BUSINESS PLAN

MJUKU AGRO FORESTRY ENTERPRISE

PRESENTER : GRACE ANZAZI ONESMUS

COURSE : DIPLOMA IN ENVIROMENTAL SCIENCE AND

TECHNOLOGY

CENTER CODE : 106120

INDEX NO : 1061201189

INSTITUTION : KENYA COAST NATIONAL POLYTECHNIC

SUPERVISOR : MADAM KATHURE

PRESENTED TO : KENYA NATIONAL EXAMINATION COUNCIL IN

PARTIAL FULFILMENT FOR THE AWARD OF

DIPLOMA IN ENVIROMENTAL SCIENCE AND

TECHNOLOGY

i
 DECLARATION
I declare that this business is mine and it will run under me and no one else.

NAME: GRACE ANZAZI ONESMUS

SIGNATURE: …………………………………………….DATE: ………………………………….…

SUPIVISOR;

NAME: MADAM KATHURE

SIGNATURE: …………………………………….DATE: …………………………………..

ii
 ACKNOWELEDGEMENT

I would like to thank my supervisor for conducting working tirelessly in completion of this
project. I also want to acknowledge my family for supporting me through the project.

All above thank the Almighty for giving me strength through the writing process.

iii
 DEDICATION

The project was dedicated to my family who have supporting me through the process of writing
not leaving my supervisor Mr. Masita who help me in drafting of the project.

iv
TABLE OF CONTENTS
DECLARATION..............................................................................................................................................ii
ACKNOWELEDGEMENT...............................................................................................................................iii
DEDICATION................................................................................................................................................iv
EXECUTIVE SUMMARY.................................................................................................................................v
1.1 BUSINESS DESCRIPTION.........................................................................................................................v
1.2 MARKETING PLAN..................................................................................................................................v
1.3 ORGANISATION AND MANAGEMENT PLAN.........................................................................................v
1.4 PRODUCTION AND OPERATIONAL PLAN..............................................................................................v
1.5 FINANCIAL PLAN....................................................................................................................................v
CHAPTER ONE..............................................................................................................................................6
1.0 BUSINESS DESCRIPTION.........................................................................................................................6
1.1 BUSINESS NAME....................................................................................................................................6
1.2 BUSINESS LOATION................................................................................................................................6
1.2.1 BUSINESS ADDRESS............................................................................................................................6
1.3 FORM OF THE BUSINESS OWNERSHIP...................................................................................................7
1.4 TYPE OF THE BUSINESS..........................................................................................................................7
1.5 PRODUCTS AND SERVICES.....................................................................................................................8
1.5.1 PRODUCTS..........................................................................................................................................8
1.5.2 SERVICES.............................................................................................................................................8
1.6 JUSTIFICATION OF OPPORTUNITY..........................................................................................................8
1.7 THE BUSINESS INDUSTRY.......................................................................................................................8
1.8 GOALS AND OBJECTIVES........................................................................................................................8
1.8.1 LONG TERM GOALS............................................................................................................................8
1.8.2 SHORT TERM GOALS...........................................................................................................................9
1.9 ENTRY AND GROWTH OF THE BUSINESS...............................................................................................9
CHAPTER TWO...........................................................................................................................................10
2.0 MARKETING PLAN................................................................................................................................10
2.1 CUSTOMERS........................................................................................................................................10
2.1.1 DOMESTIC CUSTOMERS...................................................................................................................10
2.1.2 COMMERCIAL CUSTOMERS..............................................................................................................10
2.3 COMPETITION......................................................................................................................................11
2.4 S.W.O.T ANALYSIS................................................................................................................................13

v
2.5 METHODS OF PROMOTION AND ADVITISEMENT................................................................................14
2.5.1 PROMOTION.....................................................................................................................................14
2.5.2 ADVERTISEMENT..............................................................................................................................14
2.6 PRICING STRATEGY..............................................................................................................................14
2.7 SALE TACTICS.......................................................................................................................................15
2.7.1 DIRECT SELLING................................................................................................................................15
2.7.2 INDIRECT SELLING.............................................................................................................................15
2.8 DISTRIBUTION STRATEGY....................................................................................................................15
2.8.1 SINGLECHANNEL OF DISTRIUTION....................................................................................................15
2.8.2 MULIPLE CHANNEL OF DISTRIBUTION..............................................................................................15
CHAPTER THREE........................................................................................................................................17
3.0 HUMAN RESOURCE.............................................................................................................................17
3.1 ORGANIZATIONAL STRUCTURE............................................................................................................17
3.2 MANAGERS AND QUALIFICATIONS......................................................................................................17
3.3 PERSONAL, NUMBER AND DUTIES.......................................................................................................18
3.4 RECRUITMENT, TRAINING AND PROMOTION......................................................................................18
3.4.1 RECRUITMENT..................................................................................................................................18
3.4.2 TRAINING..........................................................................................................................................18
3.4.3 PROMOTION.....................................................................................................................................19
3.5 REMUNARATION AND INCENTIVES.....................................................................................................19
3.5.1 REMUNARATIONS.............................................................................................................................19
3.5.2 INCENTIVES.......................................................................................................................................19
3.6 LICENCE, PERMIT AND BY-LAWS..........................................................................................................19
3.6.1 LICENCE............................................................................................................................................19
3.6.2 PERMIT.............................................................................................................................................19
3.6.3 BY-LAWS...........................................................................................................................................19
3.7 SUPPORT SERVICES..............................................................................................................................19
3.7.1 BANKING SERVICES...........................................................................................................................20
3.7.2 INSURANCE.......................................................................................................................................20
CHAPTER FOUR..........................................................................................................................................21
4.0 PRODUCTION PLAN.............................................................................................................................21
4.1 PRODUCTION FACILITIES AND CAPACITIES..........................................................................................21
4.2 PRODUCTION STRATEGY......................................................................................................................21

vi
4.3 PRODUCTION PROCESS........................................................................................................................22
4.3.1 PURCHASE OF PRODUCTS.................................................................................................................22
4.3.2 FIRM LAYOUT....................................................................................................................................23
4.3.3 CONFIRMATION OF QUALITY AND QUANTITY..................................................................................24
4.3.4 STORAGE OF THE PRODUCTS............................................................................................................24
4.3.5 DISTRIBUTION OF THE PRODUCTS....................................................................................................24
4.4 REGULATION AFFECTING OPERATION.................................................................................................24
4.4.1 HEALTH REGULATION.......................................................................................................................24
4.4.2 SAFETY REGULATION........................................................................................................................24
CHAPTER FIVE............................................................................................................................................25
5.0 FINANCIAL PLAN..................................................................................................................................25
5.2 PRE-OPERATIONAL COST.....................................................................................................................25
5.2 Working capital....................................................................................................................................25
5.3 Pro-forma balance sheet.....................................................................................................................26
5.4 Cash flow projection............................................................................................................................27
5.4.1 Cash flow projection for the year 2022............................................................................................27
5.4.2 Cash flow projection for the year 2023............................................................................................28
5.4.3 Cash flow projection for the year 2024............................................................................................29
5.5. Pro-forma income statement.............................................................................................................30
5.5.1 Trading profit and loss account........................................................................................................30
5.6 Break-Even Analysis.............................................................................................................................31
5.6.1 Break-Even analysis for 1st year........................................................................................................31
5.6.2 Break – Even analysis for 2nd year.....................................................................................................31
5.6.3 Break – Even analysis for the 3rd year...............................................................................................32
5.7 Desired financing.................................................................................................................................32
5.9 Profitability ratio for the 3 years..........................................................................................................33

vii
EXECUTIVE SUMMARY

1.1 BUSINESS DESCRIPTION

This chapter covers the following;

The business name, form of business ownership ,products and services, justification of
business opportunity, entry and growth plan and lastly business goals and objectives.

1.2 MARKETING PLAN

This will be chapter two and it will consist of Customers, market share, competitors,
pricing strategy, sales tactics, methods of advertisement and promotion and distribution
strategy.

1.3 ORGANISATION AND MANAGEMENT PLAN

This will be chapter three and it will consist of;

The business manager qualification and duties and responsibilities, recruitment, training and
promotion, other personnel’s qualifications, duties and responsibilities, number and salary to
be paid, remuneration and incentives, by-laws, license and permit and support services.

1.4 PRODUCTION AND OPERATIONAL PLAN

This chapter covers the following;

Products, services and design development, production and operational facilities and
capacity, production and operational process.

1.5 FINANCIAL PLAN

This chapter covers the following;

Overview, pre-operational costs, projected cash flow statement, proforma cash flow
projection for the first three years, proforma income statement for the first year, proforma
income statement for the first three years, proforma balance sheet, break-even analysis,
profitability ratios, desired financing, proposed capitalization.

viii
 CHAPTER ONE
1.0 BUSINESS DESCRIPTION
1.1 BUSINESS NAME
The business name will be Mjuku Agroforestry Enterprise. Mjuku is a family name and I chose it
because the business will depends its support from the family members. On the other hand,
agroforestry involves the growing of trees and crops and keeping of animals on the same piece of
land at the same time. As an environmentalist, my business trees are very important in bringing
rainfall, reducing the chance of drought and enhancing food production.

1.2 BUSINESS LOATION

Mjuku Agroforestry Enterprise will be allocated at Mkombe sub-location area which is one
kilometer way from Tezo Trading Centre from west. The business will be allocated at Mkombe
sub-location because of: cheap labor, good population and the family land is in Mkombe sub-
location.

1.2.1 BUSINESS ADDRESS

My business address will be as follows:

MJUKU AGROFORESTRY ENTREPRISE,

P.O BOX. 1111, MKOMBE,

KILIFI- KENYA

TEL: 0112816128

EMAIL: graceanzazionesmus@gmail.com

A SKETCH OF THE BUSINESS LOCATION

1
 MALINDI MOMBASA

MKOMBE AREA

MKOMBE

MJUKU AGRO-FORESTRY

ENTERPRISE

1.3 FORM OF THE BUSINESS OWNERSHIP

The form of business ownership will be partnership. This is possible because of the following
reasons. Partnership are relatively easy to established, with more than one owner, the ability to
raise funds may be increased and the partners’ personal taxes, also prospective employees may
be attracted to the business if given incentive to become a partner.

1.4 TYPE OF THE BUSINESS

Mjuku Agroforestry Enterprise is a start-up business and will be partnership form of business. I t
will form of business. It will involve producing of goods in bulky. The goods will be sold to
customers at a competitive price.

2
1.5 PRODUCTS AND SERVICES
1.5.1 PRODUCTS
Mjuku Agroforestry Enterprise will offer goods such as crops, animals, and animal products,
fruits and many others at an affordable price. It will be dealing with quality products at a price
which is friendly to the customers.

1.5.2 SERVICES
Mjuku Agroforestry Enterprise will offer the following services to customers. Transport of
products will be offered to customers who buy goods in large discount, customers will be advice
to cope with the challenges their working environment and also discount will be offered to
customers depending on the quality of goods bought hence if a customer buys more goods,
he/she will receive a large discount.

1.6 JUSTIFICATION OF OPPORTUNITY

Mjuku Agroforestry Enterprise is allocated at Mkombe sub-location area in order to satisfy the
needs of the local people hence reducing transport cost since it is nearer to people. Security is
also available. Moreover, there is no stiff competition in the area; therefore, job opportunities are
created for the people as employees.

1.7 THE BUSINESS INDUSTRY

Mjuku Agroforestry Enterprise belongs to agricultural industry. This is a large industry with
large and small firms. Therefore, there is stiff competition between the large scale firms and the
small scale firms, as large scale firms offers wide selection of supply high volume of goods to
the customers and have an advantage in purchasing finance distribution and market. Small scale
firms can compete by offering special products providing superior services.

1.8 GOALS AND OBJECTIVES

1.8.1 LONG TERM GOALS
In 10 year time, the business will be able: to employ workers hence reducing unemployment in
the society, to obtain maximum profit for the expansion and growth of the business and also to
establish and buy land in other rural area to start-up another agroforestry.

3
1.8.2 SHORT TERM GOALS
Mjuku Enterprise will focus to meet some objectives in three year time which are as follows:
offering quality products in a customer friend environment and also providing employment to the
local people hence improving the life standards.

1.9 ENTRY AND GROWTH OF THE BUSINESS

Mjuku Agroforestry Enterprise will employ skilled and experienced workers to deliver
qualitative services to customers in which tend to improve the performance of the far business.
Supervisors will be encountered to workers to ensure fair treatment of customers. This will
results to high performance hence leading to expansion of the business.

4
 CHAPTER TWO
2.0 MARKETING PLAN
2.1 CUSTOMERS
Customers refer to the people who buy products or services of the business. Mjuku Agroforestry
Enterprise will go to have the following customers.

2.1.1 DOMESTIC CUSTOMERS

These are the most targeted customers to the business. The main aim of the Mjuku Agroforestry
Enterprise is to improve the quality products and services to customers in the area at economic
cost. The enterprise will ensure the products are produced in large stocks in order to satisfy the
needs of their customers. The customers will be treated of high products and the service will be
done at a quicker way.

2.1.2 COMMERCIAL CUSTOMERS

Customers will buy goods in bulky and ell to retailers. They include: Mbeyu Investments, Wa
Kwao Investment and Dena Investment. Due to the rapid growth in the area there is competition
from similar enterprise. At the beginning the market will be 35% equivalent to 110,000 sales. In
the second year it will be 50% of the market sales and end will be 80% of the market in third
year.

TABLE

The chart shows how the business will capture the market share in the duration of three years.

CUSTOMER TYPE SALES PERCENTAGE

Domestic customer 38,500 35
Commercial customer 55,000 50
TOTAL SALES 110,000 80

5
2.3 COMPETITION
The main competitors in the segment are any agricultural farm produce. With 400 meters radius
along the Mkombe area, there are Mbeyu Investments, Wa Kwao Investments and Dena
Investments. Their addresses are as follows:

MBEYU INVESTMENTS,

P.O BOX 1111, KILIFI,

Allocated few meters along from west.

WA KWAO INVESTMENTS,

P.O BOX 1111, KILIFI,

Located at Tezo Trading Centre.

DENA INVESTMENTS,

P.O BOX 1111 KILIFI,

Located some few meter away from west.

6
 Sales

15%

35%

20%

30%

MBEYU INVESTMENTS WAKWAO INVESTMENTS

DENA INVESMENTS MJUKU AGRO FORESTRY INTERPRISE

Sales

10%

15%

50%

25%

MBEYU INVESTMENTS WAKWAO INVESTMENTS DENA INVESTMENTS MJUKU AGRO FORESTRY

7
 Sales

4%
6%

10%

80%

MBEYU INVESTMENTS WAKWAO INVESTMENTS

DENA INVESTMENTS MJUKU AGRO FORSSTRY ENTERPRISE

2.4 S.W.O.T ANALYSIS

2.4.1 TABLE

COMPETITOR STRENGTH WEAKNESS

Mbeyu Investmets
Wa Kwao Investment
Dena Investment
Well established Closes the business early
Offers quality goods
Produce good products No specific time to open the
Flexible business
Have a good location
Offers quality products and Delay products and unskilled
services as per expected workers

8
Therefore, Mjuku Agroforestry Enterprise will capitalize on the weaknesses of its competitors as
follows: Define working hours, good location to be accessed by the customers and skilled
workers will be employed in the company.

2.5 METHODS OF PROMOTION AND ADVITISEMENT

2.5.1 PROMOTION
The business will offer discount to its customers hence encouraging them to buy more goods.
Protective clothes will be offered to workers, e.g. overall, also there will be free t-shirts for
regular customers printed on the name of the business, location and address of the business.
Transportation will be offered to customers who buy goods in bulky this will tend to attract more
customers to the enterprise.

2.5.2 ADVERTISEMENT
Mjuku Agroforestry Enterprise will advertise its business through posters, social media etc.

ADVERTISING VIA POSTERS

The posters will be designed and distributed all over the center to inform people about the
business and its products and services it offers

ADVERTISING VIA SOCIAL MEDIA

The business will advertise its products and services via what Sapp and Facebook which is a
cheaper way. The advertised products will be viewed by many with short period of time.

2.6 PRICING STRATEGY

The price of the goods or products or services will be general less compared to the competitors
out profits are generated. Discount will be offered to customers depending on the size of goods
bought.

9
2.7 SALE TACTICS
There will be direct selling and indirect selling

2.7.1 DIRECT SELLING

Refers to, when customers come to the business and purchase their owner to learn the strength
and weakness of the business via the customers hence an immediate action can be taken after
identifying the weakness.

2.7.2 INDIRECT SELLING

It involves the manager to customers through cellphone calls, producers to retailers and
customers. It enhances advertisement hence making the enterprise to be familiar with the
products of the business.

2.8 DISTRIBUTION STRATEGY

The enterprise will go to use both single channel of distribution where the products will be from
producers to customers.

2.8.1 SINGLECHANNEL OF DISTRIUTION

SINGLE CHANNEL DITSTRIBUTION
Producer Consumer

2.8.2 MULIPLE CHANNEL OF DISTRIBUTION

It involves retailers, distributors and internet. Mostly the business people prefer multiple channel
of distribution to reach its customers with their products. Vehicles will be used for the
transportation of products since it is faster means of transport. The transport cost will be
estimated with the number of the orders required. This means of transport minimizes the loss
hence maximizing the profit of the enterprise.

10
 PRODUCER

RETAILERS DISTRIBUTORS

DEALERS

CONSUMER CONSUMER BUSINESS SEGMENT

11
 CHAPTER THREE
3.0 HUMAN RESOURCE
3.1 ORGANIZATIONAL STRUCTURE
Good performance and success always is determined by managing team of the business hence
the business will have the following organization.

3.2 MANAGERS AND QUALIFICATIONS

PERSONNEL QUALIFICATION EXPERIENCE
Account clerk Must have C plain and above At least one year experience
in math’s in K.C.S.E
Must have a certificate of
literate
Distributors Must be able to speak in At least six month experience
English or Kiswahili fluently
Must be creative and at least
with ‘O’ level certificate
Workers Must hardworking and self- One year experience
motivated
Must have self discipline
Security guards Must speak in English and Two year experience
Kiswahili fluently
Must have a certificate of a
good conduct
Salesmen Must be 20-25 years of age One year experience
Must be of self motivated
Understand English and
Kiswahili

3.3 PERSONAL, NUMBER AND DUTIES

PERSONNEL NUMBER DUTIES

12
 Accounts clerk 2 Will be dealing with money
and receipt keeping
Distributors 5 They will be distributing
goods to customers
Workers 7 Loading and offloading goods
Offers services like selling of
the goods
Security guards 4 Ensuring maximum security in
the business
Salesmen 2 Offers services to customers
like loading and offloading of
goods

3.4 RECRUITMENT, TRAINING AND PROMOTION

3.4.1 RECRUITMENT
Recruitment is a process of seeking and attracting a pull of applicants’ rom which qualified
people for job vacancy are filled within an organization. Recruitment will be conducted through
advertisement via newspapers, posters, notices and radios. The applications will be shortlisted
then successful candidates will be interviewed to obtain the qualified employees to satisfy the
need of the business. This is done to enhance the growth of the enterprise and provide best
services to customers.

3.4.2 TRAINING
Training is the activity of sharing and acquiring skills and knowledge as well. The manager will
ensure the employees are trained accordingly to their respective jobs applied by an expert in that
area of specialization. This will lead to high performance of the business and also reduces
supervision to the employees.

13
3.4.3 PROMOTION
Promotion will be done to the workers in the business who perform very well in the business.
The hardworking workers will be promoted hence the promotion will depend on the workers
performance. This help to motivate and retain employees in the business.

3.5 REMUNARATION AND INCENTIVES

3.5.1 REMUNARATIONS
Remuneration will be paid to workers on monthly basis as it will be taken on top of the worker’s
monthly basis. Every employee will be entitled to one month leave annually.

3.5.2 INCENTIVES
These are rewards given to workers when their performance is high. Incentives are given to
employees in order to motivate them. Few of the incentives are: the employees will be provided
with breakfast and lunch on their daily basis and also allowances will be given to employees who
bring five and above customers to the business to buy goods or services.

3.6 LICENCE, PERMIT AND BY-LAWS

3.6.1 LICENCE
The Mjuku Agroforestry Enterprise will acquire a business license from Kilifi County council
at sh.1000. This will be renewed after every one year.

3.6.2 PERMIT
Mjuku Agroforestry Enterprise will acquire its permit from the public health officer of Kilifi
County at sh. 500 and will be renewed every one year.

3.6.3 BY-LAWS
The business will provide the employees with protection shoes, laboratory coats and protective
cloves

To ensure they are safe. This will be done so as to comply with the by-laws issued by the county
council. The Enterprise will provide the employees with clean toilets for health and safety.

3.7 SUPPORT SERVICES

The enterprise will acquire different support services to enable to carry out its operation
effectively. These services will include banking services and insurance services.

14
3.7.1 BANKING SERVICES
The business will open bank account for its operations. The bank account for the business will be
co-operative bank. The account will be a current account. The manager will be in charge of this
banking operation. This is done to provide the enterprise with easy access of its money, either
with checks or debit card.

3.7.2 INSURANCE
The enterprise will acquire will acquire an insurance from the Insurance Regulatory Authority at
sh. 800 which is renewed after an every year at the same cost. This will provide safety of the
enterprise.

15
 CHAPTER FOUR
4.0 PRODUCTION PLAN
Mjuku Agroforestry Enterprise will require basic equipment and tools to start with before
expanding to more equipment and tool with time.

4.1 PRODUCTION FACILITIES AND CAPACITIES

The enterprise will require the following basic equipment and tools in order to manage
operational process. The equipment include commercial insurance instruments pipes, watering
cans, containers, green house , store, water, offices, electricity and health and safety devices.

TABLE SHOWING PRODUCTION FACILITIES AND DIFFERENT CAPACITIES

ITEM CAPACITY COST QUALITY TOTAL

Commercial 1000 kw 100000 1 100,000
instruments
Pipes 100 inches 5000 1 5000
Watering cans 200 10 2000
Containers 500 10 5000
Green house 3000 1 3000
Store 5000 2 rooms 10000
Water tank 50000 litres 30000 1 30000
Office 20000 2 rooms 40000
Electricity 12000 2 phase 24000
Safety devices 6000 5 30000

4.2 PRODUCTION STRATEGY

Mjuku Agroforestry Enterprise will be acquiring in products from the consumption, for example
nursery based area. Some products from the farm will be packed for example, apples, mangoes
and some will be sold unpacked for example, tree nursery plants. The products will be sold at the
required price depending on the quality and quantity of the products in order to satisfy the
demand of the customers.

16
4.3 PRODUCTION PROCESS
Every section for producing products will have its own production process accordingly. The
following is an illustration process of one of the products in agroforestry, that’s nursery plants. It
is as follows:

1. Clear vegetation and weeds, one week before planting

2. Add 7cm layer of well –rotted manure
3. Raise the nursery bed 15-20 cm high and 1m wide
4. Level well
5. Remove the plant from the pot
6. Inspect the roots
7. Place the plant in a prepared hole
8. Firm the soil around the plant with your hands
9. Water well

When the seedling is dominant the nursery plants are ready for transplanting to the main bed or
selling.

4.3.1 PURCHASE OF PRODUCTS

The purchase of products will be done as per demand of customers. In regular basis will be done
after three weeks hence the marketing persons will send inquiring letter for the order. However,
they will send inventory records that show when to order or re- order level of the products.

17
4.3.2 FIRM LAYOUT

MANAGERS OFFICE ENTRANCE STAFF ROOM

DINNING HALL

ASSISTANT MANAGERS OFFICE STORE

EXIT

18
4.3.3 CONFIRMATION OF QUALITY AND QUANTITY
It will be done when all the products have been purchased. Each of the products will be aligned
according to its quality depending on cost, durability and the need of the buyers.

4.3.4 STORAGE OF THE PRODUCTS

The accountant clerk will be responsible for that will record the products and arrange the
products systematically according to their quality and quantity.

4.3.5 DISTRIBUTION OF THE PRODUCTS

Mjuku Agroforestry products’ will be sold according to orders, also customers will be coming
for the products. The customers who order their goods will be transported to them accordingly.

4.4 REGULATION AFFECTING OPERATION

4.4.1 HEALTH REGULATION
The business firm will set rules which will be applied by the employees in the organization not
only for the production but also for the health of the employees. The health regulations will
include;

1. Every employee must have Insurance card

2. Report of any disease outbreak
3. An employee must be responsible for his/her own health
4. Training is a must to the employees
5. Every employee must use suitable personal protective equipment

4.4.2 SAFETY REGULATION

The Enterprise will ensure safety of waste products disposal. The waste products will be treated
then disposed but animal disposal will be used as manure for fertility and good production of
crops and trees. The useful disposal will be disposed into a safe place which complies with the
government rules and regulations. The firm also will be also always clean and free from dust to
ensure high products goods of good quality and quantity and safety of the society around the
area.

19
 CHAPTER FIVE
5.0 FINANCIAL PLAN
5.2 PRE-OPERATIONAL COST
ITEM COST
Transport 10000
Electricity bill 8000
Registration 12000
Rent 11000
Designing 14000
Recruitment 8000
Research 38000
Installation 17000
Advertisement 5000
License 4000
TOTAL 127,000

5.2 Working capital

CURRENT ASSENTS
Cash at hand 40000
Cash at bank 60000
Debtors 150000
TOTAL 250,000

CURRENTS LIABILITIES

Creditors 30000
Bank over draft 100000
Accruals 60000
TOTAL 190,000

20
Working capital=Current assents-Currents liability

WC=250000-190000=60000

5.3 Pro-forma balance sheet

FIXED ASSETS AMOUNT
Rent 8000
Furniture and fittings 10000
Machine and equipment 4000
Motor vehicle 100000
TOTAL 122,000

CURRENT ASSETS

Cash at hand 160000

Debtors 110000
Cash at bank 240000
TOTAL 510,000

CURRENTS LIABILITIES

Creditors 100000
Bank over draft 230000
Accruals 120000
TOTAL 450,000

[122000+510000]-450000

632000-450000=182000

21
 5.4 Cash flow projection
5.4.1 Cash flow projection for the year 2022
RECEIPTS JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC TOTAL
Cash at 51000 38000 74000 32000 30200 33800 40000 38200 54400 51600 50290 52100 546,190
hand
Sales 16000 36000 44200 67800 71000 75200 70000 64000 70400 68100 79400 74000 796,100
Loans 60000 _ _ 50000 _ _ _ _ 40000 _ _ _ 150,000
Debtors 11000 11000 11000 11000 11000 11000 11000 11000 11000 11000 11000 11000 132,000
Discounts 1800 1800 1800 1800 1800 1800 1800 1800 1800 1800 1800 1800 21600
received
TOTAL 140,400 86,800 131,000 162,600 114,000 442,200 122,800 115000 177600 132500 142490 138900 1,645,890

PAYMENT
Stock 11000 10000 11000 10000 10000 110000 10000 11000 10000 11000 10000 11000 126,000
Creditors 11000 11000 11000 11000 12000 12000 12000 12000 11000 11000 11000 11000 136,000
Rent 10000 10000 10000 10000 10000 10000 10000 10000 10000 10000 10000 10000 120,000
Salary 10000 10000 10000 10000 10000 10000 10000 10000 10000 10000 10000 10000 120,000
License 400 400 400 400 400 400 400 400 400 400 400 400 4800
Discount 2800 2800 2800 2800 2800 2800 2800 2800 2800 2800 2800 2800 33,600
allowed
Transport 11000 11000 11000 11000 11000 11000 11000 11000 11000 11000 11000 11000 132,000
Loan _ 30000 _ _ _ _ _ 10000 10000 _ _ _ 50,000
repayment
Electricity 500 500 500 500 500 500 500 500 500 500 500 500 6000
TOTAL 56000 85,700 56,700 55700 57,000 57,700 56,700 67,700 65,700 56,700 56,700 56,700 488,400
SURPLUS 83,700 1100 74,300 106,900 56,300 384,500 66,100 47,300 111,900 75,800 87,790 82,200 1,157,490

22
 5.4.2 Cash flow projection for the year 2023
RECEIPTS JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC TOTAL
Cash at 14000 24000 38000 43000 45000 36000 34000 20000 44000 26000 31000 40000 395000
hand
Sale 44000 44000 44000 44000 44000 44000 44000 44000 44000 44000 44000 44000 528,000
Loans 40000 _ _ _ _ _ _ _ _ _ _ _ 40000
Debtors 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 144,000
Discount 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 24,000
received
TOTAL 112,000 82,000 96,000 101,000 103,000 94,000 92,000 78,000 102,000 84,000 89,000 98,000 1,131,000

PAYMENT
Stock 12000 12000 12000 12000 12000 12000 13000 13000 13000 13000 13000 13000 150,000
Creditors 11000 11000 11000 11000 11000 11000 11000 11000 11000 11000 11000 11000 132,000
Rent 10000 10000 10000 10000 10000 10000 10000 10000 10000 10000 10000 10000 120000
Salary 10000 10000 10000 10000 10000 10000 10000 10000 10000 10000 10000 10000 120,000
License 400 400 400 400 400 400 400 400 400 400 400 400 4800
Discount 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 60,000
allowed
Transport 9000 9000 9000 9000 9000 9000 9000 9000 9000 9000 9000 9000 108,000
Loan _ _ 20000 _ _ _ _ _ _ _ _ _ 20000
payment
Electricity 500 500 500 500 500 500 500 500 500 500 500 500 6000
TOTAL 57,900 57,900 77,900 57,900 57,900 57,900 58900 58900 58900 58900 58900 58900 720,800
SURPLUS 54,100 24,100 181,100 43,100 45,100 36,100 33,100 19,100 43,100 25,100 30,100 39,100 410,200

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 5.4.3 Cash flow projection for the year 2024
RECEIPTS JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC TOTAL
Cash at hand 60000 60000 60000 60000 60000 60000 35000 35000 50000 50000 50000 50000 630,000

Loan _ - - _ _ - _ _ _ - - - -
Sales 15000 15000 15000 15000 15000 150000 14000 14000 14000 10000 10000 13000 152,000
Debtors 47000 47000 47000 47000 47000 47000 45000 45000 46000 47000 47000 47000 559,000
Discount 4000 4000 4000 4000 4000 4000 4000 4000 4000 4000 4000 4000 48,000
received
TOTAL 126000 126000 126000 126000 126000 126000 98000 98000 114000 111000 111000 1140000 1389000

PAYMENT
Stock 18000 18000 18000 18000 15000 15000 15000 15000 15000 20000 20000 20000 207000
Creditors 11000 11000 11000 11000 11000 11000 11000 11000 11000 11000 11000 11000 132000
Rent 10000 10000 10000 10000 10000 10000 10000 10000 10000 10000 10000 10000 120000
Salary 10000 10000 10000 10000 10000 10000 10000 10000 10000 10000 10000 10000
License 400 400 400 400 400 400 400 400 400 400 400 400 4800
Discount 6000 6000 6000 6000 6000 6000 6000 6000 6000 6000 6000 6000 72000
allowed
Transport 10000 10000 10000 10000 10000 10000 10000 10000 10000 10000 10000 10000 120000
Loan _ _ _ _ _ _ _ _ _ _ _ _ _
payment
Electricity 500 500 500 500 500 500 500 500 500 500 500 500 6000
TOTAL 65900 65900 65900 65900 62900 62900 62900 62900 62900 67900 67900 67900 775800
SURPLUS 60100 60100 60100 60100 63100 63100 35100 35100 51100 43100 43100 46100 613200

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5.5. Pro-forma income statement
5.5.1 Trading profit and loss account
ITEM YEAR 1 YEAR 2 YEAR 3
748000 1120000 1,267,000
Stock 82000 114500 491,000
Closing stock 61100 350100 427,900
Cost of sales 19700 275600 65,000
Gross profit 910800 1,860,200 2,250,900

LESS EXPENSES
Salaries 500000 640,000 600,000
Water 7000 8500 7,340
Electricity 16000 20100 16,000
Advertisement 4200 5,600 9,800
Rent 73000 90,000 7,200
License 4000 6,000 6,200

TOTAL EXPENSES 604200 770,200 646,540

Net profit before tax 306600 1,090,000 1,604,360
Tax provision 8% 24528 87,200 126,348.8
Net profit after tax 282072 1,002,800 1,476,011.2

25
5.6 Break-Even Analysis
5.6.1 Break-Even analysis for 1st year
Break -Even =Fixed x Variable/Contribution

Contribution =Sales -Variable cost

FIXED COST AMOUNT VARIABLE AMOUNT

License 6000
Rent 71000
Salary 610000 Stock
Electricity 16000
TOTAL 703,000 91,400

Cash sales =98,000

Contribution =98,000 -91,400 =6,600

Break -Even analysis = [ 703000 x 91400/6600] = 9735484.8484

5.6.2 Break – Even analysis for 2nd year

Break-Even analysis = Fixed cost x Variable/Contribution

Contribution = Sales – Variable cost

FIXED COST AMOUNT AMOUNT

License 7000
Rent 84000
Salary 637,000 Stock
Electricity 20,000
TOTAL 748,000 115,500

Contribution = [ 500000 -111500]-388,500

Break even = [748000 x 11500/388500] =223428.57142

26
5.6.3 Break – Even analysis for the 3rd year
Break – even analysis =Fixed cost -Variable/Contribution

Contribution = Sales – Variable

FIXED COST AMOUNT AMOUNT

License 6000
Rent 74000
Salary 590,000 Stock
Electricity 16000
TOTAL 686,000 493,000

Cash sales 600000

Contribution 600000 -493 000 =107000

Break -Even [ 686000 x 493000/107000] =3160728.9719

5.7 Desired financing

ITEM AMOUNT
Pre-operational cost 685,200
Working capital 155,000
Fixed asset 202000
TOTAL 1,042,200

5.8 Capitalization

ITEM AMOUNT
Cash at hand 8,030,500
Fixed asset 110,000
TOTAL 8,140,500

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5.9 Profitability ratio for the 3 years
Gross profit ratio = [gross profit/Sales] x 100%

= [2639500/3088000] x 100% =85.5%

Net profit ratio = Net profit/sales x 100%

= [ 563600/309960] x 100% =18.18%

Retain on the equity = Net profit/owner profit x 100%

1st year owner profit = [{Opening capital + net profit} -withdrawing]

= [ 14800/505500] x 100 % =2.9 %

= [50600/2785000] x100% =1.82 %

3rd year on the equity =Net profit /owner profit x 100%

= [ 486900/5652700] x 100 % = 8.61%

Quick ratio for 1st year = [Current assets – closing stock] /Current liability

[740000 – 67200] /56000 =12.01

Quick ratio for 2nd year =[ Current asset -closing stock] / current liability

[740000 – 381000] /56000 =6.41

Quick ratio for 3rd year = [ Current assets -closing stock] /Current liability

[740000-438800] /56000 =5.38

28
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