BUSINESS PLAN

FOR

SAMKIP WHEEL REPAIRS

AND BALANCING

PRESENTED BY : KIPKEMBOI SAMUEL

INDEX NO : 1061200182

SUPERVISOR : MADAM JEMIMAH

SUBMITTED TO : KENYA NATIONAL EXAMINATION COUNCIL

IN PARTIAL FULFILLMENT FOR THE AWARD

OF DIPLOMA IN AUTOMOTIVE
ENGINEEERING

CENTRE : KENYA COAST NATIONAL POLYTECHNIC

SERIES : July/August 2021

 DECLARATION
I Samuel Kipkemboi do declare that this is my original work of my hand and it has never been
presented before to any institution for any academic award or any other award.

I personally did all the activities and research of this work

NAME: KIPKEMBOI SAMUEL

SIGNATURE: ………………………………………………….

DATE: …………………….……………………………………

SUPERVISORS: MADAM . JEMIMAH

SIGNATURE: ………………………………………………….

DATE: …………………………………………………………..

i
 DEDICATION
I thank God for this far He has enabled me to reach. My special dedication goes to my parents
and my family at large who has kept encouraged me and paid my fees during my college period
throughout. I also dedicate this work to the National Youth Service for supporting me in terms of
school fees payment. May the Almighty God see their efforts through my success.

ii
 ACKNOWLEDGEMENT
I thank my Almighty God for giving me good health and strength throughout academic period. I
thank my classmate for rectifying spelling errors and also other mistakes. I also acknowledge Mr.
Diero Jacob, Madam Jemimah and Dr. Owala who supervised my work since the start up to the
end of it. God bless them abundantly. Lastly, I wish to acknowledge everyone who contributed to
the academic excellence and completion of this intellectual content.

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 TABLE OF CONTENT
DECLARATION........................................................................................................................................i
DEDICATION...........................................................................................................................................ii
ACKNOWLEDGEMENT.......................................................................................................................iii
TABLE OF CONTENT...........................................................................................................................iv
EXECUTIVE SUMMARY......................................................................................................................vi
1.0 BUSINESS DESCRIPTION..............................................................................................................vi
2.0 MARKETING PLAN.........................................................................................................................vi
3.0 ORGANIZATIONS AND MANAGEMENT PLAN........................................................................vi
4.0 OPERATIONAL PLAN....................................................................................................................vii
5.0 FINANCIAL PLANS........................................................................................................................vii
CHAPTER ONE........................................................................................................................................1
1.0 BUSINESS DESCRIPTION..............................................................................................................1
1.1 BUSINESS NAME............................................................................................................................1
1.2 BUSINESS LOCATION AND ADDRESS.......................................................................................1
Business Address.....................................................................................................................................3
1.3 FORM OF OWNERSHIP..................................................................................................................3
1.4 BUSINESS TYPE.............................................................................................................................3
1.5 PRODUCT AND SERVICES...........................................................................................................4
1.6 JUSTIFICATION OF THE BUSINESS OPPORTUNITY................................................................4
1.7 INDUSTRY.......................................................................................................................................4
1.8 GOALS OF THE BUSINESS...........................................................................................................5
1.8.1 SHORT TERM GOALS.................................................................................................................5
1.8.2 LONG TERM GOALS...................................................................................................................5
1.9 .1 ENTRY AND GROWTH STRATEGY........................................................................................5
1.9.2 GROWTH STRATEGY.................................................................................................................6
CHAPTER TWO.......................................................................................................................................7
2.0 MARKETING PLAN........................................................................................................................7
2.1 Market share......................................................................................................................................7
2.2 COMPETITION................................................................................................................................8
2.3 WAYS OF OVERCOMING COMPETITION..................................................................................9
2.4 METHOD OF PROMOTION AND ADVERTISEMENT..............................................................10
2.5 PRICE STRATEGY........................................................................................................................10

iv
 2.6 SALES TACTICS...........................................................................................................................11
2.7 DISTRIBUTION STRATEGY........................................................................................................11
CHAPTER THREE.................................................................................................................................12
3.0 ORGANIZATIONAL AND MANAGEMENT PLAN....................................................................12
3.1 ORGANIZATIONAL STRUCTURE..............................................................................................12
3.2 STAFFING AND THEIR QUALIFICATION................................................................................13
3.3 REMUNERATION AND ALLOWANCES....................................................................................15
3.4 TRAINING AND PROMOTION....................................................................................................16
Table 3.2 Employee Training schedule..................................................................................................16
3.6 BUSINESS CONTROL OF ASSETS.............................................................................................17
3.7 SUPPORT SERVICES....................................................................................................................17
CHAPTER FOUR...................................................................................................................................18
4.0 OPERATIONAL/ PRODUCTION PLAN.......................................................................................18
4.1 PRODUCT DESIGN AND DEVELOPMENT................................................................................18
4.2 PRODUCTION FACILITIES AND CAPACITY...........................................................................18
4.3 PRODUCTION STRATEGY..........................................................................................................19
4.4 PRODUCTION PROCESS.............................................................................................................22
4.5 GOVERNMENT REGULATIONS.................................................................................................23
CHAPTER FIVE.....................................................................................................................................25
5.0 FINANTIAL PLAN........................................................................................................................25
5.1 PRE-OPERATIONAL COST..........................................................................................................25
5.2 WORKING CAPITAL....................................................................................................................26
5.3CASH FLWO STATEMENTS.........................................................................................................27
5.3.1 CASH FLOW STATEMENT FOR YEAR ONE 2023.................................................................27
5.3.2 CASH FLOW STATEMENT FOR YEAR TWO 2024................................................................28
5..3.3 CASH FLOW STATEMENT FOR YEAR THREE 2025...........................................................29
5.4 PROFORMA INCOME STATEMENT..........................................................................................30
5.4.1 PROFORMA INCOME STATEMENT FOR YEAR ONE 2023.................................................30
5.4.2 PROFORMA INCOME STATEMENT FOR YEAR TWO 2024................................................31
5.4.3 PROFORMA INCOME STATEMENT FOR YEAR THREE 2025.............................................32
5.5 PROFORMA BALANCE SHEET..................................................................................................33
5.6 BREAK EVEN ANLYSIS..............................................................................................................34
5.7 FINANCIAL REQUIREMENT......................................................................................................37
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5.8 OPERATIONAL COSTS................................................................................................................37
5.9 PROPOSED CAPITALIZATION...................................................................................................38
5.10 EXPECTED PROFITABILITY RATIOS.....................................................................................38
5.11 POTENTIAL RISK AND OTHEIR SOLUTIONS.......................................................................39
APPENDIX...........................................................................................................................................40

vi
 EXECUTIVE SUMMARY

1.0 BUSINESS DESCRIPTION

The official name of the business will be Samkip Wheel Repairs and Balancing. The business
will carry out its operations within Nandi Hills Town at Nandi Hills Sub-County in Nandi
County. This business is a startup sole proprietorship intended to grow into a private company.
The main objective of the business is to gives services to the public that is wheel repairs and
balancing. I will also be selling wheels and their spares. The business is projected towards
enhancing and sustaining both the owner and his employees.

2.0 MARKETING PLAN

The business will serve both the residents of Nandi County, Neighboring Counties and all the
visitors in the County in need of the services. Customers will include all the vehicle owners
within Nandi County among which the residents of Nandi Town shall be the potential customers.
There is a lot of vehicles at the proposed location and this gives the proprietor a good
anticipation of the success of the business. This chapter also analyses the SWOT analysis of the
business so as to be in position to overcome challenges and take the advantage over the available
opportunity.

3.0 ORGANIZATIONS AND MANAGEMENT PLAN

The owner of the business will be the top manager since by the time the business commences, he
shall have earned a Diploma in Automotive Engineering. The business employees will be
recruited from the public according to set of requirements and the necessary training required.
The owner aims at providing good environment and remuneration to his employees for
motivation so as to increase motivation of the workers to produce their best. The business shall
have a general manager, a secretary, an accountant, a supervisor and the staff which shall be reof
the business to operate efficiently of the business needs, support services like postal and the
communication, baking, advertising, legal and consulting services.

vii
4.0 OPERATIONAL PLAN
The chapter presents a detailed discussion of the production facilities required and their capacity.
For the enterprises to start production there must be equipment to be used. The equipment will be
bought from Nairobi town where there are largest dealers who import from Japan direct. For the
enterprise to start initial capital of Kshs.350, 000 will be required. The business will employ both
skilled and unskilled. They will be employed depending on the qualification required in every
post. The human resources shall be very essential because the business shall entail a lot of
services rather than selling of goods. Water, electricity and telephone will be installed for use in
the enterprise to ensure work is carried out smoothly. The services shall be produced based on
the recommendation procedures by the clients to ensure high quality products and services.

5.0 FINANCIAL PLANS

The trading of the business will include loan from the bank of Ksh.250,000, Friend’s
contribution Ksh.150,00 nd owner’s savings of Ksh.500,000. The total anticipated start up assets
is of Ksh350,000. In this chapter, the proprietor shows the flows of cash in the business starting
from the preoperational costs, cash flow statements, income statement, balance sheet and all the
financial undertakings throughout the three financial years.

viii
 CHAPTER ONE

1.0 BUSINESS DESCRIPTION

The owner of the business will be Samuel Kipkemboi now pursuing a Diploma in Automotive
Engineering. This business will be a start-up business with the main purpose of providing the
surrounding community and the nearest market with wheel repair and balancing services. The
proprietor will use the knowledge acquired in the course to be a competent business man. The
business is set to commence on August 2022 which is just one year after the proprietor completes
his studies at Kenya Coast National Polytechnic.

1.1 BUSINESS NAME

The name of the business will be called SAMKIP WHEEL REPAIRS AND BALANCING. The
word Samkip is derived from the owner’s name Samuel Kipkemboi taking letter Sam from
Samuel and Kip from Kipkemboi. The therefore, the word Sampkip signifies the ownership of the
business. The remaining part that is ‘…WHEEL REPAIRS AND MAINTAINACNE’ represents the
king of business that the proprietor is going to operate in. Just as the name suggests, the business
shall venture into wheel repairs and balancing and ensure satisfactory to its clients.

1.2 BUSINESS LOCATION AND ADDRESS

The proposed shall be located in Nandi Hills town within Nandi Sub-County in Nandi County.
The entrepreneur chooses on this location because of the following reasons:

i. There is security
ii. Good infrastructure like roads, availability of power, enough water in the area
iii. Accessibility to the Nandi –Nairobi Highway where there are a lot of vehicle in need of
services
iv. High demand of wheel repairs and balancing in Nandi County
v. Good relationship amongst people in the area

The enterprise can be reached from Nairobi using the following direction

1
Figure 1.1 Location of the proposed business

NANDI HILLS STADIUM

NANDI
HILLS
SHOPS MARKET
SHOPS
ROAD

MODALLIC MPESA
KEPTUMO
BUS
STATION
District SAMKIP WHEEL
Commissioners REPAIR AND
Office BALANCING

KOITALEL SAMOEI
KOITALEL SAMOEI ROAD
ROAD

SHOPS

NANDI HILLS
PHARMACY

Source: Author 2021

2
Business Address
For any business to thrive it requires a postal address which is not only a statutory requirement by
the low but it plays a crucial role in the business since it gives direction to the customers.
Therefore, the proposed business will be contacted through the following family box number
shown below.

SAMKIP WHEEL REPAIRS AND BALANCING,

P.O BOX, 612-30300

NANDI – KENYA.

Email:

TELL: 0701406569

1.3 FORM OF OWNERSHIP

The proposed business that is Samkip Samkip Wheel Repair and Balancing will be under a sole
proprietor. This is because it is on a small scale and little capital is required to start. This means
that owner will have direct control of the business. The following are other advantages of this
business

i) The sole proprietor enjoys profits alone

ii) Quick in decision making
iii) No corporate tax payment
iv) Sale or transfer can take place at the direction of the sole proprietor

1.4 BUSINESS TYPE

The proposed business will operate on permanent basis, the operation of the business shall be
permanent throughout the week so as to allow customers get the services daily. The business shall
venture into provision of wheel repair services and also selling of wheel spares. This will allow the

3
business to attract more customers since in times of low demand of services selling of spares will
save the business from getting loss.

1.5 PRODUCT AND SERVICES

The business shall offer the service of repairing wheels and servicing them to ensure that they are
in good conditions. There shall also be goods to be sold to customers which are materials used in
preparing the wheel. This will enable the proposed business to maximize on profit because all the
services offered to clients shall go in line with the selling of goods thus maximizing profit.

The business will also offer the following services to its customers as a way of maintaining the
customers.

Credit services –the potential customers shall be allowed to receive the services in times they are
in need of it. This will make them trustworthy to the business since every person around the World
would like to get services where they can be lend in times they are down.

After sale services –those who buy the spares at our shop shall receive a commission of one third
of the services used to fit such spare parts on the wheels. This will attract many customers buy
spares at our shop and have their servicing fees reduced.

1.6 JUSTIFICATION OF THE BUSINESS OPPORTUNITY

The business will be viable alive because it aims at providing essential services to the public apart
from maximizing on profit.

 Attract more customers

 To provide good services to its customers
 To enhance quality product
 To provide durable and lasting material
 To maintain martial friendship amongst the customers

4
1.7 INDUSTRY
This industry will fall under Engineering; it will start as a small scale set which has future plans
for expansion. The capital required to start is Kshs.350,000 its capital will be gotten from the
following sources

Personal savings Kshs.120 000

Loan from banks and other organization Kshs.150 000

Friends Kshs.70 000

To add on the above, the business shall borrow and lease the property where possible and plan to
buy all the necessary tools within the first two years of the startup.

1.8 GOALS OF THE BUSINESS

For any business to be successful it must have realistic short term and long term goals. The goals
of the proposed business shall be as discussed below:

1.8.1 SHORT TERM GOALS

 To maximize profits through increased production services
 To establish new methods of advertisement to reach the market and people at large thus
creating services awareness
 To improve the living standards of inhabitants through creation of employment
opportunities
 To provide quality services using modern technology and employing qualified personnel
 To ensure customers satisfactory by providing quality services at affordable prices

1.8.2 LONG TERM GOALS

 To become a leading whole sale of wheel spares in Nandi County and in Kenya at large.
 To open more branches in other towns within the country.

5
1.9 .1 ENTRY AND GROWTH STRATEGY
To ensure that Samkip wheel repairs and balancing services and goods are acceptable in the
market, the following strategies of advertisement shall be put in place:

 Posters
 Word of mouth
 Television
 Radio
 Mafundi stage- indicators

1.9.2 GROWTH STRATEGY

The business has established the following strategies in order for it to expand:

a) By creating business awareness in the market to attract more customers which will lead to
expansion of business
b) Opening up new market segment as a way of expanding operators in case the business
finds buyers in other areas.

6
 CHAPTER TWO

2.0 MARKETING PLAN

Samkip wheel repair and balancing will have the categories of customers and they are:

i. Domestic customers
ii. Intuitional customers
iii. Commercial customers

Domestic customers

These are individual customers who will come from within and outskirts of Nandi County. Since
there is increasing number of motor vehicles in the area, the residents are building and
constructing, they will provide ready market for goods.

Institutional customers

The business will sell its commodities to other service providers within the town since there are
other technicians in the town and outside the town.

Commercial customers

These are known as middlemen. The business expects to have commercial that will buy products
and sell to customers within their locality

2.1 Market share

The estimated customers in the area around fifty thousand people and the business will expect to at
least possess a large average share of the customers.

7
 Sales

18%

ALLOY WHEEL REPAIR

SPECIALISTS
40%
RIM DOCTOR
SAMPKIP WHEEL REPAIR
12%
AND MAINTAINANCE
FIJI WHEEL AND RIM REPAIR
SERVICES

30%

Source: Author 2020

2.2 COMPETITION
The field study has shown that there will be two kinds of competitors that SAMPKIP WHEEL
REPAIRS AND BALANCING will face:

a) Direct competitor
b) Indirect competitor

But the business will expect stiff competition from four direct competitors who are discussed
below as shown in the table.
8
 Name of the business Weakness Strength
Alloy wheel repair specialists Poor personnel It’s well located
Rim Doctor It’s very small and sells very Can be easily spotted by
little products customers
People choice hardware It access not render offer sales Highly skilled and trained
services personnel
Fiji wheel and Rim repair Its poorly located Vast in exploitation of their
services personnel
Table 2.1 Market share with competitors
Source: Author 2020

2.3 WAYS OF OVERCOMING COMPETITION

The business will overcome competitors through the following ways:

Advertising

To create awareness of the business to the customers; the business will print media posters and
sign posts. Electronic media may also be used if need be. The locall radio stations may be used.

Offering discount

Promotions will be done by giving discounts to customers and also free transport will be offered to
those who buy spares in bulky at ago.

Time management

The owner will open business early in the morning at 7.00a and also relatively late in the evening
at 8:00pm

2.4 METHOD OF PROMOTION AND ADVERTISEMENT

The following methods will be used to create awareness since business is new in the market. For
each method there are attached costs that shall be incurred since it will be implemented by humans
who need to refresh time after time.

9
They are:

Posters – Sh. 1000

Magazines Sh. 5000

Word of mouth Sh500

Television Sh. 5000

Total Sh. 11500

2.5 PRICE STRATEGY

The price of product will be determined by cost of production cost of labor, transport cost and
profit. On the other hand, the business will sell its commodities relatively cheaper than its
competitors so as to provide affordable services to the public.

a) Competitive pricing

Its adjustment on pricing will be observed depending on the prices prevailing on the market in
order to maintain the degree of integrity of the business

b) Psychological pricing

They will be done by business on the customers deemed and the potentiality the prevailing
condition, seasons or accession either pricing method could be, products on low demand one
priced low and first running product are priced high

c) Discounts and create facilities

Discount will be allowed to those customers who buy goods and services in large quantities.
Credit facilities will be for those customers who come frequently to buy goods and services
especially when the stock is large in the store in case of spares.

10
2.6 SALES TACTICS
The business will be dealing its goods and services on cash basis daily and credit for the common
customers in the business in case they are in need of it. The business will also offer proper packing
and free transport to the customers.

2.7 DISTRIBUTION STRATEGY

This is how goods will reach the customers. It may directly or indirectly. The services shall be
offered to the customers directly from the staff. On the other hand, the spares will be sold to
retailors who will further resale to their customers. There shall also be customers who shall buy
spares directly and use them to service the vehicles for their clients. All these customers are of
great importance to the business and therefore they should be handled with care in order to attain
the required standard.

CHAPTER THREE

3.0 ORGANIZATIONAL AND MANAGEMENT PLAN

Organizational and management is a blue print for the way the proposed entity will run, both day
to day activities and on long term. It includes the standards methods of performing various
activities handling funds, dealing with actual work of the business and addressing the way
employee in the organization do their jobs.

11
Management –Is the administration of an organization whether it will be an enterprise on profit
organization or government body. Management includes the activities or setting up the strategy of
an organization and coordinating the efforts of its employees.

The business will have various management team e.g General manager, account clerk,
storekeeper, salesman, and watchman. The organizational management design will contribute to
the quality of products or services output in the business.

3.1 ORGANIZATIONAL STRUCTURE

In order to define the flow of authority, relationship among workers and each person’s position;
the entrepreneur decided to come up with the organizational structure so as to attain clarity.
The figure below show the flow of the organization structure of the entity:

Figure 3.1 The organization structure

C.E.O –THE OWNER

GENERAL MANAGER

12
Security MARKETING OFFICRE HUMAN RESOURCE WHEEL REPAIR AND
OFFICER BALABNCING SUPERVISOR

STAFF
ACCOUNTANT

Source: Author 2020

3.2 STAFFING AND THEIR QUALIFICATION

The owner shall be the C.E.O of the proposed business and there shall also be other employees as
discussed below:

A) GENERAL MANAGER

Qualifications

 Must have a diploma in business management

 Must be of at least two to three years’ experience
 Must be between 35 to 40 years at age
 Must be a computer literate

Duties

 Supervising day to day activities of the business and works

 Carrying out long term goals
 Coordinating the enterprise to run successful
 Plan business programmes and duties of employees

B) ACCOUNTANT

Qualification

 Be a bearer of certificate public account (CPA) I and II

13
 Must be a computer literate
 Should be fluent in both English and Kiswahili
 Must have been working with an experience of more than 2 years

Duties

 Will carry out all financial transaction

 Updating all account books
 Prepare budget and statement of account

D) STAFF

Qualification

 Fluent in both English and Kiswahili

 A computer literate
 Craft certificate in sale management

Duties

 Handing corresponding accordingly and informing the manager

 Preparing orders of the customers
 Can receive cash where necessary
 Handling customers inquires

E) WATCHMAN (SECURITY)

Qualifications

 Must have O level of education

 Must be of sound mind
 Must be healthy and has proof from a recognized medical institution

14
 Working experience of not less than two years
 Certificate of good conduct
 Have at least 30 years of age

Duties and responsibilities

 Provide maximum security

 Act as a messenger
 In charge of security guards

3.3 REMUNERATION AND ALLOWANCES

The following table shows the amount of money to be given to employees

Table 3.1 Remuneration and allowances

Position No. of employees Basic salary Medical allowance Gross pay

Manager 1 10,000 3000 13000

Account clerk 1 6,800 1200 8000

Sales Manager 2 3,500 1000 45000

Marketing manager 1 2000 800 2800

Security man 1 1300 600 1900

Source: Author 2020

3.4 TRAINING AND PROMOTION

The business will ensure that its employees are well trained by sending them to various seminars
for the benefit of the business.

The business will ensure that employees are trained by providing them short courses and
vocational training

The businesses will promote its employees from one level to another by using

 Hardworking of the employees

15
  Level of education of the employees

The business will consider the promotion of employees after a period of at least two years.

Table 3.2 Employee Training schedule

Personnel Training period Duration

Manager April 3 weeks

Account clerk December 4 weeks

Sales Manager August 2 weeks

Store keeper April 5 weeks

Source: Author 2020

3.5 LICENCES PERMIT AND BY LAWS

SAMKIP WHEEL REPAIRS AND BALANCING will receive a license to enable it run
smoothly. The license will be obtained from CIC insurance company hence the cost will be Ksh.
2000

The other legal requirements that the enterprise need in order to compile include:

 First Aid kit. In case of a minor accident of an employee

 Fire extinguishers in case of fire in the enterprise

3.6 BUSINESS CONTROL OF ASSETS

The following are ways in which the business will control its assets:

Financial Management

It will be under the accounts clerk, he will be responsible for all financial statements of every
department within the enterprise

16
Insurance

The business will insure all the assets against theft or fire at the cost of Ksh. 5000. It will obtained
insurance cover from CIC insurance company.

3.7 SUPPORT SERVICES

The following are support staff and services which help the business to run smoothly

a) Banking services

The account clerk will ensure all the funds kept in bank for security and books of account are
property kept.

b) Management advisor

The Management term e.g general manager, sales man storekeeper, watchman will be responsible
to ensure all the enterprise activities run smoothly and will cooperate to solve solutions to any
problem affecting the enterprise.

c) Insurance services

The manager will ensure all the assets in the enterprise are insured in case of a loss by the
insurance company.

CHAPTER FOUR

4.0 OPERATIONAL/ PRODUCTION PLAN

4.1 PRODUCT DESIGN AND DEVELOPMENT

The business on commencement will be selling its services and goods and the customers will be
motor vehicle owners. The cost of selling its services will depend according to the type, size and

17
make of the vehicle and according to its puncture. The firm will expand steadily as its planning to
reach a wide market through the introduction of the new technology as explained in the market
structure.

Modern technology will be readily available in the business to help in the easy diagnosis of the
wheels. Due to changes of technology day by day the business has plan to be joint with their
supplier of diagnosis machine i.e. Lenovo computers system so as in case of change in technology
will communicate and report in order to install the new information in the fault diagnosis
computer

4.2 PRODUCTION FACILITIES AND CAPACITY

The business will need to buy some facilities required before the business start operating some of
the spare parts will be manufactured in the business workshop since that it’s a jua kali sector. This
will facilitate availability of spare parts and easy maintenance, it is cheaper hence enable the
owner to acquire many equipment. The equipment will facilitate effective running of the business,
facilities required, the number and their cost is as tabulate below:

Table 4.2 Production facilities and capacity

Equipment Quantity Suppliers Cost @ each Total

cost

18
 Welding machine 1 Base electrician 20,000 20,000

A meter/tester 1 Base electrical 5,000 5,000

Spray painting machine 1 Neon and jack lift 15,000 15,000

Lifting hydraulic jack 2 Neon and jack lift 10,000 20,000

Computer fault diagnosis system 2 Lenovo computer 5,000 10,000

system
Tool box complete 2 15,000 30,000
Mohamed
Grinder 2 5,000 10,000
hardware

Furniture and fitting 2 5,000 10,000

Muti Ltd

Meme furniture
Lining machine 3 6,000 18,000
Nairobi best liners

Total 138
Source: Author 2021

4.3 PRODUCTION STRATEGY

The service required in this proposed enterprise will be achieved from producers to customer
direct. The service will be available throughout the year and will be conducted in the business by
the working team. This will ensure fluctuating demand will be well catered for hence satisfaction
of customers will be maintained. Service will be of high quality and standard. The entrepreneur
will incur labour cost on daily and monthly basis to employment of persons who will help in the
operation of the business. The effective cost of employee salaries per day provision will be
incurred as shown in table below.

Table 4.3. Employees’ salary estimation

Personnel No Salaries in daily Salaries per month

19
 manager 1 19,000

Accountant 1 10,000

Automotive technician 1 14,000

Welding and fabrication 1 11,000

technician

Auto electrical technician 1 10,000

Mechanical technician 1 12,000

Security officer 1 5,000

Total 7 81,000

Source: Author 2021

The daily labour cost incurred by the entrepreneur is Ksh . therefore, the labour cost is Ksh
81,000. The enterprise will incur production expenses doing operation

The table below shows a list of monthly stock of materials that will be required in the workshop
Table 4.3.1 Monthly stock of materials that will be required in the garage.
Materials Quantity cost TOTAL
Gas supply in cylinder 2 @ 4,000 8,000
Electrical marking top rolls 3 500 500
Welding rods 4 dozen 4 @ 250 1,000
Soap and detergent 10 @ 90 900
70 liters paraffin and diesel 70 @100 7,000
Super glue @ 50 40 @50 2,000
Grease and oil 5 @100 500
Grinder file @ 200 10 @200 2,000
Plain job cards 1 @500 500

20
 Working instructors’ tickets 6 @200 1,200
Sand papers 7 @100 700
Stationery and record books 6 @400 2,400

TOTAL 162 26,700

Source: Author 2021

Table 4.3.2 The overhead cost.

ITEMS MONTHLY COST
Telephone 5,000
Business, premises, rent 20,000
Postage fee 6,000
Advertisement 20,000
Licenses and permits 15,000
Water bill 2,000
Electricity bill 3,000
Repair and maintenance 5,000
Transport 8,000
Insurance 20,000
Salaries
TOTAL 190,000

Source: Author 2021

These are the cost that will be incurred at the proposed business which will be beside labour and
service cost. She will also require some amount in order to meet the day to day activities.
The owner would focus at the future, as the business grows up, He will put aside some capital for
expansion of the business so as to meet the need of many customers in the area.

21
4.4 PRODUCTION PROCESS
The following are steps followed during the operations of the firm.
i) Reception
ii) Fault diagnosis
iii) Repair /service section
iv) Verification and testing
v) Clearance and payment

a. Reception
This is the first step where the customers will be and directed to the next step according to the
problems or kind of service they need.
b. Fault diagnosis
This is the second step where the vehicles are assessed by the use of fault diagnosis electrical
computer machine by an automotive engineering technician who is well trained and he notices the
specific point of the problem.
c. Repair/ service section
This is the third process whereby the problem is already noted and the engineers work upon it at
this stage.
d. Verification and testing
This is where the vehicle after check-up, service and repair are taken for road test to make sure
that customers are satisfied with the service.
e. Clearance and payment
This is the last step where customers will pay to accountant after being issued with break down
showing the kind of service, repair and the total cost incurred.

Internal factors that may affect production process

Due to the growth of the business and demand of the people employees may opt to steal materials
and machines in order to open their business.
Failure and breakage of machines may reduce the rate of work done in the business.
Power failure will also contribute to discontinuity of work leading to poor production of work
done since most of machines use electricity.

22
 Measures to minimize internal problems that may affect product
The business intends to buy generator to supplement power failure to avoid power interruption.
The business rule that the right machine to be used for the right work or job
Employees who will be found with theft cases will be fined double and be suspended from work
will follow.

Eternal factors that may affect production process

Fire could be caused willingly or accidentally, to tackle this extinguisher will be provided and
employees will be trained on how and ways and means of using them.
Competition due to new competitors entering in the business.

Measures to minimize external factors that may affect production process

The business intends to continue offering services of high quality and standard so that it can retain
its customers.
Employees will be trained on ways and means of working with fire extinguishers.

4.5 GOVERNMENT REGULATIONS

Licenses, permits
The business will obtain licenses and permits from the ministry of trade and industry from Nandi
County Council. These documents include:
 Trade licenses as required by trade licenses act cap 497
 Permits and certificate from the local authorities
 The business will remit taxes and NSSF contribution
The business will adhere to the by-laws of the following
 Local government act 265 and the By-laws of the Nandi County Council
 Trade union act cap 497 which offer trade licenses and other permits
 Workmen compensation act cap 490 which compensate for industries, damage, or deaths
of workers on site.
 The business will also observe public act cap 479 that relates to sanitary and hygienic
conditions such as drainage, cleanliness and ventilation in offices and work place.

23
The business will offer safety gears such as overall to workers while working on site.

24
 CHAPTER FIVE

5.0 FINANTIAL PLAN

This section outlines the budget of the money available so as to satisfy the needs and requirement
for each unit of the project.

5.1 PRE-OPERATIONAL COST

Bright Light Electricals will incur the following expenses before the business commences.

PARTICULARS COST (KSHS)

Premises 10,000

Market research 5,000

Equipment and machines 200,000

Fitting and furniture 20,000

Advertisement and promotion 10,000

Insurance 3,000

Water, electricity and telephone 20,000

Initial stock 5,000

TOTAL 768,000
Source: Author 2021

25
5.2 WORKING CAPITAL
This is the amount of money needed in the immediate business activities.

CURRENT ASSET AMOUNT

Cash at hand 200,000

Cash at bank 300,000

Stock 500,000

Debtors 100,000

TOTAL 1,100,000

CURRENT LIABILITIES

Bank loan + investment 100,000

Other creditors 70,000

TOTAL 170,000
Source: Author 2021

Working capital = Total Current Assets – Total Current Liabilities

1,100,100-170,000 = 930,000 KSHS.

26
 5.3CASH FLWO STATEMENTS
5.3.1 CASH FLOW STATEMENT FOR YEAR ONE 2023
ITEM JAN FEB MAR APR MAY JUNE JULY AUG SEPT OCT NOV DEC TOTAL
Opening Cash 100,000 100,000 100,050 54,000 160,000 37,000 70,000 70,000 80,000 2,000 20,000 4,000 797,050
Cash sales 120,000 110,000 100,000 150,000 100,000 110,000 200,000 200,000 105,000 105,000 150,000 250,000 1,700,000
Debtors 2,000 50,000 2,500 6,000 4,000 50,000 16,500 7,000 3,500 6,000 12,500 2,000 162,000
Total cash inflow 222,000 260,000 202,550 210,000 264,000 197,000 286,500 277,000 188,500 113,000 182,500 256,000 1,971,550
Purchases 20,000 30,000 100,000 10,000 100,000 90,000 10,000 35,000 10,000 405,000
Creditors 250 500 750 1,000 390 250 500 3,640
Salaries and 60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000 720,000
wages
Interest on loan 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 27,000
Rent 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 120,000
License 10,000 10,000
Insurance 2,000 2,000 2,000 2,000 2,000 2,000 12,000
Electricity 1,000 1,020 1,000 2,000 2,500 2,000 1,050 1,000 1,080 1,000 2,000 2,000 17,650
Water 350 400 500 300 250 450 500 600 450 500 550 480 5,330
Telephone and 700 400 650 600 400 500 550 460 700 800 450 500 6,710
postage
Transport 1,000 900 1,000 1,050 1,300 1,300 1,200 1,000 900 800 1,020 1,000 12,470
Advertisement 2,000 2,000 2,000 2,000 8,000
Repairs 300 1,000 700 600 500 400 100 200 3,800
Stationary 500 500 1,000 300 500 600 300 3,700
Total cash 110,850 104,220 179,100 79,950 90,050 175,050 171,550 76,560 89,530 79,190 114,770 84,480 1,355,300
outflow
Net cash 111,150 155,780 23,450 130,050 173,950 21,950 114,950 200,440 98,970 33,810 67,730 171,520 1,303,750
Accumulative 111,150 266,930 290,380 420,430 594,380 616,330 731,280 731,720 1,030,690 1,064,500 1,132,230 1,303,750

27
cash

5.3.2 CASH FLOW STATEMENT FOR YEAR TWO 2024

ITEM JAN FEB MAR APR MAY JUNE JULY AUG SEPT OCT NOV DEC TOTAL
Opening Cash 164,000 90,000 90,000 10,000 7,000 5,000 10,000 10,000 90,000 50,000 7,000 7,050 459.050
Cash sales 120,000 80,000 9,000 50,000 97,180 65,000 12,000 40,000 80,000 50,000 100,000 700,000 1,403,180
Debtors 3,000 2,000 3,000 50,000 4,000 4,500 50,000 20,000 30,000 2,000 4,000 5,000 177,500
Total cash inflow 287,000 172,000 102,000 110,000 108,180 74,500 72,000 70,000 119,000 102,000 111,000 712,050 2,039,730
Purchases 10,000 5,000 7,000 3,000 2,000 1,000 1,000 5,000 3,000 37,000
Creditors 750 500 4,000 300 200 100 2,250
Salaries and 60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000 720,000
wages
Interest on loan 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 12,000
Rent 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 36,000
License 10,000 10,000
Insurance 2,000 2,000 2,000 2,000 2,000 2,000 12,000
Electricity 2,000 1,000 570 800 900 1,000 500 280 500 800 1,000 500 9850
Water 750 750 600 500 1,000 1,050 500 500 700 500 1,000 500 8,300
Telephone and 800 800 800 500 800 800 500 300 300 300 900 500 7,300
postage
Transport 1,000 900 1,000 5000 1,000 1,050 500 500 500 500 1,050 500 9,000
Advertisement 2,000 2,000 2,000 2,000 2,000 2,000 12,000
Repairs 800 500 700 1,000 3,000
Stationary 1,000 1,000 1,500 1,000 500 1,000 6,000
Total cash 95,100 73,950 79,970 69,700 75,400 69,650 70,000 66,580 71,000 66,300 79,050 69,000 884,700
outflow
Net cash 191,900 98,050 22,030 40,300 32,780 5,850 2,000 3,420 48,000 35,700 31,950 643,050 1,155,030

28
Accumulative 191,900 289,950 311,980 352,280 385,060 390,910 392,910 396,330 444,330 480,30 511,980 1,155,030
cash

5..3.3 CASH FLOW STATEMENT FOR YEAR THREE 2025

ITEM JAN FEB MAR APR MAY JUNE JULY AUG SEPT OCT NOV DEC TOTAL
Opening Cash 108,050 30,000 100,000 80,050 100,000 70,000 71,000 90,050 57,050 300,000 200,000 10,000 1,216,2000
Cash sales 400,000 70,000 45,000 90,000 50,000 30,000 38,050 95,050 90,000 300,000 100,000 90,000 1,398,100
Debtors 10,000 5,000 1,500 2,000 1,570 1,000 3,000 1,000 2,000 500 1,000 2,000 30,570
Total cash inflow 518,050 105,000 146,500 172,050 151,570 101,000 112,050 186,100 149,050 600,500 301,000 102,000 2,644,870
Purchases 130,000 10,000 10,000 20,000 10,000 30,000 100,000 70,000 50,000 30,000 460,000
Creditors 2,000 500 1,000 500 100 200 300 600 5,200
Salaries and 60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000 720,000
wages
Interest on loan 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 36,000
Rent 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 36,000
License 10,000 10,000
Insurance 2,000 2,000 2,000 2,000 8,000
Electricity 2,000 1,050 2,000 1,500 1,999 1,881 1,599 1,500 1,500 2,000 1,500 1,050 19,579
Water 1,000 1,050 800 1,000 1,500 800 700 1,000 1,500 700 900 800 11,300
Telephone and 800 800 850 1,000 900 750 600 500 400 800 900 800 9,100
postage
Transport 1,000 1,050 2,000 500 1,000 1,000 850 700 1,000 800 1,000 1,000 11,900
Advertisement 2,000 2,000 2,000 2,000 8,000
Repairs 400 700 1,000 290 300 400 600 500 4,190
Stationary 1,000 500 1,500 500 600 200 550 4,850
Total cash 218,200 80,650 82,650 96,000 83,399 70,821 104,249 170,200 140,950 74,800 121,450 100,750 1,344,199
outflow
Net cash 299,850 24,350 63,850 76,050 68,171 30,179 7,801 15,900 8,100 525,700 179,550 1,250 1,300,751

29
Accumulative 299,850 324,200 388,050 464,100 532,271 562,450 570,251 586,151 594,251 1,119,951 1,299,50 1,300,751
cash 1

30
5.4 PROFORMA INCOME STATEMENT

5.4.1 PROFORMA INCOME STATEMENT FOR YEAR ONE 2023

ITEM AMOUNT (KSHS)
Sales 1,700,000
Cost of goods sold 405,000
Cross profit 1,295,000
Expenses:
Wages 720,000
Rent 120,000
Water 5,330
Telephone 6,710
Electricity 17,650
Advertisement 8,000
Stationery 3,700
Postage 6,710
Insurance 12,000
Transport 12,470
Depreciation 300
Interest 27,000
License 10,000
Repairs 3,800

TOTAL 958,160
Net profit before tax 936,840
Tax 10% 33,684
Net profit after tax 303,156

31
5.4.2 PROFORMA INCOME STATEMENT FOR YEAR TWO 2024
ITEM AMOUNT (KSHS)
Sales 1,403,180
Cost of goods sold 37,000
Cross profit 1,366,180
Expenses:
Wages 720,000
Rent 36,000
Water 8,300
Telephone 7,300
Electricity 9,850
Advertisement 12,000
Stationery 6,000
Postage 7,300
Insurance 12,000
Transport 9,000
Depreciation 3,000
Interest 12,000
License 10,000
Repairs 3,000

TOTAL 855,750
Net profit before tax 510,430
Tax 10% 51,043
Net profit after tax 459,387

32
5.4.3 PROFORMA INCOME STATEMENT FOR YEAR THREE 2025
ITEM AMOUNT (KSHS)
Sales 1,398,100
Cost of goods sold 460,000
Cross profit 938,100
Expenses:
Wages 720,000
Rent 36,000
Water 11,300
Telephone 9,100
Electricity 19,579
Advertisement 8,000
Stationery 4,850
Postage 9,100
Insurance 8,000
Transport 11,900
Depreciation 2,000
Interest 36,000
License 10,000
Repairs 4,190

TOTAL 890,019
Net profit before tax 48,081
Tax 10% 4,808.1
Net profit after tax 43,272.9

33
5.5 PROFORMA BALANCE SHEET
SAMKIP WHEEL REPAIRS AND BALANCING
BALANCE SHEET
AS AT 31ST DECEMBER FOR THREE YEARS
ITEM YEAR 1 (KSHS) YEAR 2 (KSHS) YEAR 3 (KSHS)
ASSETS:
FIXED ASSETS
 Building 2,000,000 1,999,000 1,500,000

 Tools and 100,000 80,000 80,000

equipment 500,000 500,00 500,000

 Vehicle
2,600,000 2,579,000 2,080,000

TOTAL
CURRENT ASSETS:
 Cash at hand 1,278,130 740,030 1,300,721
and bank
 Stock 405,000 37,000 460,000

 Debtors 162,000 177,500 30,570

TOTAL 1,845,130 954,530 1,791,291

LIABILITIES:
LONG-TERM
LIABILITIES
 Capital 797,050 459,050 1,216,200

 Bank loan 100,000 100,000 100,000

SHORT-TERM
LIABILITIES:
3,640 2,250 5,200
 Creditors

900,690 561,300 1,321,400

TOTAL

34
5.6 BREAK EVEN ANLYSIS
1) Gross Profit for the First Year
Gross profit = Sales – Direct cost
=1,700,000 – 1,295,000 = Kshs405,000

2) Gross profit margin for the first year

Gross profit = Gross profit x 100
Sales
= 405,000 x 100
1,700,000

= 23.83

3) Operating expenses for the first year

EXPENSES AMOUNT (KSHS)

Wages 170,000

Rent 120,000

Water 5,330

Telephone 6,710

Electricity 17,650

Advertisement 8,000

Stationary 3,700

Postage 6,710

Insurance 12,000

35
Transport 12,470

Depreciation 300

Creditors 3,640

Interest 27,000

Licenses 10,000

Repairs 3,800

TOTAL 957,310
Source: Author 2021

4) Breaking level of sales for the first year

Expenses x 100
Breakeven level =
Gross profit margin

957,310 x 100
¿
23.82
= Kshs40,189,33.67

5) Break even revenue

= Total sales – total cost of expenses

= 1,700,000-957310

= Kshs742,690.

Contribution x 100
Contribution ratio %=
Total sales

36
 742,690 x 100
¿
1,700,000

= 43.69

6) Break even turn over

= fixed cost x 100

Contribution margin%

957310 x 100
¿
46.69

=2.05%

7) Break even units

= contribution margin
Fixed cost

46.69
¿
957,310

= 0.000049%

5.7 FINANCIAL REQUIREMENT

The business requires the following amount of money in order to commence.

37
 ITEM AMOUNT (KSHS)
Preoperational cost 768,000
Working capital 930,000
Fixed assets 7,257,000

TOTAL 8,957,000

5.8 OPERATIONAL COSTS

ITEM AMOUNT (KSHS)
Telephone 1,000
Transport 8,000
Installation cost 15,000
License 15,000
Permits 1,000
Water 1,500
Electricity 2,000
Market research 5,000

TOTAL 48,000

5.9 PROPOSED CAPITALIZATION

SOURCE AMOUNT (KSHS)
Personal savings 500,000
Bank loan 250,000

38
 Friends and Relative 150,000

TOTAL 900,000

5.10 EXPECTED PROFITABILITY RATIOS

The gross profit for the three years.

1. Gross profit margin year one

Gross profit margin = gross margin x 100

Sales

405,000 x 100
¿
1,700,000

= 23.82%

2. Gross profit margin year two

Gross profit margin = gross profit x 100

Sales

471,180 x 100
¿
1,408,180

=33.46%

3. Gross profit margin year three

Gross profit margin = gross profit x 100

Sales

39
 1,068,100 x 100
¿
1,398,100

=76.39%

5.11 POTENTIAL RISK AND OTHEIR SOLUTIONS

RISK SOLUTIONS
Fire Effective firefighting equipment will be provided in
the premise.

Theft The security officer will help to guard the premise

against theft and each employee to report any
suspected person or item in the premise.

Injuries The business will provide to the employees the

safety equipment so as to avoid injuries and death
of persons in the premise. The workers are also
encouraged to care for themselves and for the
others. Carelessness will highly be highly
discouraged in the business.

The business will also be insured against any kind of risk that may arise during the
operation.

40
APPENDIX

41