BUSINESS NAME ; OXYPLUS MEDICAL GASES ENTERPRISE

LOCATION AND ADDRESS : P.O. BOX 3160-30100 ELDORET.

TELEPHONE: +25474570039

EMAIL: Oxyplus enterprise@ yohoo.com

BUSINESS LOGO

TITLE : BUSINESS PLAN

PRESENTED BY : SAMUEL MUWATA MUTETI

INDEX. NO. : 5521051764

DERPARTMENT : HAAPS

CENTER NAME : RIFT VALLEY INSTITUTE OF SCIENCE AND

TECHNOLOGY.

PRESENTED TO : KENYA NATIONAL EXAMINATION COUNCIL

FOR THE AWARD OF A DIPLOMA IN

BIOMEDICAL ENGINEERING.

EXAM SERIES : JUNE / JULY 2023.

DECLARATION

I hereby declare that this is my own original project work which has not been presented by
anybody else for the award of diploma in Biomedical engineering.

NAME; SAMUEL MUTETI SIGNATURE…………………DATE………………….

Internal supervisor

Name; MRS. MUTAI

Title……………………………………………….

Signature………………………. Date…………………….

External supervisor

Name…………………………………………………………….

Title……………………………………………………………………...

Signature……………………………Date………………………………...

i
 ACKNOWLEDGEMENT
I would like to thank my parent, and other several friends for the support they gave me
throughout the carrying out of the project. They gave me emotional, spiritual and financial
support.

I do hereby thank my supervisor for the guidance and patience in supervising my work.

May God bless you all.

ii
 DEDICATION

This work is dedicated to my dear parents for encouragement, moral and financial support till
success of this proposal

iii
 EXECUTIVE SUMMARY
CHAPTER ONE

BUSINESS DESCRIPTION

This chapter shows the name of the business OXYPLUS ENTERPRISE. It will be located at
Eldoret along Eldoret - Uganda road near Paul’s bakery limited. The business will be a sole
proprietorship form of business dealing with sales and supply of medical gases such as Oxygen,
Nitrous oxide, Medical air etc. The reason for offering their services being that the entrepreneur
is an expert in biomedical engineering hence there will be provision of quality services to the
clients. In addition, the business will employ skilled and unskilled members of the society which
makes the society be proud about the business since its generating income to them. Furthermore,
the area of its operation has several organizations that require biomedical engineering services.

CHAPTER TWO

MARKETING PLAN

The market for the business will be potential customers who include; hospitals, Research Centre
veterinary medical service providers with critical gases for biological usage. The business aims
at getting 25% of the market share. The firm will capitalize on competitor’s weakness. In order
to gain market faster it will plan for future excellent ways to cope with the competition like
extension of working hours from 7.00am to 9.00pm, employment of qualified staff,
establishment of customer care units online which my competitors don’t have. In order to
promote the business will use sales promotion, advertisement and personal selling to create
awareness to the public.

CHAPTER THREE

ORGANISATION AND MANAGEMENT PLAN

The manager of the business will be the owner. He will be planning and directing day today
activities and checking books of accounts during admission both responsibilities and duties of
each employee will be made known. Recruitment services also will be offered. Before the
business starts it will obtain required documents such as permits, licenses and by-laws.

iv
CHAPTER FOUR

OPERATION AND PRODUCTION PLAN

The capital needed to run the business is totaling to ksh 1,000,000 on which shall be bank loan,
owner’s contribution and friends’ contribution. The business will hire business premises at
Eldoret along Eldoret– Uganda road near Paul’s bakery, also the equipment and furniture shall
be purchased to enable the operation of the business. The capital for the business shall be used to
cater for both pre-operational costs and operational costs. The labor shall be provided by both
skilled and unskilled employees. The business will ensure it has adhered to the rules and
regulations affecting the business.

CHAPTER FIVE

FINANCIAL PLANNING

The firm will require a total capital of ksh 1,000, 000. This capital will be obtained from various
sources as indicated below;

(i) Owner’s contribution ksh 500 000

(ii) Contribution from friends and family ksh 300 000

(iii) Bank loan ksh 200 000

Profitability ratios for the firm include gross profit ratios, return on equity and return on
investment.

The breakeven point for the business is ksh 1,650,671.98

Other features in financial planning include pre-operational cost, pro-forma income statement,
pro-forma cash flow, pro-forma balance sheet and desired financing.

v
 Table of Contents
DECLARATION………………………………………………………………………………….i

ACKNOWLEDGEMENT...............................................................................................................ii

EXECUTIVE SUMMARY............................................................................................................iv

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

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

1.1 Background information........................................................................................................1

1.2 BUSINESS NAME................................................................................................................1

1.3 BUSINESS LOCATION AND ADDRESS..........................................................................1

1.4.1 MISSION........................................................................................................................2

1.4.2 VISSION.........................................................................................................................2

1.5 FORM OF OWNERSHIP......................................................................................................2

1.6 TYPE OF BUSINESS...........................................................................................................3

1.7 PRODUCT AND SERVICES...............................................................................................3

1.8 JUSTIFICATION OF OPPORTUNITY...............................................................................3

1.9 INDUSTRY...........................................................................................................................4

1.9.1 SIZE OF THE INDUSTRY............................................................................................4

1.9.1 TRENDS OF THE INDUSTRY................................................................................4

1.9.2 INDUSTRY CHARACTERISTICS..........................................................................4

1.9.3 FUTURE OF THE INDUSTRY................................................................................5

1.10 BUSINESS GOALS AND OBJECTIVES....................................................................5

1.10.1 SHORT TERM GOALS...............................................................................................5

1.10.2 LONG TERM GOALS..............................................................................................6

1.11 ENTRY AND GROWTH STRATEGY........................................................................6

1.11.1 ENTRY.........................................................................................................................6

1.11.2 GROWTH STRATEGY............................................................................................6

vi
2 CHAPTER TWO.....................................................................................................................8

2.0 MARKETING PLAN............................................................................................................8

2.1 CUSTOMERS.......................................................................................................................8

2.1.1 Hospitals.........................................................................................................................8

2.11.2 Commercial customers..............................................................................................8

2.2 MARKET SHARE................................................................................................................9

2.3 COMPETITION..................................................................................................................10

2.3.1 WAYS OF USING MY COMPETITORS’ WEAKNESS AS STRENGTHS........11

2.4 PROMOTION AND ADVERTISING................................................................................12

2.4.1 ADVERTISING......................................................................................................12

2.4.2 PROMOTION..........................................................................................................12

2.5 PRICING STRATEGY.......................................................................................................13

2.6 SALES TACTICS...............................................................................................................13

2.7 DISTRIBUTION STRATEGY...........................................................................................14

3 CHAPTER THREE...............................................................................................................16

3.0 ORGANIZATION AND MANAGEMENT PLAN............................................................16

INTRODUCTION.....................................................................................................................16

3.4 RECRUITMENT, TRAINING AND PROMOTION.........................................................18

3.4.1 RECRUITMENT..............................................................................................................18

3.4.2 TRAINING..............................................................................................................19

3.4.3 PROMOTION..........................................................................................................19

3.5 REMUNERATION AND INCENTIVES......................................................................20

3.5.1 REMUNERATION......................................................................................................20

3.5.2 INCENTIVES..........................................................................................................20

3.6 RLICENSES, PERMITS AND BY LAWS....................................................................21

3.6.1 LICENSES....................................................................................................................21

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 3.6.2 PERMITS................................................................................................................21

3.6.3 BY LAWS...............................................................................................................21

3.7 SUPPORT SERVICES........................................................................................................21

3.7. 1 INSURANCE SERVICES.......................................................................................21

3.7.2 BANKING...............................................................................................................22

3.7.3 POWER AND POSTAL SERVICES......................................................................22

3.7.4 LEGAL ASSISTANT..............................................................................................22

3.7.5 SECURITY..............................................................................................................23

4. CHAPTER FOUR.................................................................................................................23

4.0 OPERATION AND PRODUCTION PLAN.......................................................................23

4.1 PRODUCTION DESIGN AND LAYOUT....................................................................23

4.2 PRODUCTION FACILITIES AND CAPACITIES.......................................................24

4.2.1 CAPITAL.....................................................................................................................24

4.2.2 PREMISES..............................................................................................................24

4.2.3 FACILITIES............................................................................................................26

4.2.4 LABOUR.................................................................................................................26

4.2.5 SOCIAL AMENITIES............................................................................................26

4.3 PRODUCTION STRATEGY..............................................................................................27

4.3.1 MONTHLY MATERIALS COST..........................................................................27

4.3.2 MONTHLY LABOUR COST.................................................................................27

4.3.3 EXPENSES/OVERHEADS....................................................................................28

4.4 PRODUCTION PROCESS.............................................................................................28

4.5 RULES AND REGULATIONS AFFECTING THE OPERATIONS................................30

5. CHAPTER FIVE...................................................................................................................32

5.0 FINANCIAL PLAN........................................................................................................32

INTRODUCTION.....................................................................................................................32

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5.1PRE-OPERATIONAL COSTS............................................................................................32

5.2WORKING CAPITAL.........................................................................................................32

5.3PROJECTED CASH FLOW STATEMENT.......................................................................33

5.4PRO-FORMA INCOME STATEMENT.............................................................................36

5.5PRO-FORMA BALANCE SHEET......................................................................................37

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

5.6PROFITABILITY RATIOS.................................................................................................39

5.7DESIRED FINANCING/FINANCIAL REQUIREMENT..................................................40

5.8PROPOSED CAPITALIZATION........................................................................................41

ix
 CHAPTER ONE

1.0BUSINESS DESCRIPTION
The name of the entrepreneur is Samuel Muteti. The name of the proposed business will be
Oxyplus medical gases enterprise, it will be located in Uasin Gishu County in Eldoret town. The
enterprise will ensure that all hospital around the region are supplied with all kind of medical
gases required for various activities.

1.1 Background information

The owner of Oxyplus medical gases enterprise is Samuel Muteti. He was born in Langas
location, Uasin Gishu County in the year 1997. He sat for his K.C.S.E in the year 2017. He is
currently in stage three pursuing a diploma in medical engineering at Rift valley institute of
science and technology. He is self-driven individual and passionate in medical engineering field.
He has experience after having worked as assistant biomedical engineer in Eldoret hospital.

1.2 BUSINESS NAME

The name of the business is OXYPLUS ENTERPRISE. The name is derived from its operation
which is distributing medical gases in cylinder to hospitals, research centers and veterinary. The
idea of the business is generated from the hard time that hospital and other health centers went
through looking for oxygen supplier during the pandemic outbreak of covid-19.

1.3 BUSINESS LOCATION AND ADDRESS

The business will be situated at Eldoret along Eldoret – Uganda road area, next to central police
station. The location is strategically chosen due to the following: -

(i) There is police station which will offer security to the business
(ii) Presence of infrastructure like road network which makes it to be accessible by the
clients.
(iii) Availability of many health center in the region
oret

spit
Eld

Ho
To

al

Equity bank
x
To Eldoret town from Nakuru

OXYPLUS Police station

RH
MT
To
The business address is: - Oxyplus enterprise

P.O BOX 3160-30100

ELDORET

Email: Oxyplus enterprise@gmail.com

Tel: +254745170039

1.4 MISSION AND VISION

1.4.1 MISSION
We are focused on constant technology improvements and we embrace research to ensure
efficiency, safety and timely service delivery.

1.4.2 VISSION
We supply hospitals, research centers and veterinary medical service providers with critical
gases for biological usage.

1.5 FORM OF OWNERSHIP

Ownership of the business is sole proprietorship. The entrepreneur preferred this ownership
because of the following: -

(i) The business is simple to start and operate

(ii) The firm is also flexible where one can change its roles and management
(iii) The starting capital is accessible
(iv) Profit made by the firm belongs to the owner because he contributed capital alone
xi
(v) Also government policy on taxation for small firms are exempted from direct taxes and
therefore do not suffer over or under taxation

1.6 TYPE OF BUSINESS

The business will be a services firm offering biomedical gases such as oxygen, Nitrogen,
Helium, medical air etc.

The business will be a new business and will therefore require hiring a shop to start.

The firm will commence its activities on 31 st December 2024. This is because most of the
business firms draw their financial statement at the end of the year.

1.7 PRODUCT AND SERVICES

The firm offers various services to the clients. The services are sales of the medical gases and
transportation of the same. The price of my services will be relatively low compared to those of
my competitors. The aim of this is to attract clients to the firm and also to increase market
diversification of my services since the firm is still new.

The business will take advantage of monopoly to some extend since most businesses of this type
are located far from the area. Moreover, the business will also offer the services online, and
delivery made to its clients who don’t wish to come to the offices unlike my competitors who
lack this technology.

1.8 JUSTIFICATION OF OPPORTUNITY

(i) Since the firm is located along the Eldoret-Uganda road it will be recognized by many
hospitals and clinics located along Eldoret Uganda road and many other parts of the east
of Eldoret town.
(ii) There is also high number of hospitals in these areas around east and north of Eldoret
city.
(iii) In addition, skilled and unskilled members of the society are employed in the business
which makes the society to be proud about the business since its generating some income
to them.
(iv) Furthermore, the entrepreneur is an expert in biomedical engineering hence there will be
g of quality services to the clients.

xii
The enterprise will fulfill the great need of hospital and health centers in the region that need
supply of medical gases which up –to-date is still not easily available.

1.9 INDUSTRY
The business belongs to a service industry in biomedical services. When it expands it may supply
medical gases countrywide.

1.9.1 SIZE OF THE INDUSTRY

The size of my industry will be a big business the reasons being that: -

(i) The health centers to be served by the firm will be many and also due to the wide range
of services provided by the firm.
(ii) The business will be able to devote much investment to the provision of training courses
and other resources necessary to ensure their staff are competent, able to a higher
standard and are less likely to be compromised by actions of clients.
(iii) Also the firm wouldn’t face a lot of competition because only few firms are there
in this region of operation.

1.9.1 TRENDS OF THE INDUSTRY

In this industry there is provision of services such as sale of medical gases, sales of cylinders and
safety equipment for medical gas and also illustration on how to use them. The industry is
growing rapidly due to increment in number of hospitals that may require the gases to carry out
their activity.

The number of competitors has increased to about 10% in the past three years. This is due to
increment in number of clinics and other health centers, compared to the past years.

1.9.2 INDUSTRY CHARACTERISTICS

(i) Capital requirement

The basic capital required to the business will be averaging to ksh. 1000,000. This capital will be
acquired from loans from banks, personal savings etc.

(ii) Technology

The kinds of technology used here include both labor and capital intensive method.

xiii
Labor intensive will involve the employees handling the clients’ services manually for example
customer care services provision.

Capital intensive involves use of computers to process data and research of the emerging
computerized gas in the industry

(iii) Number of employees

The average number of employees will be approximately ten. This is because it’s only at its
startups.

(iv)Competition

The degree of competition is absolutely high this is due to increased demand for biomedical
gases supply.

1.9.3 FUTURE OF THE INDUSTRY

The sales profits are expected to be high due to use of modern technology and provision of high
quality services. Moreover, due to employment of qualified personnel in the business, services
will be of high quality and hence more clients will be interested with the firm hence increase in
sales figures.

Expected method to be used in production in the business will include;

a) Digital mobility opportunities: these will reduce capital costs increasing service and
employee productivity by leveraging mobile devices and digital platforms.
b) Increased focus on client service: providing enhanced customer service, leveraging
technology to automate processes and free up staff, while proving more personalized and
strategic advice and counsel to clients.

1.10 BUSINESS GOALS AND OBJECTIVES

1.10.1 SHORT TERM GOALS
1. The business aims to increase the number of employees from ten to fifteen by the end of
the year.

xiv
 2. The firm also intends to increase sale of the services from 20% to 30% at the end of the
year.
3. The business aims at increasing its profits from 10% to 25% at the end of the second year
of the start of the business

1.10.2 LONG TERM GOALS

2. To establish more branches in different parts of Kenya like Mombasa, Meru, Kisumu,
Kitale, Thika etc. by the end of second year.
3. The firm also intends to purchase piece of land to build its own offices instead of rentals
at the end of the second year from the start of the business by use of funds from loans
from banks and also grants by NGOs.
4. The business Intends to purchase five vehicles at the end of year two to serve the clients
and employees.

1.11 ENTRY AND GROWTH STRATEGY

1.11.1 ENTRY
To penetrate the market, the business will do the following:

i. Offer their services at low prices than those of my competitors so as to attract clients to
the firm.
ii. The business will also use promotional methods like advertising through the media
concerning the existence of the firm and the services it offers to the market.
iii. The business will use posters to create awareness to customers about existence of the firm
its location and the services it offers.

1.11.2 GROWTH STRATEGY

The business opportunities for growth include:

i. The entrepreneur and his staff have qualified skills in biomedical engineering which will
lead to provision of quality services.
ii. The business will also increase the number of its employees each year depending on the
number of clients it serves.
iii. Also the firm will purchase more vehicles like five of them for use by the employees.
xv
iv. The business will also open new branches Kisumu, Mombasa etc. to diversify their
services.

xvi
 CHAPTER TWO

2.0 MARKETING PLAN

The business will be targeting hospital and health centers in Eldoret town and its
surrounding. The town is highly populated with increased number of health centers that may
require medical gases supply which will be a stepping stone for oxyplus enterprise in the
region.

2.1 CUSTOMERS
Customers will be large and small clinics, hospitals and private health centers. From the market
survey, the proprietor has come up with the following potential customers:

2.1.1 Hospitals
As the proprietor being a resident of this area and well known most of the hospital have made
promises to offer tenders for medical gases. Hospitals like Eldoret hospital etc. have promised to
support me by offering me with tenders to supply them with the biomedical gases they require.

1.11.3 Commercial customers

There are individuals who have given me support and pushed me to be offering them biomedical
services which has pushed me to launch this venture e.g. customers who own private hospitals
and laboratories also

Factors that will influence the customers to purchase the services of the business include: -

i. Prices: where the business will offer its services at low prices so as to boost the sales of
the firm since it is still new.
ii. Accessibility: the firm is strategically placed along Eldoret- Uganda Road which makes it
accessible by many clients.
iii. The business will offer after sale services to its clients like transporting goods for the
clients to their premises.
iv. The quality of services provided by the firm will be high due to existence of qualified
personnel in the firm.

xvii
2.2 MARKET SHARE
Refers to how the total market is shared between a business and its competitors. The total target
market in the area of operation will be 1500 institutions i.e.

Total population of hospitals and clinics = 1500

Number of potential clients = 625

Therefore, the proposed market share of my business will be: -

40%

The proposed market share of my competitors will be

1. Quantum investment = 22%

2. Trojan investment = 27%
3. Others = 15%

Sales

oxyplus Quqntum Troan 4th other

The reasons for proposing to start at that share are that: -

xviii
 i. The prices for my services will be slightly lower than that of my competitors so as to
attract clients to the firm.
ii. Quality: - services offered will be of high quality hence customers will be attracted.
iii. The entrepreneur is an expertise in the field of biomedical which my competitor quantum
and Trojan firm lacks.
iv. Location of the business: - the business is strategically at Eldoret -Uganda road which
make it accessible by the clients plus the clients are assured of safety due to presence of
police station near the firm.

To attain the expected market, share the business will be able to: -

i. Expand its business to new areas like Mombasa, Thika, etc. where my competitors are
not very well known.
ii. To increase the firms image/ reputation by establishment of customer care services online
to ensure that the clients are fully satisfied with our services.
iii. Also the firm will try to use free illustration to its clients as to test the quality of our
services which is not the case with our competitors.
iv. Also the business will employ qualified staffs who are well trained in the field of
biomedical equipment.

2.3 COMPETITION
Competition is inevitable and business must be prepared to design strategies to cope with it.

The competitors who challenge my business include: -

(i) Quantum investment

(ii) Trojan investment

The strength and weakness of each of my competitors is as shown in the table below: -

Competitor Strength Weakness

xix
1. Quantum 1. Their business is recognized by many
investment people.
2. They have been in the field for so long
hence they have gained experience.
3. Also offer its service at cheaper prices.
2. Trojan investment 1. The firm has wider market penetration.
2. Has qualified staff with experience and
skills.
3. The business has good reputation/image.
4. Offers quality service.
1. Their weakness has limited
skills for they are not trained
hence not enlightened with
modern biomedical
equipment’s.
2. Have poor customer care
services due to lack of
training in that area.
3. Offer poor quality services
to the clients.
1. Poor distribution channel
used.
2. Poor locality of the business.
3. Short working hours where
they operate from 8.00 am to
6.00 pm.
4. The firm doesn’t carry any
advertisement nor promotion
strategies for their services.

2.3.1 WAYS OF USING MY COMPETITORS’ WEAKNESS AS STRENGTHS

1. Use of sophisticate technology; competitor like Quantum his staff is not familiar with
modern technology my business will adopt new technology so as to speed up business
operations and produce quality services.
2. Establishment of customer care centers/unit; due to poor handling of customers by my
competitors the business will be able to come up with customer care services online and
in the firm’s office to be able to listen to customers’ grievances and respond to them
appropriately.
3. Use of promotional and advertising methods; firms like Trojan investment don’t use
promotion methods to beat him I will do rather advertising via Radio, Television and
Posters plus Billboards and also internet to create awareness to the clients about the
existence of the firm.
xx
 4. Extension of working hours; the business will extend its working hours from 7.00 a.m. to
9.00 p.m. so as to serve its clients without hurry.
5. Employment of qualified staff; the firm will employ staff who are well equipped with
modern biomedical knowledge and have experience in biomedical engineering.
6. Location of the business; the business will be strategically located in the area to ensure
that our clients can easily access the office any time.

2.4 PROMOTION AND ADVERTISING

Being a startup business will attempt to expand so widely by promoting its services and
appreciating clients’ interests in order to attain and maintain their loyalty.

This will be done by use of promotion methods shown below.

2.4.1 ADVERTISING
This refers to the process of communicating persuasive information about a product or a service
to the target market by means of written and spoken or visual materials. Advertising tends to
create awareness about the existence of a business product or service.

Oxyplus medical supplier intends to use the following advertising methods.

(i) Use of media; e.g. radio since it’s only the start of the business the firm will tend to
promote its services through local media like Milele FM, Classic 105, Homeboyz
Radio, Capital FM and Radio Maisha
(ii) Use of posters; the firm will promote its business through use of posters by stating
the services they offer and the location of the firm.
(iii) Use of billboards; since it’s a rapidly growing firm it will tend to use billboards to
capture the attention of the road users about the existence of the firm.

2.4.2 PROMOTION
The business will use the following promotion methods to attract more clients into the firm.

(i) Sales promotion; this involves marketing activities that are directed at improving in a
temporary or permanent manner the value for a product giving a short-term additional
incentive to purchase a product/service. The sales promotion means include the use of

xxi
 after sales service like the firm will offer free transport service to the clients’
premises.
(ii) Personal selling; the firm will be rending its employees to various institutions and
businesses to promote the firm face to face with clients so as to gain more reputation
and attract more clients to the firm.
(iii) Advertising; this will involve the use of mass media like radio, posters and signposts
to promote the business.
(iv) Online marketing will also be available in the business’ website, Facebook page etc.

2.5 PRICING STRATEGY

Price is the value of a product/service expressed in monetary terms. The business intends to
charge its services at lower prices since it is still new. The charges include the following: -

Service Price (Ksh)

1. Oxygen gas 3000

2. Nitrous oxide 3500
3. Medical Air 2500
4. Helium gas 2000

Others will be charged according to the standing charges of other firms.

The factors that influenced the prices of my services include: -

(i) Demand of the services is high; due to increasing number of hospital in the region my
services will be charged at relatively high prices due to high demand for the services.
(ii) Attract more clients to the firm; in order to win more clients to the business, the firm
chose those prices which are relatively lower to my competitors so as to be able to
attract more customers to the firm.
(iii) Production cost is also relatively low compared to my competitors since my business
will be growing at greater speed due to the presence of new technology.

2.6 SALES TACTICS

The business being a sole proprietorship form of a business will be able to offer their services
directly to the clients so as to reduce the cost of operation.

xxii
Direct selling will involve the owner offering services directly to the clients moreover he will
also use his employees to offer services to his clients on his behalf.

Other sales tactics methods that the business will use include;

(i) Sales promotion; this will be done by use of free scanning to enable the clients know
the type of services offered, free gifts like calendars that illustrates the functions of
the company will also be given to the clients.
(ii) The business will also do thorough advertising through the mass media, use of posters
and billboards to attract more clients to the firm.
(iii) Staff courtesy; the business will employ qualified personnel who will be customer
friendly and ready to offer services.
(iv) Also the business will provide discounts; this will be offered to services bought in
large quantities by the clients.

2.7 DISTRIBUTION STRATEGY

Channel of distribution refers to the route/path taken by a product/service as it moves from the
producer to the final consumer. In this case my business will use the following type of channel.

(i)
Producer (owner) Consumer (clients)

This is where the owner of the firm will be able to offer services directly to his clients without
involving any middlemen like his employee.

This will be done by the client coming to the office directly to be offered with the service or the
owner going to the client’s premises to offer the service.

(ii) Producer (owner) Middleperson Consumer (client)

(employee)

The owner will use the employees in his firm to serve clients on his behalf.

2.7.1 MEANS OF TRANSPORT

xxiii
The means of transport in my business will be the use of firm’s vehicle and also due to lack of
enough vehicles to go to the clients premises the employees will have to use public service
vehicles.

2.7.2 COST OF TRANSPORT

The transport cost per month will be an approximate of ksh. 10 000 per month depending on the
number of clients served that month.

The anticipated distribution problem in my business is just the transportation cost where the firm
has one vehicle and sometimes it is forced to operate with public service vehicle in order to curb
this the firm will try to purchase more vehicles by the end of the year after the business operates
for that year and saving the profits it has made we will be able to determine the number of
vehicles to purchase.

xxiv
 CHAPTER THREE

3.0 ORGANIZATION AND MANAGEMENT PLAN

INTRODUCTION
Organization is the process of grouping activities and resources in a logical and appropriate
fashion with aim of goal attainment. On the other hand, management is the act of getting things
done through and with people in formally organized groups.

Planning is important to an organization for it takes into account different organizational

priorities. Planning can also help create an environment conducive to properly motivating
managers and employees.

3.1 ORGANIZATIONAL STRUCTURE

The business will be led by the proprietor who will be the manager, assisted by
assistant manager then those who lead any income generated i.e. accountant, sales
person and other personnel e.g. cleaners, drivers and security men.

Manager

Assistant
manager

Accountant Receptionist Secretary Driver Cleaner

3.2 MANAGEMENT PERSONEL

The proprietor of the business who will also be the manager will be SAMUEL
MUTETI, all the other subordinates will be answerable to him.

Qualifications
xxv
 (i) Kenyan citizen aged 20 years and above.
(ii) Diploma in Biomedical engineering holder
(iii) At least have a degree in biomedical engineering related courses.
(iv) Have at least three years’ experience in medical firm.
(v) Computer knowledge and skills.

Duties and responsibilities

1. Administering salaries.
2. Recruitment of staff.
3. Delegation of duties to subordinates.
4. Checking on books of account.
5. Overall management of the business.

Title Qualifications Duties/responsibilities

1. Assistant manager 1. Aged between 30-35 years. 1. Negotiating and signing contracts of the
2. Have three years’ experience in the business.
field of biomedical engineering 2. Taking every responsibility of the day to day
3. Have at least a degree in biomedical or operation of the business.
its relevant field. 3. Remunerate workers on behalf of the manager.
4. Be a Kenyan citizen with good 4. Recruiting employees in the business
conduct and good communication 5. Ensuring smooth flow of work by managing,
skills. controlling, delegating, staffing etc.
2. Accountant 1. Aged between 25-28 years. 1. Drafting final account for a given period.
2. Kenyan citizen. 2. Paying other employees of the firm.
3. A holder of CPA I. 3. Receiving all the money entering to the firm.
4. Have at least one-year experience in a 4. Checking the account of the business for the
recognized firm. running of the business before taxation.
5. Bachelor’s in commerce or its related
field.
3. Secretary 1. Aged below 25 years. 1. Preparing outgoing mails and orders.
2. Have a certificate in secretarial studies. 2. Receiving telephone calls on behalf of the
3. One year experience in the related manager.
field. 3. Keeping petty cash

xxvi
 4. Procuring the firm’s assets and resources
4. Receptionist 1. Aged between 23-30 years and Kenyan 1. Welcoming customers to the firm and giving
citizen. them the information they require.
2. Should have basic computer 2. Answering and receiving telephone calls from
knowledge. clients.
3. Have a certificate related to that field.
5. Driver 1. Aged below 35years. 1. Transporting personnel in case of outside job
2. Kenyan citizen. concerning business.
3. Driving license. 2. Delivering firms resources to and from the firm.
4. Have more than two years’ experience 3. He will also act as a messenger.
in the driving field.
6. Cleaner 1. Aged between 21-40 years. 1. Maintaining good sanitation standards.
2. K.C.S.E certificate with D- and above. 2. Maintain proper arrangement of items.
3. Should be smart, clean etc.

3.4 RECRUITMENT, TRAINING AND PROMOTION

3.4.1 RECRUITMENT
Recruitment refers to the process of searching for prospective employees and stimulating and
encouraging them to apply jobs in an organization.

The procedure for recruiting employees into the business will be as follows;

(i) Advertisement of the vacancies available on radio, newspapers, business website and
use of posters showing clearly the kind of jobs and the respective qualifications.
(ii) Receiving of applications from the candidates.
(iii) Short-listing those applicants who have qualified and then invite them for interviews.
(iv) Interviewing the shortlisted applicants.
(v) Selection and placement will be done to those candidates who have qualified and will
start working on probation for six months before they are employed on permanent
basis.

xxvii
 3.4.2 TRAINING
Training refers to the process of increasing the knowledge and skills for doing a particular job.
Training bridges the gap between job recruitments and present of an employee.

The methods to be used by my business to train the employees include on-job training (OJT),
seminars, orientation etc.

(i) On the job training; the trainee will be placed on a regular job and taught skills
necessary to perform it. The employee will learn by observing and handling the job.
The methods to be used on-job-training will include coaching, job rotations and
committee assignments.
(ii) Seminars; employees will be attending seminars concerning the type of the job they
perform.
(iii) Orientation; this will be done during placement of workers after selection has been
done.

The importance of training in my business will be the following;

1. Better quality of work; in formal training the best methods are standardized to
employees. Uniformity of work methods and procedures help to improve the quality of
service.
2. Cost reduction; trained employee will tend to make economical use of materials and
machinery. Maintenance cost will also be reduced due to fewer machine breakdowns.
3. High morale among employees; training will help develop positive attitude among
employees this is due to rise in earnings and job security.
4. Reduced supervision; training helps to make employees self-reliant and motivated hence
require less guidance and control leading to enlargement of management span.
5. Higher productivity; training helps to improve the level of performance because they
perform better by using better methods of work.
6. Self confidence among workers; training will enable my workers to approach and
perform their job with enthusiasm.

3.4.3 PROMOTION
This refers to the upward mobility of employees in their work positions. Criteria for promotion
of employees in my business will be done on the basis of;
xxviii
 1. Individual performance of duties; this will be determined by the quality of services he/she
offers to the clients.
2. Academic qualifications of the employee.
3. Experience he/she has in the field of engineering.
4. Behavior of the employee in that business i.e. is he/she in disciplined or not.

3.5 REMUNERATION AND INCENTIVES

3.5.1 REMUNERATION
The remuneration for the employees will be paid on monthly basis. The below schedule shows
the salaries for various workers paid on monthly basis.

SALARY SCHEDULE PER MONTH

Title Number of Salary per Allowances Total salary

position month per month
1. Manager 1 25 000 10 000 35 000
2. Assistant manager 2 17 000 3 000 20 000
3. Accountant 3 15 000 2 000 17 000
4. Secretary 4 10 000 Nil 10 000
5. Receptionist 5 8 000 Nil 8 000
6. Driver 6 6 000 Nil 6 000
7. Cleaner 7 4 000 Nil 4 000
85 000 15 000 100 000

3.5.2 INCENTIVES
This refers to motivations given to employees which may be financial or non-financial benefits.

Apart from paying the employees their respective salaries, the enterprise will offer the following
as incentives to motivate employees to work hard;

1. They will be given leave once in a year at different intervals.

2. The firm will organize free tours to the employees away from their work place.
3. Medical allowances shall be given to all employees.
4. Free meals on weekends and holidays.

xxix
 5. Free transport to employers’ while on their way to their premises.

3.6 RLICENSES, PERMITS AND BY LAWS

3.6.1 LICENSES
The business is licensed by county government of Eldoret, the licensing cost being ksh 5 000.
Upon licensing the business will obtain practicing certificate which will be obtained from
ENGINEERING Authority offices in Eldoret. The certificate will be obtained at a fee of ksh 1
000.

3.6.2 PERMITS
A permit to conduct the business will be given by the county government of Eldoret. This will
permit operations to be conducted from the county of ELDORET, at cost of 5000 per year.

3.6.3 BY LAWS
The business is expected to adhere to specific by laws established by the county. The by-laws
include;

(i) Sales tax; the manager will ascertain whether the fee charged to clients will be
subject to tax in order to deduct such accordingly
(ii) Income and self-employment tax; employers should deduct taxes to authorities of
their employees.
(iii) Professional liability; this will protect the business from consequences of bod
decision and action of employees in giving services to clients.

3.7 SUPPORT SERVICES

These refer to the relevant infrastructure required to operate a business. These will include;
insurance, banking, power and postal services.

3.7. 1 INSURANCE SERVICES

This is very important to the business because any risk to the business can be compensated e.g.
fire, theft, bad debts etc. the insurance cover will be obtained from;

APA INSURANCE CO.

xxx
 P.O BOX 64300-00200

ELDORET

3.7.2 BANKING
Banking will be done at the nearest bank-since there are several banks around, the business will
open an account with equity bank.

3.7.3 POWER AND POSTAL SERVICES

Power for the business will be supplied by;

KENYA POWER

P.O BOX 30099-00200

ELDORET.

A post office box number will also be acquired at ELDORET post office. This is where
incoming mail will be collected while outgoing mails will be posted via the same by the
manager.

OXYPLUS ENTERPRISE

P.O BOX 3160-230100

ELDORET.

3.7.4 LEGAL ASSISTANT

The lawyer will be hired to guide the firm in procedure required in registration advise the firm on
how to enter the tenders, contracts and other legal contracts to be signed by customers

The firm will use NYACHIRO AND ADVOCATES

P.O BOX 10200-30402

ELDORET

xxxi
 3.7.5 SECURITY
Security will be obtained from nearest police station from which is Eldoret central police station,
so that it can extend their business services.

xxxii
 CHAPTER FOUR

4.0 OPERATION AND PRODUCTION PLAN

INTRODUCTION

Operational plan is used to highlight the various techniques and procedures which are to be
followed in the preparation and provision of an entrepreneur services to the customer.

4.1 PRODUCTION DESIGN AND LAYOUT

Oxyplus enterprise shall rent premises that will enable its operation. The rental charge
will be 10000 per month. The business will be operated within seven rooms.

Entry

Reception

Waiting
Cylinder storage Accountants and
bay
secretary offices

Manager’s
Assistant
Store office
manager

xxxiii
4.2 PRODUCTION FACILITIES AND CAPACITIES
4.2.1 CAPITAL
This refers to the money required to start and run a business and it normally divided into three
categories;

(i) Pre- operational capital

(ii) Starting capital
(iii) Operational capital

The business will require a total capital investment of ksh 1000 000 to run its activities.

The capital will be obtained from the following sources:

Personal savings = ksh 500 000

Contribution from friends and parents = ksh 300,000

Bank loan = ksh 200 000

4.2.2 PREMISES
The business premises shall be rented near Paul’s bakery at Eldoret. The rental charge will be
ksh 10 000 per month. The business will be operated within seven rooms. The 1 st room will be
the reception point, 2nd room will be working area, third room will be accountants versus
secretary office, the fourth room will be manager’s office, the fifth room will be a store and the
rest will be the waiting bay.

xxxiv
 Entry

Reception

Waiting
Accountants and
Working Area bay
secretary offices
Manager’s
Assistant
office
Store manager

(i) Reception section; this will deal with customer care services and receiving of telephone
calls on behalf of the firm from the clients.
(ii) Working area; this is where all services will be offered and goods sold to customers.
(iii) Store section; this will be used to store firms’ files, facilities and equipment
(iv)Accounts and secretarial offices; this will deal with book keeping of the firm and
management of financial assets.
(v) Managerial office; this will deal with the entire operational activities of the firm.
(vi)Waiting bay; this will be the reception area where clients will sit as they await to be
served.

The business will not allow future expansion in this rental instead it will buy land and build its
own offices at the end of second year of the commencement of the business.

4.2.3 FACILITIES
This refers to the tools and equipment that will be used in running the business operations. The
below table shows the type of tool required by the firm their capacities, units, cost per item and
their total cost.

xxxv
 Item Quantity Source Unit cost Total cost
1. Computer 3 Stephan computers and 20 000 60 000
accessories
2. Printer 1 Stephan computers and 22 000 22 000
accessories
4. Furniture and fittings 4 Eldomatt supermarket 10 000 40 000
TOTAL COST 52 000 122 000

4.2.4 LABOUR
There are people required to do work so as to achieve the set goals and objectives.

The labor cost will be skilled labor; skilled labor refers to trained personnel who have acquired
knowledge and skills through training for a particular position in an organization.

These will include the manager, accountant, secretary, driver, receptionist and cleaner.

4.2.5 SOCIAL AMENITIES

Social amenities will include latrines, lighting and electricity, water, banking and insurance.
Latrines will be part of rental premises to satisfy the clients’ needs and wants. Lighting and
electricity will be provided to employees to ensure safety and comfortable environment. The
lighting and electricity will be obtained from Kenya Power and Electricity Company.

The insurance services will be provided by jubilee insurance company and the banking services
will be provided by Equity bank.

4.3 PRODUCTION STRATEGY

The business will be a service and goods business and will offer services like supply of medical
gases, illustration services and sale of biomedical gases accessories etc.

It involves the use of materials, labor and also the cost of production will be incurred.

4.3.1 MONTHLY MATERIALS COST

Type of material Source Quantity Unit cost Total cost
xxxvi
 Receipt books Jamal bookshop 6 150 900
Pens Jamal bookshop 12 20 240
Realms Jamal bookshop 10 350 3500
TOTAL COST 23 520 4640

The materials in the table above will ensure smooth running of business activities in addition the
materials will be supplied throughout the financial year by my supplier who is Jamal bookshop,
ensuring they are available to the firm when it needs them.

4.3.2 MONTHLY LABOUR COST

This refers to the manpower employed in a business so as to achieve the set goals and objectives.

The monthly labor costs requirement for the business is as shown in the table below;

Title Number of Salary per Allowances Total salary per

position month month
1. Manager 1 25 000 10 000 35 000
2. Assistant manager 1 17 000 3 000 20 000
3. Accountant 2 15 000 2 000 17 000
4. Secretary 2 10 000 10 000
5. Receptionist 3 8 000 8 000
6. Driver 3 6 000 6 000
7. Cleaner 4 4 000 4 000
TOTAL 85 000 15 000 100 000

xxxvii
 4.3.3 EXPENSES/OVERHEADS
The business expenses will include electricity bills, water bill, rent payment and taxes and many
others.

These are shown in the table below;

Table 1

Expense/overhead Amount (Ksh)

Rent 10 000
Electricity 3 000
Water 1 500
Advertising and promotion 10 000
Telephone expense 5 000
TOTAL 29 500

(iv) And then the service will be forwarded either directly or indirectly to the client.

The main features involved in offering my proposed services will include;

(i) Customer care services; this service will be provided by the receptionist in his
reception desk. He will communicate to the client either through telephone or face to
face with the client and also he will send the customer care services online to clients
who may be at far places and require our services. Our website will also contain a
chatting button where clients will be allowed to post their comments and needs and
get immediate assistance.
(ii) Offering relatively lower prices compared to those of my competitors.
(iii) Digital mobility opportunities; these will reduce capital costs increasing service and
employee productivity by leveraging mobile devices and digital platforms.
(iv) The business will also use promotional methods like advertising through the
media concerning the existence of the firm and the services it offers to the
market.
(v) Employing qualified and skilled staff who are well familiarizing with modern
biomedical machines.

xxxviii
The external and internal factors likely to affect my business process are as shown below.

External Factors Internal Factors

1. Competition from my competitors who 1. Small working space
offer same services as mine
2. Technology changes 2. Breakdown of machines due to electricity
shortage
3. Stringent government policies e.g. 3. Industrial strikes by workers where they
taxation demand more pay
4. Electricity shortage
The plans to overcome the internal factors in the business will entail;

(i) Offering additional allowances to my employees and motivating the hardworking

employees by giving them gifts, free lunch and taking them for tours.
(ii) Payment of electricity bills in time to avoid electricity shortage which might interface
with business production process.
(iii) Building or purchasing our own premises after the end of first financial year so as to
create space among employees.

The plans to minimize the external production process factors will include the following;

(i) Paying the suppliers in good time and in advance so as to avoid delay in supply of
materials needed to run the production process.
(ii) Offering customer care services online and even visiting the clients’ premises to offer
services there which is not the case with my competitors.
(iii) Complying with government rules and regulation e.g. paying taxes accordingly and
also ensuring that my business has a trade certificate.

4.5 RULES AND REGULATIONS AFFECTING THE OPERATIONS

The government regulations, compliances and approvals affecting the business operation
include; licenses and permits required, local taxes payable, government regulation like
trademarks and healthy regulations etc.

(i) Trade license; the license shall be obtained from city council of Nairobi at ksh 5 000.

xxxix
(ii) Permits; this will involve the certificate of computer operation and any certificate
required to run engineering firm. This will be obtained at ENGINEERING authority
Kenya at ksh 3000.
(iii) Taxes payable; the tax to be paid by the firm will be based on the amount of profit
the business will get on every financial trading period. It will be approximately 10%
of the profits made.
(iv) The other government regulations will include getting a trademark for the firm,
maintaining green environment, and the social corporate responsibility.
4.6 EQUIPMENT REQUIRED
In order for the firm to run smoothly the business will require some equipment
Equipment cost
Supply vehicle (pickup) 200000
Gas cylinders 100000
Gas regulator 5000
Fire extinguisher 3000
Telephone 4000

xl
 5. CHAPTER FIVE

5.0 FINANCIAL PLAN

INTRODUCTION
This chapter gives information on the means and ways of obtaining and use of business capital.

The main features include: pre-operational costs, working capital, cash flow projection, pro-
forma income statement, pro-forma balance sheet, breakeven points, profitability rations, desired
financing and proposed capitalization.

The firm will obtain its capital from three sources:

(i) Personal savings ksh 500 000

(ii) Contribution from family and friends 300 000
(iii) Loan from the bank ksh 200 000

5.1PRE-OPERATIONAL COSTS
This refers to the costs incurred before the opening of the business. These costs include;

Item Amount (Ksh)

Rent 10 000
Insurance policy 5 000
Equipment e.g. computers 160 000
Furniture and fittings 40 000
Advertisement and promotion 10 000
License and registration 15 000
Total pre-operational costs 240 000

5.2WORKING CAPITAL
This refers to the amount of capital required to meet the daily operations of the business.

It is the difference between the current assets and the current liabilities i.e.

xli
OXYPLUS WORKING CAPITAL REQUIREMENTS

ITEM As at opening 2nd year 3rd year

Current assets
Cash in hand 125 000 250 000 400 000
Cash at bank 100 000 300 000 200 000
Debtors 40 000 60 000
Prepaid rent 10 000
Prepaid insurance 5 000
Total current assets 240 000 590 000 660 000

Current liabilities
Creditors 40 000 70 000
Total working 240 000 550 000 590 000
capital

5.3PROJECTED CASH FLOW STATEMENT

Cash flow is the most important financial planning tool available to an entrepreneur. This is
because they indicate to the entrepreneur when the business may have surplus cash or cash
shortages, also allow him/her to identify possible cash flow problems in advance.

xlii
 OXYPLUS PROJECTED CASH FLOW STATEMENT FOR THE 1ST YEAR OF OPERATION

ITEM January February March April May June July August September October November December Totals
Receipts  
Capital introduced 500 000                       500 000
Bal buff   590 000 614 000 622 500 549 000 507 700 871 000 1,141 200 1,219 200 2,640 600 2,687 800 2,443 800 2,989 300
Cash sales 250 000 350 000 400 000 450 000 250 000 400 000 700 000 650 000 500 500 350 000 100 000 900 000 5,300 500
Credit sales 50 000 40 000 70 000 90 000 65 000 30 000 100 000 10 000 63 000 10 000 18 000 60 000 6,66 000
Purchases 60 000 50 000 47 000 25 000 50 000 100 000 10 000 20 000 1,300 000 10 000 15 000 60 000 460 000
Total cash inflows 860 000 1,030 000 1,131 000 1,187 500 914 000 1,037 700 1,681 700 1,881 200 3,052 700 3,100 600 2,820 800 3,463 800 9,915 800
Payments/cash outflows
 

Salaries/wages 100 000 100 000 100 000 100 000 100 000 100 000 100 000 100 000 100 000 100 000 100 000 100 000 1,200 000
Electricity 1 500 1 500 5 000 3 000 1 300 1 500 5 000 1 500 1 300 1 300 1 500 6 000 30 400
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 1,20 00
Water 500 500 500 500 500 500 500 500 500 500 500 500 6 000
Advertisement 10 000 8 000 10 000 10 000 10 000 10 000 15 000 10 000 11 000 10 000 12 000 10 000 126 000
Repair& maintenance 3 000 6 000 1 000 6 000 3 000 2 000 6 000 5 000 3 000 6 000 5 000 6 000 52 000
Loan repayment 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
Insurance 5 000 5 000 5 000 5 000 5 000 5 000 5 000 5 000 5 000 5 000 5 000 5 000 60 000
Creditor 100 000 250 000 350 000 470 000 250 000 100 000 370 000 500 000 280 000 250 000 210 000 300 000 3,430 000
Miscellaneous expenses 20 000 10 000 5 000 11 000 3 000 5 000 10 000 9 000 10 000 10 000 12 000 15 000 120 000
Tax payable 10 000 15 000 12 000 13 000 13 500 12 000 9 000 11 000 11 300 10 000 11 000 12 000 127 920

Total cash 270 000 416 000 508 500 638 500 406 300 166 000 540 500 662 000 442 100 412 800 377 000 474 500 5,392 320
outflows/payments

590 000 614 000 622 500 549 000 507 700 871 000 1,141 200 1,219 200 2,640 600 2,687 800 244 380 2,989 300 4,523 480
Net cash flows

44
5.4PRO-FORMA INCOME STATEMENT
This shows how much money a company has earned during an accounting period and is usually
prepared annually.

It is an essential illustration of profitability of the enterprise to the entrepreneur, potential

investors and potential financiers and also acts as a tool of monitoring the actual performance of
the enterprise against the projected perform

OXYPLUS PRO-FORMA INCOME STATEMENT FOR THE 1ST YEARS (2023,

2024AND 2025)

ITEM AS AT OPENING 2018 2019

Sales 5,206 500 6,000 000 7,500 000
Cash of goods sold (3,000 000) (2,500 000) (3,500 000)
Gross profit 2,206 500 3,500 000 4,000 000
Expenses
Salaries/wages 1,200 000 1,500 000 2,000 000
Electricity 30,400 70,000 60,000
Water 6,000 10,000 10,000
Advertisement 126,000 100,000 70,000
Repair and maintenance 52,000 30,000 10,000
Loan interest 120,000 60,000 90,000
Insurance 60,000 60,000 60,000
Rent 120,000 120,000
Miscellaneous expenses 120,000 100,000 150,000
Depreciation on
- Motor vehicle 50,000 10,000 100,000
- Computer 30,000 5,000 10,000
- Furniture and fittings 10,000 (1,924 400) 10,000 (2,075 000) 15,000 (2,495 000)
Net profit 282,100 1,425 000 1,505 000
Provision for tax 15% 42,315 213,750 225,750

45
 Net profit after tax 239,785 1,211,250 1,279 250

5.5PRO-FORMA BALANCE SHEET

The balance sheet shows where all of the business money has come from and it has been used.

It usually lists everything a business owns and everything it owes at a moment in time and it is
fundamental that all sources and uses of money must be equal.

PRO-FORMA BALANCE SHEET

ITEM As at opening As at end of year 1 As at end of year 2

CURRENT ASSETS
Stock (opening work in progress) 50,000 100,000 100,000
Cash at bank 100,000 350,000 600,000
Debtors 250,000 100,000 350,000
Prepaid rent 10,000
Prepaid insurance 20,000 10,000 10,000
Cash in hand 300,000 250,000 270,000
Total Current Assets 730,000 310,000 1,380 000
FIXED ASSETS
Motor vehicle 100,000 500,000 1,000 00
Provision for depreciation (10,000) 15,000 (20,000)
90,000 485,000 980,000
Furniture and fittings 40,000 60,000 100,000
Provision for depreciation (10,000) (10,000) (30,000)
30,000 50,000 70,000
Computers 160,000 180,000 250,000
Provision for depreciation (70,000) (10,000) (50,000)
90,000 170,000 200,000
Stationary 60,000 60,000 50,000
Total Fixed Assets 229,000 765,000 1,255 000
TOTAL ASSETS 959,000 1,575 000 2,635 000
LIABILITIES
Current liabilities

46
 Creditors 100,000 575,000 635,000
Total current liabilities 100,000 575,000 635,000
Long-term liabilities
Bank loan 359,000 500,000 500,000
Owners’ equity 500,000 500,000 1,500 000
Total liabilities and equity 959,000 1,575 000 2,635 000

BREAK-EVEN ANALYSIS
i) Gross profit

Year 1

Year 2

Year 3

ii) Gross profit margin

Year 1

Year 2

Year 3

iii) Total overheads/expenses

Year 1

Year 2

Year 3

N/B as shown in income statement

iv) Break-even level of sales

Year 1

47
Year 2

Year 3

Break-even point B.E. P

Fixed costs

Rent 120 000

Water 6 000

Salaries/wages 1,200 000

Loan repayment 120 000

Insurance 60 000

1,506 000

Variable costs

Advertisement 126 000

Electricity 30 400

Repair and maintenance 52 000

Miscellaneous expenses 120 000

Tax payable 127 920

(456 320)

1,049 680

5.6PROFITABILITY RATIOS
(i) Gross profit ratio

48
This ratio shows how firm makes profit in relation to element representing what it took that
amount.

Year 1

Year 2

Year 3

(ii) Return on equity

Year 1

Year 2

Year 3
(iii) Return on investment

Year 1

Year 2

Year 3

This shows the value of the resources employed as the total assets employed in the business. This
gives a view of efficiency with which the assets are employed in business.

5.7DESIRED FINANCING/FINANCIAL REQUIREMENT

Item Amount

Preoperational cost 200 000

49
 Working capital 215 000

Computers 45 000

Furniture and fittings 40 000

Total desired capital 500 000

5.8PROPOSED CAPITALIZATION
Personal savings/owners’ equity 500 000

Contribution from friends and family 300 000

Bank loan 200 000

Total investment 1 000 000

5.8 Reference

Class notes by Mrs. Mutai.

Mastering basic management second edition

Management by Roger second edition.

Harold K, (1990) Essentials of Management; Mc Gralo Hill fifth Edition

50