Business Plan- Ds 24th Friday

7/30/2019 Business Plan- Ds 24th Friday

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BUSINESS PLAN

FOR

SWEET SPRING DEPOT

PRESENTED BY: SAMMY NJIHIA KAMAU

ADMISSION NO: DP070054

INDEX NO: 401040-002

PAPER NO:

PRESENTED AT: KENYAINSTITUTE OF SURVEYING

AND MAPPING

PRESENTED TO: KENYA NATIONAL EXAMINATIONCOUNCIL (KNEC) BEING A PARTIAL

FULLFILMENT OF THE

REQUIREMENTS FOR THE AWARD

OF DIPLOMA IN LAND SURVEYING

EXAM SERIES: OCT/NOV 2009

DECLARATIONWith utmost truthfulness and honesty, I declare that this is my original work and has notbeen presented elsewhere for anything related to academic or examination purposes.

Name: Sammy Njihia Kamau


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Signature:

CERTIFICATE OF SUPERVISIONI hereby certify that I have supervised each and every part of this project.

Name:

Signature:

Date:


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DEDICATIONThis project is cordially dedicated to my parents Mr. and Mrs. James Kamau for their

guidance and financial support they have given me.

Secondly, the lecturers in humanities department for their ideas and guidance.

Finally, I am sincerely grateful to all my colleagues in the Photogrammetry class.


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TABLE OF CONTENTS

DECLARATION

CERTIFICATE OF SUPERVISIONDEDICATIONTABLE OF CONTENTS

ACKNOWLEDGEMENT

SECTION ONE

1.0 Executive Summary

1.1 Business description1.2 Marketing plan

1.3 Organization and management plan

1.4 Operation plan

1.5 Financial plan

SECTION TWO

2.0 Business Description2.1 Business name

2.2 Business location and address

2.3 Form of ownership2.4 Type of business

2.5 Products/Services

2.6 Justification of opportunities2.7 Industry

2.5 Goals of business2.9 Entry and growth strategies


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SECTION THREE

3.0 Marketing plan

.1 Customers

.2 Market share

.3 Competition

.4 Methods of promotion and advertising

.5 Pricing strategy

.6 Sales tactics

.7 Distribution strategy

SECTION FOUR

4.0 Organization and management

4.1 Business manager and qualification4.2 Personnel, number and duties

4.3 Recruitment and training

4.4 Remuneration and incentives4.5 Licences, permits and bylaws

SECTION FIVE5.0 Operation plan

5.1 Production facilities and capacity

5.2 Production strategy

5.3 Production process5.4 Regulations affecting operations

SECTION SIX6.0 Financial plan

6.1 Pre-operational cost

6.2 Estimates of working capital6.3 Preparation of cash flow projections

6.4 Preparation of proforma income statements

6.5 Calculation of break even point

6.6 Calculation of profitability ratios6.7 Desired financing

6.8 Proposed capitalization

SECTION ONE

1.0 EXECUTICE SUMMARY

Sweet Springs Depot is a sole proprietorship type of business. It will offer first class

sales and delivery services to all its customers with full commitment and dedication.

1.1 BUSINESS DESCRIPTIONSweet Spring Depot will be a sole proprietorship type of business which will be located

at a shopping center called free area which is located three kilometers from Nakuru town

and is on Nakuru-Nairobi highway. The business will be started early in the year 2010.

The main business activities will include purchasing soft drinks mainly sodas and mineral

water from manufacturers and supplying them to Nakuru town and neighboring towns

like Njoro and Bahati. The business therefore will be offering sales services andtransportation of the mentioned products.


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1.2 MARKETING PLANThe target customers comprise traders in the said areas running retail shops, restaurants

and also social events like weddings, and company meetings. Effective methods of

advertising will be employed to reach out to all these customers when the business starts.

1.3 ORGANISATION AND MANAGEMENT PLAN

The business will be purchasing the products on cash and short term credit. The managerwill oversee all the activities in various departments and will be assisted by the other

employees. The duties and responsibilities will be divided clearly to ensure smooth

running of activities in the business. Every employee will be supervised by his or herimmediate boss.

1.4 OPERATION PLAN

All the activities in the business will be done in a very co-coordinated manner to avoidany hitch that may occur along the way. As a manager I will be responsible in organizing

all the sections and also make contingency plan where necessary. I will establish and

maintain a good trading relationship with my customers and suppliers in order to buildtrust among ourselves. I will also ensure the products I receive are genuine and have met

the Kenya Bureau of Standards requirements.

1.5 FINANCE PLAN

I intend to start the business with a capital of Ksh. 6,000,000. I intend to raise this money

from a bank loan of about Ksh.2200000. loan from Youth fund of about Ksh.2, 300,000

and my personal savings and friends contributions of about Ksh.1, 500,000.

I intend to establish a proper documentation of all financial transaction that will be

showing the financial status of the business at any point in time.

SECTION TWO

2.0 BUSINESS DESCRIPTION2.1 BUSINESS NAME

The name of the business shall be SWEET SPRING DEPOT. This name bonds very well

with this kind of business considering that the business deals with beverage drinks. It is

therefore very easy to associate the drinks and the sweet spring as the source.

2.2BUSINES LOCATION AND ADDRESS

The business address shall be

SWEET SPRING DEPOT

P.O. BOX 15104

NAKURUEmail: [email protected]

It shall be located at a place called Free Area which is a shopping centre located about

three kilometers from Nakuru town. It is also found along the Nakuru Nairobi highway.

2.3FORM OF OWNERSHIP
mailto:[email protected]:[email protected]


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This shall be a sole proprietorship whereby as a manager, I shall oversee all the activitiesof the business. I will be formulating the policies of this business and at the same time

seek consultative services on various issues touching on the business. I will enjoy all the

profits realized by the business and also all the losses incurred by the business. My choicefor this form of ownership is due to some of its outstanding advantages such as quick

decision making, ease of starting and also being in touch with the customers.

2.4 TYPE OF BUSINESS

The business deals with purchasing sodas and mineral water from the manufacturing

companies and distributing them at both retail and wholesale. The business will also beoffering some transportation services to its customers.

2.5 BUSINESS PRODUCTS AND SERVICES

The business products will include will include mainly all soda brands from Coca-ColaCompany such as Fanta, Sprite, Coke, Stoney, Krest, and Mineral water from Keringet

Mineral Water Company.

The services to customers will be transportation, some credit supplies and also some saletips.

2.6 JUSTIFICATION OF OPPORTUNITIESNakuru town is growing and expanding at a very high rate. This has lead to increased

business activities. Nakuru town also serves as headquarter for Rift Valley province. The

weather in the area for a considerable period in a year is normally dry and therefore the

business can trade during this period. The business location is quite strategic since it isnear the highway and also close to other shopping centers like Lanet and Bahati.

2.7 INDUSTRYThe business falls under Manufacturing and Transport Industries since it deals with

manufactured products and also engages in transportation.

These two industries have been growing rapidly due to some factors like:

1) Improved infrastructure

2) Improved popularity of some products like bottled water

3) Government support

These Industries performance also varies with seasonal events like religious festivals

such as Christmas and the time of the year. Basically, during festivities, the businessperformance is normally good. The manufacturing industry aims at adopting the new

technology in its operations in order to I improve quality and efficiency of production.

2.8 GOALS OF BUSINESS

For any business to grow and expand there must be set goals that will give the business asense of direction. Therefore goal setting is a crucial step in achieving the success of a

business. Some of the goals am setting for the business include:

I) Creating job opportunities for people with qualifications like driving and

store keeping.II) Profit maximization to avoid in expanding the business

III) To act as a perfect link between the retailers and manufacturers and also to

avail the products to retailers at the right time and price.IV) To offer the best after-sales-services to customers


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2.9 ENTRY AND GROWTH STRATEGYThe entry strategy shall be to offer transport services to customers for free. I will also

organize for a door to door visits to major retail shops especially in Nakuru town to

inform them of the existence of my business and services am offering.My transportation vehicles will also bear posters advertising the business. I also intend to

publish posters and distribute them to prospective customers.

GROWTH STRATEGY

The starting capital is sufficient to jump start the business. This will enable smooth start

of the business. During the initial stages of the business all the profit will be ploughedback to allow growth. The business marketing segment shall remain alert to capture any

new customers. The business shall adopt the most desirable method to carry out the

advertising during any change in market trend.

SECTION THREE

3.0 MARKETING PLAN

3.1 CUSTOMERSThe customers will be divided into three groups. These groups will be retail shops,

businesses like hotels and pubs and finally people having events like weddings andmeetings.The three groups of customers are located in Nakuru town and within the neighboring

areas distance of not more than twenty kilometers.

3.2MARKET SHAREThe area has a total population of approximately 2million people. The town is expanding

with emergence of new estates and businesses. I expect to cover and serve about 45% of

all my potential customers. The market share is bound to fluctuate due to some factorslike climatic conditions.

Pipeline depot and Menengai depot being the main competitors, I expect them to cover

30% and 15% respectively. The remaining 10% will be covered by the other smalldepots. The representation of the market share is shown in the pie chart below

3.3 COMPETITION

The main competitors of my business are Pipeline depot and Menengai depot. They areboth located about a kilometer away.

I intend to attract customers by doing the following:

1) Charging reasonable transportation fee2) Delivering orders on time

3) Offering short term credit to regular customers


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4) Employing qualified personnel who will handle customers with courtesy

3.4 METHOD OF PROMOTION AND ADVERTISING

The initial advertising will target the major customers whereby Ill organize for a salesgroup to go and approach them directly.

In future, I will use posters, print media specifically newspapers and also on radio in

various vernacular stations.

Advertising will take place continuously while promotions will be taking place

occasionally. The initial profits will cater for advertising and promotion expenses.The sales volume will be used to gauge the effectiveness of the advertising.

3.5PRICING STRATEGY

I will initially conduct a survey of the existing prices of similar products and serviceswithin the market targeted area. This survey will help in setting the best prices of

products and services.

The prices will also be affected by some factors like demand, cost of running the businessand environmental conditions like weather changes.

3.6 SALES TACTICSI will ensure that the products I deal in are original from the manufacturers and will

always be in right quantity and quality. This will ensure that no products are returned to

the business after purchase due to defects. I will also ensure that there will be enough

stock at all times.

3.7 DISTRIBUTION STRATEGY

The business distribution chain will cover the following areas:Free area, Lanet, Bahati, Njoro, and Nakuru town.

The furthest from these areas is 20kilometers from the business location. These,

combined with good road networks in the area will create a smooth distribution flow.In future, I intend to expand the distribution chain to cover areas like Molo and Mau.

SECTION FOUR

4.0 ORGANISATION AND MANAGEMENT4.1 BUSINESS MANAGER AND QUALIFICATION

NAME SAMMY NJIHIA KAMAU

TITLE MANAGER

DUTIES 1) Chief Administrator

2) Provides the initial capital3) Recruit employees

4) Formulate business policies


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5) Supervise and co-ordinate the other departments

6) Set goals and targets for the business

QUALIFICATION -Diploma Photogrammetry & Remote Sensing-CPA II

-Computer literate

4.2 PERSONNEL NUMBER AND DUTIES

PERSONNEL NO DUTIES

ACCOUNTANT 1 -Receiving payment from customers.-Releasing money to buy stock

-Compute and prepare business final accounts

and statements

PROCUREMENTOFFICER

1 -Keeping the list of suppliers-Monitoring the stock

-Organize for new or replacement of assets

-Assign duties to store assistants

ADMINISTRATIVE

OFFICER

1 -Ensure the business assets are in good

condition and safe

-Organize for the repair of motor vehicles and

buildings-Assign duties to drivers, watchmen and

cleaners.

STORE ASSISTANTS 8 -Perform all the duties assigned to them by theprocurement officer

DRIVERS 5 -Supplying the products to the customers

-Ensuring the vehicles are well maintained

CLEANERS 3 -Cleaning the store and offices

WATCHMEN 2 -Ensuring security to the business premise and

the vehicles

4.3 RECRUITMEENTAND TRAINING

I intend to advertise the following positions


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AccountantProcurement officer

Administrative officer

I will hire the services of a recruiting firm to interview the applicants and come up with

the best. The qualified candidates will consequently assist in the recruitment of store

keepers, drivers, watchmen and cleaners.

As a manger I shall encourage the top officers to go for part time short term courses,

where the business will offer interest free loans to these officers.

4.4 REMUNERATION AND INCENTIVES

The salaries will vary according to employee roles and job groups.As the business progress, he employees will receive salary increment proportional to their

job groups.

The starting salaries will be as follows, per month:

Manager 40,000Accountant 25,000Procurement officer 25,000

Administrative Officer 25,000

Store assistants 15,000

Drivers 15,000Watchmen 10,000

Cleaners 10,000

4.5 LICENSES, PERMITS AND BY-LAWS

LICENSES

The business shall acquire the trade license from the Local Authority in order to complywith the law.

INSURANCE

The workers, business premise and the vehicle will be insured so as to cover for anydamage that may occur in the course of running the business.

BY-LAWS1) All employees will be required to observe punctuality when reporting to work.

2) All staff should be in the right attire during working hours

3) The employee will be held liable for any act of negligence or impropriety

4) The vehicles will not be authorized to carry unauthorized goods or passengers5) The employees will be required to treat the customers with courtesy

SECTION FIVE

5.0 OPERATIONAL PLAN

Production facilities will be acquired before the business commences both on credit and

on cash terms.The facilities will fall under three categories as follows:

ACCOUNTS DEPARTMENT

ITEM QTY NEEDED COST PER ITEM TOTAL COST


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Computer

ChairsCabinets

Table

1

32

1

45,000

2,0002,500

3,000

45,000

6,0005,000

3,000

TOTAL 59,000

PROCUREMENT DEPARTMENT


ComputerTable

Chairs

TelephoneCalculators

12

4

12

45,0003,000

1,000

2,500500

45,0006,000

4,000

2,5001000

TOTAL 58,500

ADMINISTRATIVE DEPARTMENT


Mini trucksComputer

TablesChairs

32

25

600,00045,000

1,500500

1,800,00090,000

3,0002,500

TOTAL 1,895,500

5.2 PRODUCTION STRATEGY

These will be a systematic strategy of carrying out activities. The amount of stock to bepurchased will be guided by sales projection and other market factors. The sources of

supplies will be manufacturing companies mainly Coca-Cola Company and MenengaiMineral Water Bottling Company.

The three departments will be required to work hand in hand to ensure there is smoothflow of business activity. The manufacturer of the products am engaging in are wel

established and they will be delivering goods to my business premise.

The business shall have total of twenty employees including the manager. All of them

will render direct service to the business. Every employee will work in his relevant

department with clear responsibilities.


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5.4 REGULATIONS AFFECTING OPERATIONS

The location of the business falls under Nakuru County Council and therefore a trading

license must be obtained from this council. Motor vehicle drivers will be required to havvalid driving license at all times. The management will ensure that all vehicle have

complied with the traffic regulations.

The business will put emphasis on safety regulations within the business premise. Allstores and offices will have emergency exit and will be equipped with fire extinguishers.

Staff working in the stores will be given a proper attire during working hours.

The business management will be organizing clean ups for areas surrounding the business

premise in order to comply with public health regulations.

SECTION SIX6.0 FINANCIAL PLAN

The financial plan will act as a tool in assisting and determining the progress and all the

financial activities in the business. It shows the status of a business financially at alltimes.

6.1 OPERATIONAL COSTThis is the cost incurred before the business commences. The following are materials and

equipment required during the start of the business.

ITEM(S) COST KSHS.

Fixed assets

Licenses and PermitsOffice equipments

ElectricityTelephone

2,000,000

150,00030,000

3,5002,000

TOTAL 2,185,500

6.2 ESTIMATION OF WORKING CAPITAL

Working capital is the excess of total current assets over the current liabilities. Its arrivedat by deducting the difference between the total current assets and the total current

liabilities.

WC = CA CL

PARTICULARS

CURRENT ASSETS

Cash in hand

Cash at bankDebtors

Stocks

Total Current Assets

YR 1

250,000

700,000400,000

900,000

2,250,000

YR2

300,000

720,000460,000

920,000

2,400,000

YR3

450,000

690,000430,000

890,000

2,460,000

CURRENT LIABILITIES

CreditorsLoan and Interest

Bank Overdraft

400,0008000,000

500,000

350,000750,000

300,000

380,000600,000

100,000


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Total Liabilities 1,700,000 1,400,000 1,080,000

6.3 PREPARATION OF CASH FLOW PROJECTION

This will show the income and expenditure and the flow of money in and out of the

business over a period of time. It helps to determine whether the firm can meet all itsexpenses and realize profit.

ITEM JAN - MAR APR - JUNE JUL - SEPT OCT - NOV

CASH INFLOW

Cash sale

Collection from debtors

Total Cash Inflow

CASH OUTFLOW

Purchases

RentSalary

Electricity

CreditorsAdvertisementLicences

Stationery/Postage

Total Cash Outflow

Net Cash for Quarter

1,720,000

80,000

1,800,000

600,000

50,000250,000

15,000

20,00015,000

4,000

3,000

957,000

843,000

1,800,000

100,000

1,900,000

580,000

50,000250,000

15,000

18,00016,000

-

3,000

932,000

968,000

1,840,000

50,000

1,890,000

600,000

50,000250,000

15,000

20,00014,000

-

3,000

949,000

943,000

2,200,000

60,000

2,260,000

800,000

50,000250,000

15,000

25,00020,000

-

3,000

1,163,000

1,097,000

PREPARATION OF PROFORMA INCOME STATEMENT

This will help determine whether the business is running at a loss or profit. It willtherefore help determine payments of salaries and means of improving business in order

to expand.

ITEM ENDING YR1 ENDING YR2 ENDING YR3

SalesCost of good sold

Gross profit

OPERATING EXPENCES

Salaries/Wages

InsuranceElectricity

AdvertisementStationery/Postage

Rent

License

TOTAL

NET PROFIT BEFORE TAX

PROVISION FOR TAX

NET PROFIT AFTER TAX

7,560,0002,580,000

4,980,000

250,000

50,00015,000

65,0003,000

50,000

4,000437,000

4,543,000

817,740

3,725,260

7,200,0002,420,000

4,780,000

250,000

60,00015,000

60,0003,000

50,000

4,000442,000

4,338,000

780,840

3,557,160

8,200,0003,600,000

5,600,000

250,000

60,00015,000

70,0003,000

50,000

4,000442,000

5,158,000

928,440

4,229,560


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6.5 PREPARATION OF PRO-FORMA BALANCE SHEET

ITEM YR1 YR2 YR3

ASSETS

Current Assets

Cash

DebtorsBank

Stock

250,000

400,000700,000

900,000

300,000

420,000680,000

1,200,000

350,000

320,000700,000

1,500,000

Total Current Assets

Fixed Assets

VehiclesAccumulated depreciation 15%

Book Value

ComputersAccumulated depreciation 10%

Book value

Furniture and fittings

Accumulated depreciation 5%Book value

2,250,000

1,800,000-

1,800,000

150,000-

150,000

100,000

-100,000

2,600,000

180,000(270,000)

1,530,000

150,000(15,000)

135,000

100,000

(5,000)95,000

2,870,000

1,530,000(153,000)

1,000,000

135,00013,500

121,500

95,000

9,50085,500

Total Fixed Assets

TOTAL ASSETS

2,050,000

4,300,000

1,760,000

4,360,000

1,207,000

4,077,000

ITEM YR1 YR2 YR3

LIABILITIES

Current Liabilities

Creditors

Taxation

Bills payable

20,000

817,740

185,580

30,000

847,740

205,580

40,000

853,320

107,000

Total Current Liabilities

Long Term Liabilities

Bank loan

Owners equityDrawings

1,023,320

1,500,000

1,500,000294,680

1,083,320

1,000,000

2,000,000294,680

1,000,320

900,000

1,950,000222,680

Total Long Term Liabilities

TOTAL LIABILITIES

3,294,680

4,300,000

3,294,680

4,360,000

3,072,680

4,077,000

6.6 CALCULATION OF BREAK-EVEN POINT

Break even point is the volume of sales at which the business neither makes profits nor

loses. It is calculated as follows:

Fixed Cost x 100

Contribution margin %

Contribution margin = Total Sales Variable Costs


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Contribution Margin % = Contribution Margin x 100

Total Sales

COSTS YR1 YR2 YR3

FIXED COST

Salary

Licences/Permits

Insurance

Total

VARIABLE COST

Telephone

Electricity

Rent

Advertisement

Creditors

250,000

4,000

50,000

340,000

12,000

42,000

50,000

65,000

20,000

250,000

4,000

50,000

340,000

13,000

40,000

49,000

66,000

18,900

250,000

4,000

50,000

340,000

13,500

38,000

46,500

58,000

21,900

TOTAL 189,000 186,900 177,900

YEAR 1

Contribution = Sales Total Variance Cost

7,560,000 189,000

=7,371,000

Contribution Margin (cm) = 7,371,000 = 0.975

7,560,000

BREAK EVEN OF SALES IN KSHS.

Fixed Costs

Contribution Margin

340,000 = 348,717.94

0.975 = 348,718

YEAR 2

Contribution = Sales Total Variance Cost

7,200,000 186,900


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7,013,100

Contribution Margin (CM) = 7,013,100 = 0.974

7,200,000


Fixed Costs = 340,000

Contribution Margin 0.974

= 349,075.9

= 439,076

YEAR 3

Contribution = Sales Total Varance Cost

8,200,000 177,900

8,022,100

Contribution Margin (CM) 8,022,100 = 0.978

8200000


Fixed Costs

Contribution Margin

340,000 = 347,648.26

0.978 = 347,648

6.6 CALCULATION OF PROFFITABILITY RATIOS

Profitable Percentage ratio helps depict whether they are decreasing or improving

1) Gross Profit % Year 1

Gross Profit (%) = Gross Profit

Net Sales

4,980,000 x100

7,560,000

= 65.87%


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Gross Profit % Year 2

Gross Profit = Gross profit

Net Sales

4,780,000 x 100

7,200,000

66.39%

Gross Profit %Year 3

Gross Profit (%) = Gross Profit

Net Sales

Gross Profit (%) 5,600,000 x 100

8,200,000

68.29%

11) Return on Equity = Net Profit before Tax

Owners Equity

R.O.E for year 1 = 4,543,000 x 100

4,600,000

98.76%

R.O.E for year 2 = 4,338,000 x 100

4,730,000

91.71 %

R.O.E for Year 3 = 5,158,000 x 100

4,980,000

= 103.57%

111)Return On Investment = Net Profit after Tax

Total Investment

R.O.I for Year 1 = 3,725,260 x 100

6,000,000

62.08%


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R.O.I for Year 2 = 3,557,160 x 100

6,000,000

59.28%

R.O.I for Year 3 = 4,229,560 x 100

6,590,000

71.68%

6.7 DESIRED FINANCING

This indicates all the finance required to start off the business and keep it in progress

ITEM AMOUNT KSHS

Pre-operational Cost

Working Capital

2,013,000

550,000

Total Desired Financing 2,563,000

6.9 PROPOSED CAPITALISATION

This is a brief description of proposed capitalization of the business

PARTICULARS AMOUNT KSHS

Personal Contribution

Funds from borrowing

1,500,000

4,500,000

TOTAL CAPITALISATION 6,000,000

Documents

Business Plan- Ds 24th Friday