AT 31ST DECEMBER 2024

5.14 BREAK-EVEN ANALYSIS

It is the point where the business will never be making profit or loss i.e., Total Revenue = Total
Expenditure.

TOTAL VARIABLE COSTS

ITEMS AMOUNT (Kshs)

Purchases 504,000

38
Electricity 24,000

Transport 195,000

Telephone 14,700

Advertisement 55,500

Water 7,200

Rent 60,000

Maintenance 200,000

TOTAL 1,060,400

i. Total Margin Contribution

= Sales -Total Variable Costs = 1805400 - 1060400 = Kshs 745000 ii.

Contribution Margin Percentage

𝐶𝑜𝑛𝑡𝑟𝑖𝑏𝑢𝑡𝑖𝑜𝑛 𝑀𝑎𝑟𝑔𝑖𝑛
= × 100
𝑆𝑎𝑙𝑒𝑠
= × 100
= 41% iii. Total
Fixed Costs
ITEMS AMOUNT (Kshs.)

Salaries 336,000

Insurance 24,000

Loan repayment 80,000

Miscellaneous 36,000

TOTAL 476,000

39
iv. Break-even Point

= Total Fixed Cost × 100

Contribution Margin

= × 100
=Kshs 1160975

5.15 PROFITABILITY RATIOS

5.15.1 Gross Profit Percentage
Gross Profit
× 100
𝑆𝑎𝑙𝑒𝑠

× 100
= 72%
5.15.2 Return on Equity
𝑁𝑒𝑡 𝑃𝑟𝑜𝑓𝑖𝑡
× 100
𝐶𝑎𝑝𝑖𝑡𝑎𝑙 𝐸𝑚𝑝𝑙𝑜𝑦𝑒𝑑 + 𝑛𝑒𝑡 𝑝𝑟𝑜𝑓𝑖𝑡

× 100

=69%
5.15.3 Return on Sales
𝑁𝑒𝑡 𝑃𝑟𝑜𝑓𝑖𝑡
× 100
𝑆𝑎𝑙𝑒𝑠

× 100
=78%

BALANCE SHEET AS AT 31ST DECEMBER FOR THE FIRST THREE YEARS

5.16 BREAK-EVEN ANALYSIS

It is the point where the business will never be making profit or loss i.e. Total Revenue = Total
Expenditure.

40
TOTAL VARIABLE COSTS
ITEMS AMOUNT (Kshs)

Purchases 1,205,000

Electricity 49,200

Transport 516,700

Telephone 40,150

Advertisement 124,400

Water 16,600

Rent 180,000

Maintenance 450,000

TOTAL 2,582,050

i. Total Margin Contribution

= Sales -Total Variable Costs = 5222250 - 2582050 = Kshs 2640200

ii. Contribution Margin Percentage

𝐶𝑜𝑛𝑡𝑟𝑖𝑏𝑢𝑡𝑖𝑜𝑛 𝑀𝑎𝑟𝑔𝑖𝑛
= × 100
𝑆𝑎𝑙𝑒𝑠

= × 100
= 51% iii. Total
Fixed Costs
ITEMS AMOUNT (Kshs.)

Salaries 1,008,000

Insurance 72,000

Loan repayment 400,000

41
Miscellaneous 108,000

TOTAL 1,588,000

iv. Break-even Point

= Total Fixed Cost × 100

Contribution Margin

= × 100
=Kshs 3113725

5.17 PROFITABILITY RATIOS

5.17.1 Gross Profit Percentage
Gross Profit
× 100
𝑆𝑎𝑙𝑒𝑠

× 100

= 77%
5.17.2 Return on Equity
𝑁𝑒𝑡 𝑃𝑟𝑜𝑓𝑖𝑡
× 100
𝐶𝑎𝑝𝑖𝑡𝑎𝑙 𝐸𝑚𝑝𝑙𝑜𝑦𝑒𝑑 + 𝑛𝑒𝑡 𝑝𝑟𝑜𝑓𝑖𝑡

× 100

=83%

5.17.3 Return on Sales

𝑁𝑒𝑡 𝑃𝑟𝑜𝑓𝑖𝑡
× 100
𝑆𝑎𝑙𝑒𝑠

× 100

=60%

42
43