BUSINESS PLAN
P.O BOX 593-50100, KAKAMEGA
PHONE NO: +254 702 092 119 +254 713 419 860
+254 736 684 492
Website: htp//www.info@linxelectronics.co.ke
Email address: linxelectronicsoln@ymail.com
NAME: SANYA C. FELIX
ADMISSION NO: 2015/BE/30655
CLASS: 2015/BE/BA1A
SUPERVISOR: MR. LIDIGU S. SEBASTIAN
DATE OF SUBMISION: NOVEMBER 2015
SUBMITED TO: KENYA TECHNICAL TRAINERS COLLEGE (K.T.T.C) FOR THE PARTIAL FULFILMENT FOR
THE AWARD OF A DIPLOMA IN TECHNICAL EDUCATION BUSINESS ADMINISTRATION OPTION
Declaration
I declare that the information content of this report is absolutely and entirely personal. The research
ideas and facts have never been presented to any examination body, institution or whatsoever case for
the award of a certificate, diploma or degree.
COMPILED BY;
NAME
ADM.NO
SANYA C. FELIX
2015/BE/30655
SIGN
DATE
12/11/2015
This Business plan has been submitted for examination purpose with my approval as the college
supervisor Entrepreneurship Department.
NAME OF SUPERVISOR: MR. LIDIGU S. SEBASTIAN
SIGN
i
DATE
Dedication
I wholly dedicate the successful completion of this business plan work to my affectionate and beloved
parents; my dad MR. WANDERA JACKSON MANGALA and mom MRS. PHANICE KHAERE WANGA for
their consistent financial, advisory and moral support.
ii
Acknowledgement
I truly thank the ALMIGHTY GOD for making this project work a total success. Praise be to his name.
My gratitude goes to my dear parents MR. WANDERA JACKSON MANGALA and MRS. PHANICE KHAERE
WANGA for their endless moral, financial and advisory support. Their total consistent effort during this
academic period has been the key perpetuator of this project work. Many heartfelt thanks for their
valuable support.
Many heartfelt thanks to the entire KENYA TECHNICAL TRAINERS COLLEGE (K.T.T.C) fraternity. To
mention only but a few; the supervisor MR. LIDIGU S. SEBASTIAN worth mentioning is his valuable
support guidance and direction issued during the project work, the INSTITUTION MANAGEMENT for a
conducive learning environment, my CLASSMATES for their brilliant contributions through consultations
and giving me the morale to complete this work.
I would also like to extend my gratitude to my family member’s especially my siblings ERICK, MORDDY,
EDDY and AMO for their affiliate support during this period.
I owe the successful completion of this project to all these people for they were constantly beside me,
cheering me and supporting me all the way during my fruitful struggle to ensure this work turns out a
success. God bless you all.
iii
Table of content
Preliminary pages
Declaration
…………………………………………………………………………………
(i)
Dedication
…………………………………………………………………………………
(ii)
Acknowledgement
………………………………………………………………….…
(iii)
Table of content
…………………………………………………………………….
(iv)
CHAPTER ONE
1.0 Business description
................................................................................................
1
1.1 Business information
……………………………………………………………………………………………...
1
1.2 Business name and location ………………………………………………………………………………………………
1.3 Reasons for the choice of the location ………………………………………………………………………………
1.4 Form of ownership ……………………………………………………………………………………………………………
1.5 Objectives of the business ……………………………………………………………………………………………….
1.6 Keys to success
……………………………………………………………………………………………………………
1.7 Products or services ……………………………………………………………………………………………………………
1.8 Justification of the opportunity …………………………………………………………………………………………
1.9 Industry
……………………………………………………………………………………………………………………….
1.10 Entry and growth strategy ……………………………………………………………………………………………..
CHAPTER TWO
2.0 Marketing plan
…………………………………………………………………………………………………………..
2.1 Customers ……………………………………………………………………………………………………………………….
2.2 Competitors ………………………………………………………………………………………………………………………
iv
2.3 Strength Weakness Opportunity Test (SWOT) Analysis …………………………………………………….
2.4 Methods of Promotion/ Advertisement ……………………………………………………………………………
2.5 Pricing strategy
……………………………………………………………………………………………………………
2.6 Sales strategy/ techniques ………………………………………………………………………………………………
2.7 Distribution strategy
………………………………………………………………………………………………
2.8 Challenges and their solutions
…………………………………………………………………………………
CHAPTER THREE
3.0 Organization and management plan ……………………………………………………………………………………
3.1 Organization structure
………………………………………………………………………………………………...
3.2 Employees qualifications
…………………………………………………………………………………………………
3.4 Remuneration/ Salaries and allowances ……………………………………………………………………………..
3.5 Training and Staff
……………………………………………………………………………………………………………..
3.6 Managing change
……………………………………………………………………………………………………………..
3.7 Support services
……………………………………………………………………………………………………………..
CHAPTER FOUR
4.0 Production and operation plan
…………………………………………………………………………………….
4.1 Production facilities ………………………………………………………………………………………………………………
4.2 Production layout plan and office layout
………………………………………………………………………..
4.3 Production process ………………………………………………………………………………………………………………
4.4 Government regulations
………………………………………………………………………………………………….
CHAPTER FIVE
5.0 Financial plan
……………………………………………………………………………………………………………….
5.1 Pre-operational cost …………………………………………………………………………………………………………….
5.2 Working capital estimations …………………………………………………………………………………………………
v
5.3 Income statement for the year ending31st December 2015, 2016 and 2017 …………………….
5.4 Balance sheets for 2015, 2016 and 2017
……………………………………………………………………….
5.5 Projected cash flow for the Business for 2015, 2016 and 2017
…………………………………
5.6 Break Even Analysis ……………………………………………………………………………………………………………..
5.7 Proposed Capitalization ……………………………………………………………………………………………………….
5.8 Profitability ratio…………………………………………………………………………………………………………………..
vi
CHAPTER ONE
1.0 BUSINESS DESCRIPTION
The proposed business will be a sole proprietor business known as LINX ELECTRONICS AND
ACCESSORIES SOLUTIONS HOLDINGS basically dealing with electronics and their accessories and
services.
The anticipated business will be a potential business based on the fact that the demand of modern
electronic accessories in KAKAMEGA town has rapidly increased due to the rapid changes in the
technological advancement of electronic accessories. This is majorly due to the paramount shift into the
digital operations of the modern electronics leading to wide scope in electronics demand, taste and
preferences.
1.1BUSINESS INFORMATION
The proposed business will be a sole proprietor business .The business will be dealing with electronic
products and services such as; repair, fixing, selling, shopping, cleaning of electronics and other essential
services like charging of car batteries and mobile phones. The business is designated to commence in
January 2016.
1.2 BUSINESS NAME AND LOCATION
The sponsor intends to start an electronic and accessories shop by the name “LINX ELECTRONICS AND
ACCESSORIES SOLUTIONS HOLDINGS” which is derived from the proprietors’ name FELIX SANYA - LINX
and whose pronunciation creates the meaning of connecting.
The proposed business will be located in LURAMBI MARKET- JUNCTION situated alongside KAKAMEGAWEBUYE road 0.9 KMs from form KAKAMEGA TOWN CENTRE (CBD), 0.3 KMs from MASINDE MULIRO
UNIVERSITY OF SCIENCE AND TECHNOLOGY (MMUST), opposite the Chiefs camp and Administration
police post in the SAVLON BUILDING.
1.2.1 LOCATION MAP
KAKAMEGA WEBUYE ROAD
PETROL
STATION
PETROL
STATION
MMUST
UNIVERSITY
TO ACK SHOW GROUND
TO LURAMBI
CHIEFS
CAMP
1.3 REASONS FOR THE CHOICE OF THE LOCATION
From the market survey carried out by the proprietor it is noted that there is stiff competition already in
existence among the electronics and accessories shops in KAKAMEGA town. These shops are majorly
located in the central business district (CBD) of the town. This location close to the central business
district (CBD) but outside the central business district (CBD) will offer the enterprise a good opportunity
to attract new customers based on the region as well as reducing sharing of customers with the other
existing electronics and accessories shop.
1.4 FORM OF OWNERSHIP
The proposed business will be a sole proprietorship business because it is easy to manage and enhance
quick decision making.
1.5 OBJECTIVE OF THE BUSINESS
The primary objective of the business is to ensure that the business opportunity provides products to its
customers and accelerate good customer services to win customers confidence.
The objective of the business in relation to the product performance will be to ensure maximum
customer satisfaction through provision of high quality products of original standards at customer
friendly prices.
Other objectives include;

To create employment to the sole proprietor and other business employees


To ensure profit generation so as to sustain the business operators
To ensure customer satisfaction through good customer service provision and
quality product delivery
1.6 KEYS TO SUCCESS
LINX ELECTRONICS AND ACCESSORIES SOLUTIONS HOLDINGS has two main competitors namely;
MENENGAI ELECTRONICS AND ACCESSORIES and KAKAMEGA KIDS CAMP ELECTRONICS AND
ACCESSORIES. The competitors offer same services as that proposed by LINX ELECTRONICS AND
ACCESSORIES SOLUTIONS HOLDINGS. However LINX ELECTRONICS AND ACCESSORIES SOLUTIONS
HOLDINGS has a suitable location away from the town center reducing competition, operates at middle
level which is easier to manage and organize, offers products at a customer friendly price and has more
operational hours thus will serve more customers. Therefore LINX ELECTRONICS AND ACCESSORIES
SOLUTIONS HOLDINGS is deemed to succeed.
1.7 PRODUCTS OR SERVICES
The production services will be offering different types of electronic accessories inclusive of modern
computers, mobile phones, radios, television and their accessories so that customers can have a wide
choice from the variety.
Basic repair and maintenance of electronics such as computers and mobile phones will also be carried
out.
1.8 JUSTIFICATION OF THE OPPORTUNITY
The potential of the business prosperity is based on the fact that there is a high demand of electronics
and their accessories in the densely populated urban setting of KAKAMEGA town. The proposed
business has the potential to perform due to the available proprietor’s vast entrepreneur knowledge
and competency skills acquired through training. This includes price setting policy which is customer
friendly thus attracting more customer attention as well as favoring the business growth, proper
accounting and record keeping to facilitate swift decision making and minimizing losses, special and
careful credit.
It is important to note that the business entails selling and service of machines which are nonperishable commodities. This provides for all season availability of the market thus minimizing chances
of incurring losses due to the perishability of stocks. On the contrary it is also beneficial to have much
electronics on the display as it reduces the stock costs.
The business is cheap to start and more beneficial than any other forms of businesses identified in the
region.
1.9 INDUSTRY
The anticipated business belongs to the Electronic and Electronics Industry which has a higher potential
growth capability in KAKAMEGA COUNTY region.
1.10 ENTRY AND GROWTH STRATEGY
The anticipated business will be a potential business based on the fact that there is a high demand of
electronics and their accessories in the densely populated urban setting of KAKAMEGA town. The
available opportunity being that the demand is caused by shifting from usage of analogue electronics
systems to the modern digital system.
The proprietor has decided to set his enterprise in KAKAMEGA town entrance alongside the KAKAMEGA
WEBUYE ROAD only 0.9 KMs from the Central Business district (CBD) where competitors are congested
as an entrance strategy to minimize competing for customers. The business enterprise will major on
advertisement of its products and services through local station sign posts, posters, and brochures local
newspapers and magazines and sharing information with its customers so as to penetrate the
anticipated market. Also the business shall instill honest character amongst works to win the trust of
existing customers for the purpose of retaining them.
The business will easily grow into a success because its customers will enjoy customer friendly services
as well as special credit facilities to the esteemed customers thus meeting the anticipated market share
of up to 1500 people within and outside environment. Thus through the laid strategies the business
established is set to perform right from the opportunities available for market penetration.
CHAPTER TWO
2.0 MARKETING PLAN
The proposed business is aimed at serving customers from all level, these includes; institutional
customers, commercial customers and individuals of ordinary prudence.
2.1 CUSTOMERS
The holding has a target of customers within KAKAMEGA COUNTY region and its neighboring counties.
The anticipated customers were grouped into three major sub divisions which are discussed below.
2.1.1 INSTITUTIONAL CUSTOMERS
Proposed business targets neighboring institutions as its potential customers. The major institutions
include Kenya Medical training college (K.M.T.C), Masinde Muliro University of Science and Technology
(M.M.U.S.T), Kenya institute of management, The Kakamega Provincial General Hospital (K.P.G.H),
Kenya Agricultural Reseearch Institute (K.A.R.I), Shikoti Girls High School, Ingotse Boys High School and
potential churchs i.e the Salvation Army Church and the Catholic Church. All these institutions found in
KAKAMEGA COUNTY. They will provide a ready-made market as well as a bulky purchase for large scale
consumptions.
2.1.2 COMMERCIAL CUSTOMERS
The business shall identify commercial customers and has planned to contract successful business with
them. It will offer credit facilities to trustworthy and creditworthy customers as well as reasonable
discounts on bulky purchases. Since LURAMBI ESTATE is growing rapidly, the business will identify
commercial customers within the estate and its neighboring regions like SICHILAYI MARKET.
2.1.3 LOCAL CUSTOMERS
The business anticipates being the leading customer satisfying holding Therefor as part of the marketing
strategy the business targets to attract more local customers of all social caliber in the society. This is to
be met by availing a variety of product range so that each customer finds his./ her flavor. The business
also intends to set prices of the commodities basing on the average local customer income and as low as
possible compared to competitors in the market. The business is interested in local customers as they
serve a great role in advertisement of the enterprise through grapevine communication.
2.2 COMPETITORS
LINX ELECTRONICS AND ACCESSORIES SOLUTIONS HOLDINGS has two main competitors namely;
MENENGAI ELECTRONICS AND ACCESSORIES and KAKAMEGA KIDS CAMP ELECTRONICS AND
ACCESSORIES. The competitors offer same services as that proposed by LINX ELECTRONICS AND
ACCESSORIES SOLUTIONS HOLDINGS. However MENENGAI attempts to offer satisfactory services to its
customers compared to KAKAMEGA KIDS CAMP.
LINX ELECTRONICS AND ACCESSORIES SOLUTIONS HOLDINGS also has minor competitors who are
individual sole proprietors. They are AMANI ELECTRONICS and CHAGA ELECTRONICS.
2.3 STRENGTH WEAKNESS OPPORTUNITY TEST (SWOT) ANALYSIS
It is evident that the proprietor will compete on the competitors’ weaknesses to win more customers
and ensure business success as shown in the tables 2.3.1 and 2.3.2 below
2.3.1 MAIN COMPETITORS
EVALUATION
DETAILS
Location
Scale of production
Technological level
Products offered
Customer
–
Employee relation
Time Management:
Opening time
Closing time
Strengths
Weaknesses
KIDS CAMP
ELECTRONICS &
ACCESORIES
Town Centre
Top level
Mechanical
&
labor
intensive
Electronics & Electronic
Accessories dealers
Poor
10.00 Am
4.00 Pm
 4 Years’ Experience
 Good size



Very
Expensive
(price)
Poor services
Poor Reputation
MENENGAI
ELECTRONICS &
ACCESORIES
Town Centre
Bus stop Stage
Top level
Mechanical
&
labor
intensive
Electronics & Electronic
Accessories dealers
Fair
LINX ELECTRONICS &
ACCESSORIES SOLN.
HOLDINGS
Estate and Town
Entrance Junction
Middle level
Mechanical & labor intensive
8.30 Am
5.00 Pm
 7
Years’
Experience
 Fair price
 Poor location
 Low skilled labor
6.30 Am
6.30 Pm
 Good location
 Modern Technology
Electronics
&
Electronic
Accessories dealers
Good

New in the field
2.3.2 MINOR COMPETITORS
Table 2.3.2 Shows rating by effort
FACTORS
Size
Price
Personnel
Service
Promotion
Location
Total Score
Mean Score
LINX HOLDINGS
1
2
1
1
1
1
7
1.16
AMANI ELECTRONICS
2
1
4
2
2
2
13
2.1
CHANGA ELECTRINICS
3
4
2
3
4
4
19
3.1
2.4 METHODS OF PROMOTION/ ADVERTISEMENT
The enterprise will ensure product and services promotion is fostered due to the need to maintain
customers. This will be done through special offers being awarded to esteemed customers, provision of
after sale services to bulky purchases, free consultancy services and direction of customers at the start
of the business, issue of discounts to products on a regular schedule, association of products and
services with prominent and famous persons in the society i.e. talented musicians and finally issue of Tshirts, scarfs, handbags, caps etc. with printed organization logo and name.
2.5 PRICING STRATEGY
The business aims of pricing level are to generate maximum profits possible without exploiting the
customer. Products and service quality will commemorate the price charged to the customer.
2.6 SALES STRATEGY/ TECHNIQUES
The entire population of LURAMBI ESTATE and KAKAMEGA TOWN is 15,000 roughly by estimation. The
entire population is evenly distributed in both homesteads and rental apartments as well as in firms. The
business is expected to serve around 8,000 customers in a year with at least 30 customers in a day
within the region. Thus the market share will be based on the following target;
30(Customers per day) X 30(Days of the month) = 900(Customers per month)
900(Customers X 12 Months) = 10800 (customers per Year)
Market Share= 10,800(Expected customers per Year X 100%)
15,000(Expected customers in total population)
= 72%
Target (%) = 8,000 (Estimated customers to be served per year) X 100%
15,000(Expected customers in total population)
=53.3%
The business will then operate on the return on investment by computing expected profits earned in
relation to the capital employed to the business in order to basically satisfy the proprietor, that the
percentage target and market share percentage were perfectly estimated.
R.O.I = N.P X 100%
2.7 DISTRIBUTION STRATEGY
The channel of distribution will include supply of products i.e. electronics and electronic accessories and
services i.e. basic repair and maintenance of computers, phones etc. directly from the business to the
customers and penetrating the market in the business area. The channel of distribution will therefore be
ZERO CHANNEL AS OUTLINED BELOW.
LINX ELECTRONICS AND ACCESSORIES SOLUTIONS HOLDINGS
CUSTOMERS
2.8 CHALLENGES AND THEIR SOLUTIONS
The challenge involved in the zero distribution channel is discussed below and an attempt to find its
solution so as to cope with the challenge swiftly.
2.8.1 CHALLENGES OF DISTRIBUTION STRATEGY
All other competitors use intermediaries in their day to day transactions. This makes it easy for them as
they can easily dispose their products to the market as well as have larger market coverage through the
intermediaries’ interaction with the customers on their behalf.
2.8.2 SOLUTION TO THE PROBLEM
To ensure the business captures a wider market using the ZERO distribution channel, It is important to
sell Products to other retailers and encourage placement of orders directly from customers. The delivery
of products and services by order from customer should be quick and efficient too.
CHAPTER THREE
3.0 ORGANIZATION AND MANAGEMENT PLAN
The proposed business enterprise is designed to have a precise channel of flow of authority and
communication within members of the organization. The formal channel of communication and
authority bestowed will base on various department levels as indicated in the organization structure.
3.1 ORGANIZATION STRUCTURE
MANAGER
MANAGER
RECEPTIONIST
CASHIER
CLEANER
SECURITY/ GUARD OFFICER
3.2 EMPLOYEES QUALIFICATIONS
LINX ELECTRONICS AND ACCESSORIES SOLUTIONS HOLDINGS members will have the following
qualifications.
3.2.1 MANAGER
The business sponsor MR. SANYA C. FELIX will partake the roles and responsibilities of the overall
management of the enterprise.
3.2.1.1 QUALIFICATIONS
Holder of a Diploma in Technical Education (Business Administration Option)
Holder of a Diploma in Business Administration
Adequate knowledge in computer related field
3.2.1.2 DUTIES AND RESPONSIBILITIES
Chief financial controller of the business
Sole final decision maker
Chief formulator of business policies in regard to business operation
Managing/ checking books of accounts final statement
Overall resource allocation
3.2.2 ASSISTANT MANAGER
The assistant manager will be charged with the responsibility to assist the manager in day to day
operations and serve his roles in the manager’s absence or as assigned by the manager.
3.2.2.1 QUALIFICATIONS
Diploma holder in Business management related course
Ability to communicate fluently
3.2.2.2 RESPONSIBILITIES
Assist management in the execution of the topmost duties
Charged with personnel management
Charged with operations management
3.3 OTHER PERSONEL
Other personnel will include the receptionist, two cashiers, two cleaners and one security officer
3.3.1 CLEANER
Must have working experience in the field
Adequate knowledge in handling electronics
Must be person of good conduct and of high integrity
3.3.2 CASHIER
Must have certificate in K.A.T.C I and II (or an Equivalent certificate)
At least two years’ experience in financial department
Must have both accounting and secretarial skills
Aged 25-35 years
3.3.3 RECEPTIONIST
Fluent communication ability in both English and Kiswahili
Experience in attending to office operations
Adequate knowledge in office management and administration
Any public relation related field certificate will be considered advantageous
Should be computer literate
3.3.4 SECUIRITY OFFICER
The business shall have one security officer obtained from a well-known, qualified and certified security
agency. The security guard officer shall not be permanently employed but will be change/ replaced from
time to time basing on the contract established between the organization and the security agency firm.
3.4 REMUNERATION/ SALARIES AND ALLOWANCES
The enterprise will carry out job evaluation so as to determine importance of a job to its worthiness in
relation to payments to be established in order to motivate workers. This will be stipulated through
salaries, remunerations and incentives.
The enterprise intends to give attractive salaries on monthly basis so as to effect and employ of studying
and measuring the work by description this will depend on the job title and education level.
Essential incentives will be given inform of Bonus pay on overtime work, commissions on salaries, salary
advance, lunch will be provided and tea in the evening, educative trips for training, payments will be
administered during annual leave and annual awards on great performance.
3.4.1 REMUNERATION TABLE
JOB TITLE
NO
MOTHLY PAY
Manager
Assistant Manager
Cleaner
Receptionist
Cashier
Security guard
TOTAL
1
1
2
1
2
1
8
12500
11000
4000
5000
6000
2800
41300
ALLOWANCE
& BENEFITS
2500
2000
200
400
500
200
5800
TOTAL
15000
13000
4200
5400
6500
3000
47100
3.5 TRAINING AND STAFF
The major purpose of training employees will be to ensure they are well versed with the job they will be
performing so as to increase their vast knowledge and skills in doing the required jobs. The following
trainings will be conducted on various groups of employees.
a) Orientation training will seek to adjust the newly employed employees to the working
environment and to make them fully familiar with their superiors and subordinates and the
regulations of the organization so as to instill confidence in them
b) On- the job training will aim at increasing employees knowledge and skills on the technical
know-how to perform duties at the place of work.
c) Safety training will aim at minimizing accidents at work and reducing damage of electronics and
accessories hardware
d) Promotion training will seek to ensure existing employees are able to perform higher level jobs
for internal recruitment purposes
e) Refresher training will be designed to revise the knowledge and to upgrade the skills of existing
employees
f) Remedial training will be arranged by the top level management to overcome shortcomings in
the behavior and performance of old employees so as to rectify inappropriate methods and
style of working picked by employees.
g) Supervisory and managerial training will seek to train top level management to facilitate
effective decisions, how to work with people, improve communication, how to motivate
employees and finally problem solving.
3.6 MANAGING CHANGE
The business enterprise will conduct survey from time to time in the market and compare other related
businesses activities so as to cope with changing trends of the market. It will always establish customer
needs and requirements so as to be able to meet their changing needs. Employees of the enterprise will
be consulted at the point of need to change operations and management programs. Technological
change will be initiated in adequate time as well as scrutinize the need for embracing new technology in
the business.
3.7 SUPPORT SERVICES
The business will demand support services in its operations from other relevant institutions. These
services will include the following.
3.7.1 BANKING SERVICES
The enterprise will require several accounts i.e. saving accounts to save its money, deposit account for
purposes of deposit transactions etc. The enterprise will also establish itself to greater heights through
borrowing loans and financial advice seeking on investment from the banking institution.
3.7.2 INSURANCE SERVICES
The enterprise has resources that are useful assets. The enterprise will ensure both natural and its
human resources against expected occurrences of risks i.e. medical insurance scheme for all employees
and insurance of organization property against collateral damage like, fire, theft etc. at ARMACO
INSSURANCE COMPANY.
3.7.3 CONSULTANCY SERVICES
The enterprise management will consult on how to run their daily operations for the successive
attainment of set goals from various sources i.e. financial consultancy on banking and investment will be
done in banking institutions etc.
3.7.4 LEGAL SERVICES
Legal services will be required when establishing contracts, drafting legal letters, interpreting labor laws
and during employment. The enterprise will be associated with LIGONO AND SONS ADVOCACY
COMPANY LIMITED in its legal affairs and will obtain relevant documents from the government through
the Kenya Industrial Labor courts whenever aggrieved.
CHAPTER FOUR
4.0 PRODUCTION AND OPERATION PLAN
The plan involves activities which the operator has to meet to make the business run smoothly.
4.1 PRODUCTION FACILITIES
The intended enterprise will require equipment and facilities for its operations. The table below shows
the equipment and facilities to be bought and the cost per item.
4.1.1 PRODUCTION FACILITIES TABLE
ITEM
Taster
Radio/ DVD Player
Mobile Phones
Adapter
Generator
Solar
Computers
Chargers
Televisions
Electrical cables
Invertors
TOTAL
QUANTITY
3
1
20
2
1
2
4
3
5
4
3
COST/UNIT
5,000
20,000
80,000
2,000
5,000
20,000
80,000
30,00
20,000
2,000
3,000
TOTAL COST
15,000
20,000
80,000
2,000
5,000
20,000
80,000
3,000
20,000
2,000
3,000
210,000
4.2 PRODUCTION LAYOUT PLAN AND OFFICE LAYOUT
The enterprise will be designed in an orderly manner of arrangement of offices and other specific
working areas within the identified business premises so as to allow smooth flow of work. Each office
will have a special design of arrangement of furniture and equipment within the office depending on the
nature of the work to be done and the number of employees expected to work in the office. The general
business enterprise layout is proposed to be as follows.
4.2.1 OFFICE LAYOUT
4.3 PRODUCTION PROCESS
The production process will be divided into four different sections all operations will be carried within
the enterprise. These will include the following stages;
1st stage
-
Assembling of raw material
2nd stage
-
Repair of electronics/ electronic materials
3rd stage
-
Fixing of repaired electronics
4th stage
-
Displaying the electronic ready for customer view
From the above major stages involved in the production process various production materials will be
required to adapt for breaking hardware problems among others.
4.4 GOVERNMENT REGULATIONS
The government sets policies and legislation to act as a guide to business operations within its area of
jurisdiction. The enterprise will major on the following legislations and policies for its smooth running.
4.4.1 GOVERNMENT TRADE LISENCE LEGISLATION
The business will obtain a trade license under the trade license Act of the Kenyan law which states that
“persons may conduct business in accordance with the terms of the current license”
4.4.2 HEALTH REGULATION
Regular advice will be sought from the public health department to ensure quality assurance in
standards of sanitation of the office premises. Requirements from the public health department will be
adhered to.
4.4.3 SAFETY REGULATION
This requires the business to ensure safety of workers all time while performing their duty. Necessary
measure shall be taken to ensure employees are safe from injuries i.e. through safety training, provision
of work attire i.e. aprons, boots, dust coats, wrist straps, gloves etc.
4.4.4 LABOUR REGULATION
This provides legal obligations of the employer to keep up to date files on issues relating to promotion,
hiring, firing, remunerations etc. The enterprise is determined to keep detailed information and never to
intimidated or marginalizes employees at work but to stick by the employment agreement with workers.
CHAPTER FIVE
5.0 FINANCIAL PLAN
The financial objectives of the business will be to:
a)
b)
c)
d)
e)
Maintain a healthy liquidity position throughout the trading period.
Maintain return on owners’ equity at an enjoyable rate.
Realize a steady growth of income throughout the trading period.
Maintain and control expenses.
Maintain an effective accounting system.
5.1 PRE-OPERATIONAL COST
ITEM
COST
License and permits
6,500
Water installation
1,200
Initial advertisement
2,000
Rent deposit
36,000
Equipment and machinery
100,000
Furniture and fittings
15,000
Telephone and installation
2,000
PrOforma fee
2,000
TOTAL
168,700
5.2 WORKING CAPITAL ESTIMATIONS
ITEM
AMOUNT
Ksh.
Ksh.
CURRENT ASSETS
Stock
Debtors
Cash in bank
Cash at hand
Prepayments (Expenses)
TOTAL CURRENT ASSETS
100,000
108,000
10,000
40,000
168,700
436,700
CURRENT LIABILITIES
Creditors
Bank overdrafts
Expense owing/ Arrears/Outstanding
TOTAL CURRENT LIABILITIES
WORKING CAPITAL
10,000
30,000
10,000
(50,000)
376,000
5.3 INCOME STATEMENT FOR THE YEAR ENDING31ST DECEMBER 2015, 2016 AND 2017
ITEM
YEAR 2015
Shs.
Sales
Cost of sales
Gross profit c/d
Discount Received
Expenses
Recent Deposit
Advertisement
Electricity bill
Water bill
Installation & fittings
Salary & wages
Licenses & Permits
Telephone & postage
Depreciation on machine
NET PROFIT BEFORE TAX (10%)
NET PROFIT AFTER TAX
Shs.
YEAR 2016
Shs.
Shs.
Shs.
Shs.
1,620,000
(500,000)
1,120,000
5,000
1,125,000
1,994,000
(550,000)
1,394,000
5250
1,399,250
2,332,800
(605,000)
1,727,800
5,512.50
1,733,312.50
(618,700)
506,300
(50,630)
(649,785)
749,465
(749,465.50)
(714,763.50)
1,018,549
(101,854.90)
455,670
674,518.50
916,694.10
72,000
5,000
12,000
8,000
7,000
565,200
6,500
3,000
3,000
5.3.1 Assumptions
a)
b)
c)
d)
e)
YEAR 2017
The business sales are expected to increase at a rate of 20% P.A
The cost of goods sold amount is expected to increase by10% annually
The expenses and income for are expected to increase at a rate of 5% P.A
The enterprise expects 10% rate depreciation on machines annually
Current liabilities are expected to reduce at a rate of 10% P.A
5.4 BALANCE SHEETS FOR 2015, 2016 AND 2017
ITEM
YEAR 2015
Shs.
Fixed Assets
machines
(Less dep. 10%)
Furniture & Fittings
(Less dep. 10%)
Total Fixed Assets
Current Assets (W.C)
Stock
Debtors
Cash in bank
Cash at hand
Payments
Total Current Assets
TOTAL ASSETS
Current Liabilities
Creditors
Bank Overdrafts
Expense owing
Total Current Liabilities
Long Term Liabilities
Bank loan
Owners’ Equity
Shs.
Shs.
Shs.
Shs.
50,000
50, 000
(5,000)
15,000
(1,500)
45,000
45,000
(4,500)
13,500
(1,350)
39,500
135,000
65,000
73,125
73,562.50
426,700
512,040
614,448
491,700
585,165
688,010.50
(50,000)
(45,000)
(40,500)
(460,000)
(510,000)
(322,000)
(367,000)
(225,400)
(265,900)
210,000
250,000
TOTAL LIABILITIES
5.4.1 Assumptions
Fixed assets are expected to increase in value at a rate of 25% P.A
Provision for depreciation on fixed assets is 10% P.A
Working Capital is expected to increase at a rate of 20% P.A
Long term liabilities are expected to reduce at a rate of 30% P.A
5.4.2 FINANCED BY;
CAPITAL
426,700
Add Net Profit
455,670
882,370
Long term Liabilities
12,150
10,000
30,000
10,000
Total Long term Liabilities
a)
b)
c)
d)
YEAR 2017
Shs.
15,000
100,000
108,000
10,000
40,000
168,700
YEAR 2016
(460,000)
422,370
(1ST YEAR 2015)
5.5 PROJECTED CASH FLOW OF LINX ELECTRONICS AND ACCESSORIES SOLUTIONS HOLDINGS FOR THE
YEAR ENDING 31ST DECEMBER 2015
ITEM
Jan- April
May- Aug
Sept- Dec
Total
(Kshs.)
(Kshs.)
(Kshs.)
(Kshs.)
24,000
915,900
1,544,700
2,736,600
Sales
570,000
650,000
730,000
1,950,000
Loan
200,000
-
-
200,000
Debtors
80,000
80,000
80,000
240,000
Cash in hand
6,500
6,500
7,000
20,000
Cash at bank
10,000
10,000
10,000
30,000
Total Inflow
1,106,500
1,698,400
2,371,700
5,176,000
Salaries
56,000
56,000
56,000
168,000
Rent
20,000
20,000
20,000
60,000
Water
4,000
4,000
4,000
12,000
Telephone
4,000
4,400
8,400
16,800
Electricity
4,000
4,000
4,000
12,000
Transport
4,000
4,000
4,000
12,000
Creditor
-
-
240,000
240,000
Advertisement
1,000
500
1,000
2,500
License
-
-
9,000
9,000
Materials
60,000
60,000
60,000
180,000
Insurance
1,200
1,200
1,200
4,800
Stationery
-
-
2,000
2,000
Repair
-
-
24,000
24,000
Miscellaneous Expenses
-
-
1,000
1,000
Total Expenses
154,600
153,700
434,600
527,100
Net Income
951,900
1,544,700
1,937,100
4,649,500
Cumulative Cash
951,900
2,496,600
4,657,500
Balance b/ f
Cash Inflow:
Expenses:
5.6 BREAK EVEN ANALYSIS
The enterprise Break Even can be analyzed as in the following Calculations
Sales Year 1: =Kshs 514800
(i) Total contribution margin =Sales year 1 – Total variable costs
=Kshs. 514500 -180000
=Kshs. 334800
(ii) Contribution margin % = Contribution margin/Sales x 100
= Kshs. 334800/Kshs 514800 x 100
= 6.5%
(iii) Total fixed costs = Ksh. 263000
(iv)Break-even level of sales = Fixed cost/Contribution margin%
=Kshs 263000/6.5 x 100
=Kshs 4046153
(v) Break Even Point as a ratio of year 1 = Break-even point/Sales x 100
=Kshs. 4046153/Kshs 514800 x 100
=Kshs. 785966%
(vi)Return on Equity (ROE) = Net profit after tax/ Owners equity x 100
=Kshs. 21692/30000 x 100
=72.3%
(vii) Return on investments (ROI) = Net profit after tax/ Total investment x 100
=Kshs. 21692/Kshs 40000 x 100
= 52.3%
(viii) Net profit objectives year 1 = Net Profit after Tax/Sales x 100
=Kshs21692/ Kshs 51800 x 100
= 4.2%
5.7 PROPOSED CAPITALIZATION
PARTICULAR (S)
Owners’ equity
Friends & Relatives
AMOUNT (KSHS.)
250,000
30,000
PERCENTAGE CONTRIBUTION
51.02
42.8
Bank Structure (Loan)
TOTAL INVESTMENTS
210,000
490,000
6.12
100 %
5.8 PROFITABILITY RATIO
Profitability Test Ratio
= Current assets/ Current liabilities
= C.A: C.L
= Kshs. 236100/Kshs280000
=0.8:1