BUSINESS PLAN

BUSINESS NAME : KINGS HARDWARE LTD

P.O. BOX : 123 NYERI

PRESENTED BY : KING’ORI SAMWEL GICHUKI

INDEX : 2191010037

INSTITUTION : MUKURWE-INI TECHNICAL TRAINING

INSTITUTE

PRESENTED TO : THE KENYA NATIONAL EXAMINATION

COUNCIL FOR THE PARTIAL FULFILMENT

FOR THE AWARD OF CERTIFICATE IN

PLUMBING.

SUPERVISOR : MR.WACHIRA

EXAM SERIES : NOVEMBER 2022

DECLARATION
I declare that this is my own business plan, written out of my own capacity
and ideas which whatsoever has never been presented to Mukurwe-ini
Technical Training Institute. This will be though first time for it to be
submitted.

Student : KINGORI SAMWEL GICHUKI

Signature …………………………… Date ……………………..

Supervisor: MR. WACHIRA

Name ……………………………….

Sign…………………………………

Date………………………………..

ii
ACKNOWLEDGEMENT
I wish to acknowledge my lecture Mr. Wachira for the support he has
given to make this project a success. I also acknowledge my parents Mr.&
Mrs. King’ori for their support.

iii
DEDICATION
I dedicate this business plan to my parents and my sister for their
inspiration throughout the project writing. May the almighty God bless
them.

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 TABLE OF CONTENTS

DECLARATION..................................................................................................ii
ACKNOWLEDGEMENT...................................................................................iii
DEDICATION.....................................................................................................iv
EXECUTIVE SUMMARY................................................................................vii
CHAPTER ONE...................................................................................................1
1.0 BUSINESS DESCRIPTION..........................................................................1
1.1 BUSINESS NAME.........................................................................................1
1.2 BUSINESS LOCATION AND ADDRESS...................................................1
1.2.1 BUSINESS ADDRESS...............................................................................2
1.3 FORM OF OWNERSHIP...............................................................................3
1.4 TYPE OF BUSINESS....................................................................................3
1.5 PRODUCT AND SERVICES........................................................................3
1.6 JUSTIFICATION OF OPPORTUNITY........................................................4
1.7 INDUSTRY....................................................................................................4
1.8 BUSINESS GOALS AND OBJECTIVES.....................................................4
1.9 ENTRY AND GROWTH STARTEGIES......................................................5
CHAPTER TWO..................................................................................................6
2.0 MARKETING PLAN.....................................................................................6
2.1 INTRODUCTION..........................................................................................6
2.2 CUSTOMERS................................................................................................6
2.3 MARKET SHARE.........................................................................................6
2.4 COMPETITION.............................................................................................7
2.5 METHOD OF PROMOTIONS AND ADVERTISEMENT TO ATTRACT
AND MAINTAIN CUSTOMERS.......................................................................8
2.6 PRICING POLICY.........................................................................................9
2.7 SALES TACTICS STRATEGIES IN SALES MANSHIP..........................10
2.8 DISTRIBUTION POLICY...........................................................................10

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CHAPTER THREE............................................................................................11
3.0 ORGANISATION AND MANAGEMENT PLAN.....................................11
3.1 BUSINESS MANAGER..............................................................................11
3.2 OTHER KEY PERSONNEL........................................................................12
3.3 RECRUITMENT TRAINING AND PROMOTION...................................12
3. 4 REMUNERATION AND INCENTIVES...................................................13
3.5 EXTERNAL SUPPORT SERVICES...........................................................13
3.6 GENERAL ORGANIZATION....................................................................14
ORGANIZATIONAL STRUCTURE................................................................15
CHAPTER FOUR..............................................................................................16
4.0 OPERATION PLAN....................................................................................16
4.1 PRODUCTION FACILITIES AND CAPACITIES....................................16
4.2 PRODUCTION STRATEGY.......................................................................19
4.3 PRODUCTION PROCESS..........................................................................22
4.4 PLANT LAYOUT........................................................................................23
4.5 REGULATIONS AFFECTING OPERATIONS.........................................24
CHAPTER FIVE................................................................................................25
5.0 FINANCIAL PLAN.....................................................................................25
5.1 BOOKS OF ACCOUNTS............................................................................25
5.2 PRE-OPERATIONAL COST......................................................................25
5.3 ESTIMATION OF WORKING CAPITAL..................................................25
5.4 ESTIMATION OF FIXED ASSETS............................................................26
5.5 CASH FLOW STATEMENT FOR KINGS HARDWARE LTD................27
5.6 PROFORMA INCOME STATEMENT FOR YEAR ONE.........................28
5.7 PROFORMA BALANCE SHEET FOR YEAR 1 AT 31ST DECEMBER
2022....................................................................................................................28
5.9 PROFITABILITY RATIOS.........................................................................29

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EXECUTIVE SUMMARY
1.0 BUSINESS DESCRIPTION

This is where entrepreneur provides such information that is relevant to

identification of her business the following are dealt will under this chapter
business description, business name and logo address of the business and
location of the business the name of business should be short and capture the
address of business they may include physical address telephone and email of
business.
2.0 MARKETING PLAN

This chapter consists the market plan of the business, institutional customers,
individual customer, the competitor’s analysis, the market share promotion and
advertising, price strategy and setting sales target is outlined under this chapter.
3.0 ORGANIZATION PLAN

Under this chapter the entrepreneur is to capture the organization and

management plan, organizational structure, personnel duties and remuneration,
the salary and remuneration structure, recruitment training and promotion, the
remuneration and incentives and support services are under this chapter.
4.0 PRODUCTION FACILITIES AND CAPABILITIES

The chapter consists the operational and production plan, the product design and
development, production facilities and capacity, the production strategy
monthly labor requirements monthly expenses cost of production, the
operation/production process the entrepreneur is also to capture government
regulation affecting the business.

5.0 FINANCIAL PLAN

This is the last chapter of the business that analysis all final accept through production of the
required record different cost, capital and return on capital are calculated profitability ratio
that is mark up and margin are also calculated the contribution margin and breakeven unit of
sales are also calculated fixed capital and working capital are clearly tabulated a proforma
balance sheet which shows fixed assets current assets and current liability is also tabulated a
proforma income statement which shows the profits gained and expenses incur is also
tabulated a cash flow statement should also is also provided and chat posted in appendix.

vii
 CHAPTER ONE

1.0 BUSINESS DESCRIPTION

The business “KINGS HARDWARE LTD” will be a sole proprietorship kind of business
owned by Kingori Samwel Gichuki the business will mainly major on selling of construction
materials, such as cement, iron sheets, nails, reinforcement’s bars, dump proof course and
construction equipment like hammers, wheelbarrows, spades, trowels, plumb bobs, sheets
floats, wooden floats.

After analyzing the market and mostly the competitors “KINGS” hardware will capitalize on
the weakness of its competitors by improving the quality of the services and goods sold to the
customers, good pricing strategy and emphasis on delivering efficiency which is the key
weakness of the competitor. Entry plan will involve trade discounts and offering cash,
lowering slightly below those of competitors to attract customers and offer after sale services
for certain quantity.

The plans for the growth of business will include the following:-

 Advertisement – the proprietor will continue to advertise the business even in other
districts and provinces.
 Ordering of goods in bulk quantities to minimizes transport cost
 The proprietor will ensure his quality of services and goods and up to the required
standard

1.1 BUSINESS NAME

The name of the business is “KINGS HARDWARE LTD”. The other part of the business
name refers to the general term for the kind of goods sold by the enterprise. The idea for
supplying construction materials and equipment came across as a result of increased need fro
mare shelters through a rapid growth of town population many settlers who have been allured
by good climate in the region have been putting up more storeys building in the town. Also
the town being served by many tarmac roads has been opened to the interior. This will help
the customers in reduction of transport costs and equally improvement of accessibility.

The business motto: BUILDING STRONG NATION FOR YOU. The proprietor will ensure
that all the materials and equipment sold to the customer are certified by Kenya bureau of
standard. Better quality materials sold by the enterprise will ensure strong houses are built.
Strong buildings which have a longer life span are basis of the growth of the nation.

1.2 BUSINESS LOCATION AND ADDRESS

KINGS hardware limited will be located in NYERI district at NYERI town opposite NYERI
main bus stage and next to NYERI family bank. The business will be at strategic position
where the main road from NYERI- Nairobi passes. The business will occupy Kimili building
adjacent to Lima shopping Centre

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1.2.1 BUSINESS ADDRESS
The business address will be:-

KINGS HARDWARE LTD

PO BOX 123

NYERI

Tel: 0726526992

Email: [email protected]

Reasons for the choice of location includes:-

 The location is at a strategic location near the main road that is Nairobi-NYERI Road
 Availability of banking services such family bank which is just next to the business
location, equity bank situated about 400metres from enterprise location.
 NYERI police station being less than 1.5 kilometers away from the location of
business gives security for the business.
 Availability of many building which are under construction and others which have
been proposed to be constructed within the town and surrounding area gives a large
market share.

The enterprise intends to cover the whole area of lower part of NYERI town. The area
covered is the most fast growing part of the town. It has the highest number of building
structures under construction. The target population to be served within the region is
approximately 3,850 people

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1.3 FORM OF OWNERSHIP
The form of the business ownership will be a sole proprietorship. The owner of the business is
called:

KINGORI SAMWEL GICHUKI

PO BOX 100

NYERI

TEL (070)-2468901

Reasons for choosing this form of business are:-

i. Job security
ii. all the profit that is no sharing of profit
iii. Personal satisfaction (boss)
iv. Making of decisions is the duty of the proprietor

1.4 TYPE OF BUSINESS

The business is a hardware shop. It will deal with selling of building material and construction
equipment. The enterprise will serve residents who are carryout construction works around and
within NYERI market. The business will carry out its operation in NYERI town.

1.5 PRODUCT AND SERVICES

Reinforcements: are used on column and beams as bars meant to carry tensile stresses during
construction e.g. they exit in different types like high yield, mild steel, BRC, ribbed bars etc.

Iron sheets: used for roofing purposes in most case and they exist in different gauges g24, g26,
g28, g30, g32.

Cement: is mixed with other building material like sand and ballast to for concrete.

Plumb bobs: is used to check whether the wall is vertical.

Wheelbarrows: used to transport materials or items during construction process

The equipment sold by KINGS enterprise will give the customer a long service without wearing
out fast. Also the construction materials sold are well screened by KEBS to certify their quality.
The business is aiming to supply equipment and materials of high quality at a price affordable to
its customers. In addition diversification will be identified ranging from gods of lesser cost to
those of highest cost in-order to satisfy all the customers.

3
1.6 JUSTIFICATION OF OPPORTUNITY
The market survey has shown that the business will experience a great competition from other
two old hardwares in the town. But the survey has shown that the hardware does not sell their
materials on credit. This being the major weakness, the proprietor will use it to get a big share in
the market. Another more to gain a bigger market share will be based on long working hours and
delivery of goods on time as per the customer’s request. The business having to deal with already
manufactured goods, does not need any skilled labour bur just technical skills with a bit of
experience in customer handling.

The enterprise intends to sell quality goods to its customer that will service them for a long time
different from the counterfeit goods which have flooded the market.

1.7 INDUSTRY
The business falls in the category of building and construction industry. This industry is the most
rapid growing industry in the country. Different designs of building are emerging every day and
the inadequacy of house for rent rising as the population increases. This has attracted the
attention of clients who have money and are willing to start projects for construction of house for
renting.

This industry touches in large area ranging from house building to construction of bridges and
roads as well. The industry is among the top leading in offering jobs and improvement of the
country economy increased to the improvement of infrastructures within the country.

1.8 BUSINESS GOALS AND OBJECTIVES

The main goal of the business is to maximize profit by selling satisfactory goods to the
customers.

SHORT TERM GOALS

i. To capture 6% of the market share within a duration of the year

ii. The proprietor will be buying the requirements goods in bulk large quantities to the
economy of sale
iii. Payment with monthly installment method that is hire purchase will be introduced to
contractors who need the items at alarming speed
iv. Offering after sale service at affordable prices to attract many customers within the first
year.

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LONG TERM GOALS

i. To recover 55% return on investment within a period of 5 years.

ii. To pay 85% of the loan by the end of 5th year of operation
iii. To capture 40% markets share within NYERI town in the next 3 years
iv. To open up a sub branch at the nearby market within a period of 7 years in-order to
increase the number of customers.

1.9 ENTRY AND GROWTH STARTEGIES

i. Entry strategy

The business will be registered to acquire trading license to enable the business to operate and
carry out its operation effectively. The operator will sell materials and equipment which are
certified by the KEBS to build trust on customers and to attract them. More over the prices will
be lowered below those of competitors.

ii. Growth strategy

The enterprise will introduce new methods of payments to the customers whereby customers will
be paying with installment upon payment of 1/3 of the total price of goods sold as initial
payment.

Then the business will open sub-branch at Mitunguu to expand its operational area.

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 CHAPTER TWO

2.0 MARKETING PLAN

2.1 INTRODUCTION
The enterprise aims at increasing the sales volume with 10% for the first year and the subsequent
two years by 18% and @8% respectively. The business projects to serve 300 customers, 450
customers and 850 customer during the 1st, 2nd and 3rd year respectively of operation. The volume
of all goods to be sold is aimed to increase between 0.5% - 1.2% monthly.

The number of contract to supply with materials and equipment for construction is aim to
increase in the order of 12, 25 and 30 for the first three years. The gross income for the first three
years is aim to amount Kshs. 1,000,000.

2.2 CUSTOMERS
The customers in this business will be individuals, institutions and construction companies which
carry out building work around and within NYERI town. The customers are expected to buy
goods anytime of the day as their demand does not rely on time.

Customers are expected to purchase durable materials and equipment for construction at an
affordable price. The main customers of KINGS hardware are both businessmen and employed
people of NYERI and its environs.

The proprietor intends to off customers discount especially during e very start of the months,
since these are peaks periods when many customers earn their salaries and wages.

2.3 MARKET SHARE

Having other business of the same class which deal with the same products like Kinoti G.K
hardware and Biku stores then the percentage share of KINGS hardware is about 25%. Other
businesses are well experienced and have many customers in comparison with KINGS hardware.
The market area comprises of NYERI town and its environs within the range of five kilometers
square. The people within this area have the purchasing power as majority of them are
permanently employed while others are farmers and business community.

The enterprise sales are peak during the start of month and low during the mid month as the
farmer is the time when customers are paid their wages and salaries while the later is when all
the money has been used on projects or shopping. The issue of low sales the proprietor intends to
adjust it by selling the products in a manner that customer can pay for the product at the agreed
installments. The number of potential customers is expected to rise within a period of five years
as the area is growing at a high rate due to improvement of infrastructures. Therefore the
proprietor is expecting to get more market share within this period. The business intends to
increase its share from 25%-30%. The total sales expected per month amount to Kshs. 38,000 for
the first 3 years.
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2.4 COMPETITION
The business environment is competitive there are number of competitor in the area.

SUMMARY OF BUSINESS COMPETITION

NAME NO. LOCATION % STRENGTH WEAKNESSES

SHARE
Kinyua 1 NYERI town 39% Well known by Prices are high
Stores about 300m many Does not offer
from KINGS Good financial base after sale service
hardware Big store Does not sell on
hire purchase
Wang’ombe 2 NYERI town 33% Well known by Does not sell on
hardware about 700m many hire purchase
from KINGS Offers after sale Low salaries to
hardware service employees
Many workers No incentives
Muinde store 3 Within NYERI 3% Financial stability Does not open
town frequently

Strategies to use;-

i. Offering affordable prices for the offers which will attract most customers who are price
sensitive.
ii. Giving services to customers who purchase a certain quantity of products and goods
within the prescribed distance
iii. Reduction of the number of worker and paying them attractive salaries.
iv. Selling on hire purchase and giving discount at a convenient time especially during the
month starts.

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The following is the market share

% share

Muinde store KINGS HARDWARE LTD Kinyua Stores Wang’ombe hardware

2.5 METHOD OF PROMOTIONS AND ADVERTISEMENT TO ATTRACT

AND MAINTAIN CUSTOMERS
PROMOTION METHOD

The proprietor intend to offer the following types of promotion to attract customers;-

1) Offering after sale service

The enterprise will offer after sale services on one the customer has purchased goods
worth Kshs. 10000 and above, this is by transporting the products to the customer’s
premises
2) Trade discount
This is price reduction to customer who will be buying promptly and this will increase
the number of sales
3) Business decoration
The business premise will be designed well painted with attractive colours to the
customers externally. It will be designed on the walls the type of materials and
equipment sold.

The business will mainly emphasize on trade discount regularly to increase the number of sales
as well as attract more customers. KINGS hardware expects to use a maximum of Kshs. 7,000

8
every month on promotions. The proprietor intends to check on turn out and volume of sale in-
order to measure how promotion campaign is effective.

Advertising methods

The business will advertise its products by designing

1) Billboards
Two billboards to advertise the business existence and its products that are going to be
put up. The billboard will convey the message “. My shop offers the lowest price “ it will
also display some of materials and equipment sold by the hardware. In addition address
and contact number of KINGS hardware will be shown.
2) Calendars
The enterprise will produce a number of calendars which will be distributed to customers
free of charge. Which will help KINGS hardware to advertise its goods, these calendars
will contain the pictures of equipment and building materials like shovel, building line,
tapes, cements, iron sheets that the business deals with.

The proprietor approximates to use Kshs. 2600 to put up billboards and produce calendars. The
effectiveness of the advertising method will be measured by the profit margin and customer turn
up. These methods are best of all for they are effective and less costly and affordable.

2.6 PRICING POLICY

The factors that the business will consider when pricing products are:-

1) Competitive price
The business will consider the price of all other competitors in the market before fixing
its prices. This will be carried out by find the average price of all the competitors.
2) Price change
The enterprise will consider this factor due to the changes in climate. During heavy rains
construction works are hampered hence the sales goes down
3) Transport
The proprietor will raise the price of goods if the transportation cost of the commodities
will be high so that the transport action cost does not affect the profit margin

The proprietor wants to earn a mark-up of 20% on sales therefore the price will be given:-

Price = cost + mark-up

Where cost = direct cost + indirect cost

And the total cost =100%

Depending on the amount of goods, purchased, the customer who will purchase in large volume
will be offered discount from the original price.

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2.7 SALES TACTICS STRATEGIES IN SALES MANSHIP
The proprietor will personally sell the goods with the help of few workers who will be involved
in carrying goods from store and loading them for the customer. Sales team will be recruited on
merit of experience in the same field and then trained for three days before commencing their
jobs. In addition they will be made aware of their rights and freedom as they carry out their job

The business will set its selling method, policies and timing in such a way that there will be
certain principles to be followed for example when a customer buys on bulk he will be offered
trade discounts and cash discount. On the side of attracting the customers the business will offer
calendars. In-order to maintain sales volume the enterprise will be advertising its products and
goods in local radio station like Muga FM.

The business will also be organizing small shows where they will be selling raffles and the grand
draw made where the winner will be offered a token and cash.

2.8 DISTRIBUTION POLICY

The enterprise being small in size the proprietor will sell goods direct to customers who are
individuals and institution and building contractor. This is possible since the location of the
KINGS hardware favors its operation. The most mean of transport that the business intends to
use is by road and mainly using Lorries and min trucks. This means of transport is projected to
coast at almost Kshs. 5,000 per month.

Major problem expected in distribution is the accessibility of some places which are joined by
rough feeder roads which are impossible during rainy season. This problem will be solved
through offering of cash instead of offering transport after sale. Another problem which cannot
be predicted it is time of occurrence of accident during distribution process.

This problem can be planned for in advance by insuring the vehicles together with the goods
being transported daily.

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 CHAPTER THREE

3.0 ORGANISATION AND MANAGEMENT PLAN

Management is necessary for effective performance in-order to achieve organization goals. The
management should set rules and regulations which will govern the employees as they carry on
their duties. The management plan will show ordering and selection of tasks necessary in
achieving the proposed plan. It will also involve the assignment and the co-ordination of tasks to
be performed by each worker in the organization.

3.1 BUSINESS MANAGER

The business manager of the KINGS hardware will be the proprietor himself that is:-

KINGORI SAMWEL GICHUKI

PO BOX 100

NYERI

TEL (070)-2468901

The manager having attained an aggregate grade of B- in ordinary level examination, he has also
got an award of diploma in civil engineering. He has attended a short course in business
administration. For his diploma in civil engineering award went to NYERI technical training
institute in the year 2010 -2012

He has one year experience in sales having worked with Muhindi hardware in 2009 at NYERI
town near co-operative bank. The proprietor’s age is 24 years.

JOB DESCRIPTION

Duties and responsibility of manager:-

a. To coordinate all the activities in the business

b. Management of employee that is hiring, training promoting and motivating.
c. The manager will formulate roles of business
d. To manage money by ensuring paper financial records are kept
e. Solving conflicts between employees and addressing customer claims.

The manager being he senior staff in the business will get a salary of Kshs. 10,000 per month
plus other benefits from manufacturers offers and awards

The manager will organize free trips which are sponsored by the cement manufacturing industry
and steel manufacturing industries to their customers all over the country.

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3.2 OTHER KEY PERSONNEL
The following are other personnel required to work in line with the business. They are as
follows:-

SUMMARY ON PERSONNEL QUALIFICATIONS

ITE PERSONNE NUMBE QUALIFICATIO DUTIES/ SALARY/

M L R NS RESPONSIBILITES BENEFITS
1 Attendants 4 D+ and above in Maintaining cleanliness in Kshs.1,500 per
O-level the premises month
Over 18 years Attending to customers
with national ID effectively
A resident of Packing of goods once
NYERI town. ordered by the customers
Two years and carrying them from the
experience in store
hardware sales Loading the transportation
vehicles for the customers
Supervisor 1 C+ and above in Supervise all operations in Kshs.2,300 per
O- level the business month
Eloquent in both Keeping proper financial
English and records
Kiswahili Address customers
Has some complaints
knowledge in Stock taking
accounts and book Directing attendants on
keeping what to do
2 years experience
in a busy
hardware
Total 5 Kshs.8,300

The employees will be given other incentive that is house allowance and medical allowance. The
supervisor will be got by contacting fellow entrepreneurs who are in the same line of operation
or visiting middle colleges to look for qualified personnel. The attendants will be got through
advertisement. The performance of the employee will be evaluated through picking a number of
customers and supplying them with questionnaires concerning service delivery. Also direct line
interview of customer on quality of services offered by KINGS hardware will be carried out.

3.3 RECRUITMENT TRAINING AND PROMOTION

I) RECRUITMENT

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Two methods will be used to recruit personnel. These are; advertisement for vacant position,
advertisement will be carried out for the interested and qualified applicant to apply. After
application short listing will be done and interview date will be fixed for shortlisted applicants.
Oral and written interview will be carried out and reception of qualification documents and
education testimonials. The successful applicant will be offered the job and he/she will be
oriented for the first two days followed by three days of training in preparation for
commencement of job.

ii) Contacting fellow entrepreneur who are in the same line of operation or visiting middle
college to look for qualified personnel. In both cases the qualified person will be required to
follow the process below.

Application--- interview -----job offer --- orientation ----------- training

ii) Training

it will be a vital activity to be undertaken to enhance that employees perform their work
effectively after recruitment. The employee will be allowed to attend seminars once after two
months which will be focusing on workers performance ant their welfare. Also they will be taken
for a tour after six months where they will visit different companies.

iii) Promotions

The most pleasant job move is promotion. This is moving person into a position of greater
potential impact on the firm when the needs arise. The business will be promoting the personnel
on the basis of experience and performance of each employee. The promoted personnel will be
awarded with certificate of merits during annual lunch which will be held after the end of every
successive year hand work will also be highly recognized in promotion process.

3. 4 REMUNERATION AND INCENTIVES

The employees will be remunerated using a straight fixed salary method. The proprietor will
offer salaries in good time. Work will be done for 8hrs a day and overtime will be paid ksh 200
per hour. Worker’s rights will not be interfered with, to motivate workers in carrying out their
work effectively and with ease the business will offer the following incentives:-

a. Workers will be given apron and other protective gadgets for their safety
b. Organize party yearly
c. Those requiring urgent money shall be given and deducted from salaries
d. Sick off

3.5 EXTERNAL SUPPORT SERVICES

KINGS hardware requires external bodies for efficient running of the business.

1) Blue shield insurance

Po box 470

13
 NYERI
Tel 0770657000

The business will have this body to compensate loses occurred when the business have an
encounter with fires or accidents or injury to the workers and company vehicles.

2) Postal services
NYERI post office
Po box 4170
NYERI
Tel 06420220
The business will send and receive it letter through the post office
3) Equity building society
Po box 154
NYERI branch
The business will have to open an account of banking in equity building society which
will take 900 in the bank

3.6 GENERAL ORGANIZATION

The business will be organized in one office which will suit the enterprise for operation whereby
all the documents concerning any transaction of the business will be sorted. The office will in
corporate the supervisor.

The manager will make decision of the business. The business will be managed through staff
meeting. Here matters involving business progress will be discussed

14
ORGANIZATIONAL STRUCTURE

MANAGER

SUPERVISOR

ATTENDANTS

15
 CHAPTER FOUR

4.0 OPERATION PLAN

The business will be involved in activities which will require different facilities and equipment
in-order to carry out daily operations. Due to regulation of the county council on road reserve
usage in the market, the business is left with a small field outside premise to operate on.

4.1 PRODUCTION FACILITIES AND CAPACITIES

I) PRODUCTION FACILITIES

SUMMARY PRODUCTION FACILITIES

ITEM DESCRIPTION USE COST QUANTITY TOTAL

@ KSHS.
KSHS.
Receipt 150 x 75mm For writing the 450 2 900
book price and
product bought
Calculato Fx50 medium For calculating 1000 1 1000
r total sales and
other
calculations
Tape Medium size For binding 50 3 150
goods
Cell Nokia 1200 For 1690 1 1690
phone communicating
with customers
who need the
product
Balance Medium 25kg For weighing 2999 1 2999
materials
Total 8,019

Total cost of all equipment = Kshs. 8019. The equipment and machine used is supposed to have
a depreciation rate of 10% per year hence aimed to serve for at least 10 years before they are out
of function. All the equipment and machine will be purchased being new for long term services

II) BUSINESS PREMISE

The owner of the business has rented the building for 3000 per month. The type of premise is
permanent building of natural stones. The facilities installed in the premise include counter,
shelves, water and power. The building will be 50 x 40 feet and will need to be painted afresh in-

16
order to design the business name and sample of products sold on the external wall. There is
enough space for future expansion the premise is located at NYERI town directly opposite
NYERI bus stop next to family bank.

III) MATERIALS FOR PRODUCTION AND OPERATION

The business will be dealing with sales of building material and construction equipment and
tools. The major materials are cements, corrugated iron sheets, reinforcement bars, hardboards,
paints and nails. Materials will be coming from Nairobi through DH1 transporters because they
charge cheap and they will ensure security of the goods.

The materials are readily available throughout the year. The cost of the materials per month is
projected to average ksh 100,000 plus 4% transport cost.

SUMMARY RAW MATERIALS

ITEM DESCRIPTIO SUPPLIE QUANTIT COST TOTA REMARK

N R Y L S
Cement Blue triangle Industrial 40 740/= 29600 Those
Simba house 20 720/= 14400 items
Nairobi bought
Corrugated Dumuzas Industrial 50 450/= 22500 form the
iron sheets Mabati 8 feets house same
Thika supplier
Y6, Y8, Y12, and their
Reinforcemen Y16, Y20 Industrial 100 70/= 7000 price
t bars house exceeding
Standard 8 x 4 Nairobi 20,000 will
Hard boards fts 30 350/= 10500 be paid
through a
Blue, yellow, cheque
Paints golden Industrial 50 340/= 17000
house
All inches Thika Items
Nails 5 3,500/ 12500 amounting
DATAN = between
Wheel barrow Industrial 5 5000 5000 –
Jua kali made house 2,500/ 20000 to be
Forked jembe Nairobi 20 = 5000 paid in
All classes i.e. cash.
CA, CB etc. 250/=
Pipes Industrial 50 CA 15000
house 100 CB 15000

17
 Nairobi 50 CC 300/= 5000
150/=
100/=
Industrial
house
Thika

Industrial
house
Nairobi

NYERI
Jua kali
industry

Industrial
house
Thika
Total 171000

Total costs of all materials = Kshs.171,000

IV) UTILITIES FOR PRODUCTION

SUMMARY UTILITIES FOR PRODUCTION

ITEM DESCRIPTION SUPPLIER QUANTITY COST TOTAL REMARKS

PER PER KSHS.
MONTH UNIT
KSHS.
Electricity HEP hydro Kenya 70 KW/H 8 560 To be paid
electric power Power and monthly
Lighting
company
Water Treated water NYERI 500 litres 2 200 To be paid
and piped water monthly
supplier
Telephone Mobile phone Safaricom 400 min 3 1200 To be paid
service in cash
provider
company
Total 1900

18
Total cost per month for all utilities = Kshs.1,900

4.2 PRODUCTION STRATEGY

I) PRODUCTION CONTROL
The manager who is the owner of the business will be briefing employees every morning before
the work commences. The employees will be encouraged to work together and in union for
delivery of attractive services to customers. They should be informed that every piece of work is
none for individual but for all of them customers will be served on the basis of first come first
served without any unfairness. For easy removal of materials such as cement iron sheets and bars
for reinforcement a rail fitted with rollers will be put in place. This will ease the work done by
the employees and will make the work more efficient, simpler and effective. In-order to cope
with changes in technology the proprietor will be saving money on separate account in-order to
deal even with future technological development.
II) QUALITY CONTROL

In-order to ensure that the customers get best of their money proprietor will ensure that items
sold are per the standardization of Kenya bureau of standard. For the achievement of quality
standard

 Employees will be trained which will help them to offer standard services that please
customers and attract them
 Any item brought to the business with alteration shall be highly scrutinized
 The manager will also inspect how services are being offered to ensure they are to the
standard

III) LABOUR CONTROL

The proprietor is liable to ensure that all employees possess required skills and education level
for better performance. The business has five direct and four indirect workers.

SUMMARY LABOUR CONTROL

ACTIVITY SKILLS EDUCATION STAFF REMARKS

NEEDED ASSIGNED
Selling Should have Certificate in Manager The supervisor
knowledge civil engineering can also serve as
about the price the manager if
of the product absent
Watch man Securicor Certified course Keeping the

19
 training in Securicor premise secure
Driver Driving license Form four leaver Transportation He carries out
which is valid of purchased other duties if
goods not working

WORK SCHEDULES
MONDAY – FRIDAY
7.30 – 8.00 8.00 – 10.00 – 10.30 – 1.00 – 2.00 2.00 – 5.00 5.00
10.00 10.30 1.00
Reporting Work Tea break work Lunch work Closing or
time break overtime

SATURDAY AND PUBLIC HOLIDAYS

8.00 – 8.30 8.30 – 10.00 10.00 – 10.30 10.00 – 1.00 1.00 – 2.00 2.00
Reporting Work Tea break work Lunch break Closing or
time overtime

V) PRODUCTION OPERATION AND COSTING

The business needs ksh 250,000 to be in operation for one month. The monthly sales will be
35,000 to 55000 shilling

SUMMARY PRODUCTION COSTINGS

ITEM DESCRIPTI MATERIA LABO OVEHEA TOTAL QUANTI TOT

ON LS COST UR D COST/U TY AL
PER UNIT PER COST/U NIT (KSH
UNIT NIT S)
Cement Blue triangle 500 150 90 740 40 29600
Samba 540 120 60 720 20 14400
Corrugat Dumuzas 355 80 35 470 30 14100
ed iron mabati 340 65 25 430 20 8600
sheets
Wheel DATAN 2070 300 130 2500 5 12500
barrows
Hard 8 x 4 feets 280 50 20 350 30 10500
boards
Nails All inches 2820 500 180 3500 5 17500

Total cost of production per month = 107,200

20
SUMMARY SELLING PRICE

ITEM DESCRIPTION TOTAL MARK SELLING QUANTITY TOTAL

COST UPS PRICE KSHS
PER PROFITS
UNIT
Cement Blue triangle 740/= 100/= 840 40 33600
Samba 720/= 80/= 800 20 16000
Corrugated Dumuzas 470/= 50/= 520/= 30 15600
iron sheet Mabati 430/= 40/= 470/= 20 9400
Wheel DATAN 2500/= 485/= 2985 5 14925
barrow
Hard 8” x 4” feets 350/= 60/= 410 30 12300
boards
Nails 2 1/2 , 3, 4, 2, 1 3500/= 800/= 4,300/= 5 21,500
½ , 1 inches
Total 123325

V) PURCHASING POLICY

The manager who is the proprietor of the business will be carrying out the purchase of the
products that is materials for construction and equipment. The materials will be ordered. The
materials once delivered will be examined on arrival for approval for their suitability by the
proprietor.

Records of purchase will be kept by the manger for future reference. The supply will be done on
quarterly basis to add the existing stock. The purchasing channel will be as follows:-

INDUSTRIAL HOUSE

PO BOX 104

NAIROBI

INDUSTRIAL HOUSE

PO BOX 740

THIKA

JUA KALI SECTOR

PO BOX 12

NYERI

21
The suppliers are of great benefit to KINGS hardware for they are reliable supply quality
materials have variety of stock and they offer credits.

VII) INVENTORY CONTROL

The business owner intend to control the inventory by first establishing the re-order level to
avoid unnecessary shortages and delay in ordering. The amount to be invested in the stock will
be ksh 200,000 and stock taking shall be done once per month. The minimum level of the stock
should amount to 120,000 shilling at any given time.

SUMMARY STOCK CYCLE

ITEM DESCRIPTION SUPPLIER COST QUANTIT TOTALS REMARKS

PER Y
UNIT
Cement Simba Industrial 720 20 14400 To be paid
Blue triangle house Nairobi 740 40 29600 cheque
Nails All inches Industrial 3500 5 17500 To be paid by
a cheque
Corrugated Mabati Nairobi 430 20 8600 To be paid
iron sheets Dumuzas Thika 470 30 14100 through a
cheque
Hardboards 8 x 4” feets Industrial 350 30 10500 To be ordered
house Nairobi
Total 94700

4.3 PRODUCTION PROCESS

The business proprietor will either orders or purchase goods through cash or cheques. On the
date of delivery the manager carries out the inspection of items on delivery sheet. The materials
once offloaded are put in the store the examining of materials and equipment is carried out as
they are put in store.

The equipment and materials once confirmed by the manager then the new stock is handed over
to the supervisor who co-ordinate the arrangement of materials and equipment into their right
compartment or shelves. In-case of any changes in pricing the manager communicate new price
to the supervisor in-order for price adjustments. Once tools, equipment and building materials
are on shelves they are ready for the customer to see them and purchase at their will.

External factor likely to affect service process are rain and delay in delivery of goods, due to
transport implications.

4.4 PLANT LAYOUT

22
 CO
UN

SHELVES
SHELVES

SHELVES
SHELVES

MANAGER’S
ADJOINI
NG

OFFICE
BUILDIN
G

GENERAL STORE WAT

TO CHM
ILE AN’S

SITE

SITE

23
4.5 REGULATIONS AFFECTING OPERATIONS
The proprietor of the business will be affected by several regulations as follows:-

1) Insurance law
The proprietor intends to insure the business against burglary and fire. This will be
compulsory type of insurance policy which will be provided by east Africa Company
limited. It will go at a cost of Kshs.2000 per month.
2) Health
The proprietor will ensure that there is toilets and good water for drinking for the
workers. Hygiene is very important for any human being to live free from communicable
diseases and contact diseases.
3) Safety measures
The proprietor will provide firefighting equipment such as carbon dioxide cylinders. All
workers will be taught on how to extinguish fire using such devices. The workers in
KINGS hardware will be supplied with safety garment such as helmet, gumboots and
dust coats for their safety while carrying out the job

24
 CHAPTER FIVE

5.0 FINANCIAL PLAN

This chapter deals with financial matters of the KINGS business. Future financial potential of the
business will be looked at and also the revenue expected together with cost which the proprietor
will incur in running the business. This will enable the determination of viability of the business.

5.1 BOOKS OF ACCOUNTS

KINGS hardware will have to keep the following books:-

Cash books- this is where all cash used or received will be recorded.

Purchase ledger – this will show the goods bought

5.2 PRE-OPERATIONAL COST

These are cost incurred before the business begins its operation:-

SUMMARY PRE-OPERATION COST

ITEM AMOUNT KSHS

1 Bank account 5500
2 Bill board 2000
3 Post office box 1500
4 Construction of counter and shelves 10000
Recruitment expenses 1500
Total 20500

5.3 ESTIMATION OF WORKING CAPITAL

Working capital means the amount of money required in day to day running of the business.

SUMMARY – WORKING CAPITAL ON MONTHLY BASIS

ITEM AMOUNT KSHS

1 Opening stock 120000
2 Salaries 21700
3 Electrical bill 560
4 Postage bill 400
5 Trade license 4500
6 Loan payment 4500
7 Water bill 200
8 Rent 3000
9 Travelling 1000

25
 10 Advertisements and promotions 9600
Total 165460

5.4 ESTIMATION OF FIXED ASSETS

These are costs spent on capital machinery, tools and equipment. They usually have long life
span

SUMMARY – FIXED ASSET COST

ITEM AMOUNT KSHS

1 Calculator 1000
2 Balance 2990
3 Cell phone 1690
4 Motor vehicle 160000
Total 165680
The total amount of fixed assets Kshs.165,680

26
5.5 CASH FLOW STATEMENT FOR KINGS HARDWARE LTD
ITEMS JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC TOTAL
Cash sale 227710 191580 194210 206920 210010 212860 215800 197880 192480 198890 203130 212140 2463610
Bank interest - - - - - - - - - - - 850 850
Cash inflow 227710 191580 194210 206920 210010 212860 215800 197880 192480 198890 203130 212990 2464460
Purchases 180000 155000 16000 170000 175000 176000 178000 159000 158500 162000 165000 168500 2007000
Loan payment 4500 4500 4500 4500 4500 4500 4500 4500 4500 4500 4500 4500 54000
Salaries 21700 21700 21700 21700 21700 21700 21700 21700 21700 21700 21700 21700 260400
License 4500 - - - - - - - - - - - 4500
Postage bill 400 - - - - 400 - - - - - 300 1100
Rent 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000 36000
Water bill 200 180 150 180 200 200 200 180 180 150 200 180 2200
Electricity bill 560 500 510 530 520 510 550 500 510 520 530 530 6270
Transport fee 1000 - - - - 500 - - - - - 200 1700
Miscellaneous 350 200 - - - - 100 - - - 200 50 900
Promotions 3500 - - 2000 - - - 3000 - - - 4000 12500
Advertisement 2600 - - - - - 500 - - - - 500 3600
Total outflow 222310 185080 189860 201910 204920 206810 208550 191880 188390 191870 195130 203460 2390170
Net cash 5400 6500 4350 5010 5090 6050 7250 6000 4090 7020 8000 9530 74290
Cumulative 5400 11900 16250 21260 26350 32400 39650 45650 49740 56760 64760 742290
cash

27
5.6 PROFORMA INCOME STATEMENT FOR YEAR ONE
ITEM YEAR ONE
Cash sales 2463610
Interest 850
Total income 2464460
Cost of goods 2007000
Gross profit 457460

Expenses
Loan payment 54000
Salaries 260400
License 4500
Postage bill 1100
Rent 36000
Water bill 2200
Electricity bill 6270
Transport fee 1700
Promotions 12500
Advertisement 3600
Miscellaneous 900
Total expenses 383170
Net profit before tax 74290
Estimated tax at 15% 11143.50
Net profit after tax 63146.50

5.7 PROFORMA BALANCE SHEET FOR YEAR 1 AT 31ST DECEMBER

2022
Proforma balance sheets for year 2 as at 31st December 2022

5.8 break even analysis

Year 1

Gross margin = annual sales – variable cost of sales

= 2463610 -2034170

=429440

Gross margin percentage = gross margin x 100 / annual sales

28
 = 429440 x 100 / 2463610

= 17.4%

Summary of gross profit margin

B.E.P = total fixed cost / gross profit margin percentage

Year 1

356850 x 100 / 17.431

=20472146.73

5.9 PROFITABILITY RATIOS

I) GROSS PROFIT MARGIN

Gross profit margin = gross profit x 100 / sale

First year gross profit

= 457460 x 100 / 2463610

= 18.57

II) RETURN ON EQUITY RATIO

R.O.E = net profits after tax X 100 / owner’s equity

First year

R.O.E = 63146.50 X 100 / 384390

= 16.4%

III) RETURN ON INVESTMENT RATIO

R.O.I = net profits after taxation X 100 / total investment

Year 1

R.O.I = 63146.50 X 100 / 2007000

= 3.15%

29