BUSINESS PLAN

MAX BRICKS AND STONE SUPPLYS

PRESENTED BY : MAXVILLIAN OCHIENG GOR

INDEX NUMBER : 5411011308

CENTER CODE : 29541101

COURSE CODE : 1704

PAPER NUMBER : 105B

SUPERVISOR : SHARON KENDAGOR

PRESENTED AT : OL’LLESOS TECHNICAL TRAINING INSTITUTE

SUBMITTED TO KENYA NATIONAL EXAMINATION COUNCIL (K.N.E.C) IN PARTIAL

FULFILLMENT FOR AWARD OF CRAFT CERTIFICATE IN BUILDING TECHNOLOGY

EXAM SERIES: JULY 2020

DECLARATION
I hereby declare that this is my original work and is being forwarded to the Kenya National
Examination Council in partial fulfillment of the requirement for the award of Diploma in Civil
Engineering.

STUDENT NAME: MAXVILIAN OCHIENG GOR

SIGNATURE: ………………………………

DATE: ………………………………………

SUPERVISOR: ………………………………..

SIGNATURE: ………………………………

DATE: ………………………………………
DEDICATION
I dedicate this plan to my parents for both moral and financial support which greatly contributed
to the success of this project, without them I could not have come to this far.

May God bless them abundantly

ACKNOWLEDGEMENT
I accord my sincere gratitude to all who provided support in the development of this project.

Also i would like to acknowledge my mum for financial assistance that facilitated me to
complete the work.

Lastly I acknowledge my supervisor and my fellow class of 2020 for the guidance they gave me
throughout my strive in the production of my business plan.

MAY THE ALMIGHTY BLESS THEM ABUNDANTLY.

TABLE OF CONTENT

DECLARATION...........................................................................................................................ii
DEDICATION..............................................................................................................................iii
ACKNOWLEDGEMENT...........................................................................................................iv
TABLE OF CONTENTS..............................................................................................................v
CHAPTER ONE............................................................................................................................1
1.0 EXECUTIVE SUMMARY....................................................................................................1
1.1 BUSINESS DESCRIPTION..................................................................................................1
1.2 MARKETING PLAN............................................................................................................1
1.3 ORGANIZATIONAL PLAN................................................................................................1
1.4 OPERATIONAL PLAN........................................................................................................2
1.5 FINANCIAL PLAN...............................................................................................................2
CHAPTER TWO...........................................................................................................................3
2.0 BUSINESS DESCRIPTION..................................................................................................3
2.1 BUSINESS NAME................................................................................................................3
2.2 BUSINESS LOCATION.......................................................................................................3
2.3 FORM OF BUSINESS OWNERSHIP..................................................................................3
2.4 TYPE OF BUSINESS............................................................................................................4
2.5 THE PRODUCTS/SERVICES..............................................................................................4
2.6 GROWTH STRATEGY........................................................................................................6
CHAPTER THREE.......................................................................................................................8
3.0 MARKETING PLAN............................................................................................................8
3.1 CUSTOMER..........................................................................................................................8
3.2 MARKET SHARE...............................................................................................................10
3.3 COMPETITION...................................................................................................................11
3.4 METHODS OF PROMOTION AND ADVERTISEMENT...............................................13
3.5 PRICING STRATEGY........................................................................................................14
 3.6 SALES TACTICS................................................................................................................14
3.7 DISTRIBUTION STRATEGY............................................................................................15
CHAPTER FOUR.......................................................................................................................16
4.0 ORGANIZATION...............................................................................................................16
4.3 RECRUITMENT, TRAINING AND PROMOTION.........................................................19
4.4 REMUNERATION AND INCENTIVES...........................................................................20
4.5 LICENSES, PERMITS AND BY-LAWS...........................................................................20
4.6 SUPPORTIVE SERVICES..................................................................................................21
CHAPTER FIVE.........................................................................................................................22
5.0 OPERATIONAL PLAN......................................................................................................22
5.1 OPERATIONAL FACILITIES...........................................................................................22
5.2 OPERATIONAL STRATEGY............................................................................................22
5.3 COST OF LABUOR............................................................................................................23
5.4.0 REGULATIONS AFFECTING OPERATION................................................................25
CHAPTER SIX............................................................................................................................26
6.0 FINANCIAL PLAN.............................................................................................................26
6.1 PRE-OPERATIONAL COSTS............................................................................................26
6.2 WORKING CAPITAL........................................................................................................27
6.3.1 PROJECTED CASH FLOW STATEMENT AS AT 2019 FIRST YEAR......................28
6.3.2 PROJECTED CASH FLOW STATEMENT AS AT 2020 SECOND YEAR.................29
6.3.3 PROJECTED CASH FLOW STATEMENT 2021 THIRD YEAR..................................30
6.4 PRO-FORMA INCOME STATEMENT.............................................................................31
6.5 PRO-FORMA BALANCE SHEET.....................................................................................32
6.6 BREAK EVEN POINT........................................................................................................33
6.7 PROFITABILITY RATIO...................................................................................................35
6.8 DESIRED FINANCE..........................................................................................................37
6.9 PROPOSED CAPITALIZATION.......................................................................................37
CHAPTER ONE

1.0 EXECUTIVE SUMMARY

The business plan is divided into five chapters as highlighted below;

i. Business description
ii. Marketing plan
iii. Organization plan
iv. Operational plan

1.1 BUSINESS DESCRIPTION

Max bricks and stone supply is located in Homabay along Homabay road a few meters from
Homabay Town. It is a set up of business and is specializing in selling and distribution of bricks
and stones of various sizes for various customers.

Maxvillian Ochieng as the manager and sole proprietor of the business.

1.2 MARKETING PLAN

This covers various issues pertaining to the market of the business services. It shows the position
of Max bricks and stone suppliers in the market share.

The SWOT analysis describes competition and the competitors in the market. Factors to copy
with competition and also highlighted and proprietor ensure they are implemented as discussed.
employ unique advertising and promotion methods that see it penetrates the market within the
shortest time possible. The pricing strategy and sales tactics and distribution strategy to be
employed by the business are also distributed.

1.3 ORGANIZATIONAL PLAN

The management breakdown of the business staff is shown on the organizational chart.
Recruitment of employees as strictly based on academic qualification and work experience.
License, permit and by-laws affecting the business and various supportive services are also
discussed.
1.4 OPERATIONAL PLAN
The services that are offered by the business is selling and distributing the bricks and stones. The
business employs modern tools and equipment so as to facilitate the production of quality
services to the customers.

1.5 FINANCIAL PLAN

This shows all the transaction that is done to ensure effective operation of Max bricks and stones
suppliers. It directly shows finances, financial statement and financial calculations involved in
the business. The business need a working capital for the first three years of operation and
projected cash flow for the balance sheet and calculation of break-even points enable the
proprietor to measure the performance of the business.
CHAPTER TWO

2.0 BUSINESS DESCRIPTION

OWNERS DETAIL

NAME: MAXVILLIAN OCHIENG

ADDRESS: P.O BOX 185, HOMABAY

OCCUPATION: STUDENT

EDUCATION: I AM CURRENTLY PURSUING A CRAFT CERTIFICATE IN

BUILDING TECHNOLOGY AT OL’LESSOS TECHNICAL
TRAINING INSTITUTE.

2.1 BUSINESS NAME

The business is under the name MAX is derived from the name of the owner of the business. The
business name is meant to easily assist the customers to identify the products and services
offered.

2.2 BUSINESS LOCATION

The business is located in Homabay along Homabay route a few metres from Homabay town.
The site of the business is at the junction. Several reasons lead to the identification of this being
as an ideal location to establish the business. Some of these reasons are:-

Easy to access to transport facilities. This is due to the location along Homabay road.

The area is not crowded with similar business which is so beneficial for Max bricks and stone
suppliers in terms of attracting new customers. The business is located at a strategic position
easier to block customers accessing.

2.3 FORM OF BUSINESS OWNERSHIP

The business is a sole proprietorship. This form of business ownership was decision reached
after considering the advantages were below:-

i. Few legal requirement are involved when starting the business

ii. The proprietor is in a position to meet customers’ needs
 iii. The proprietor have direct contact with both the employees and the customers
iv. The decision making process is fact due to County decision making process is fast due to
County decision making
v. The proprietor enjoys profit evolved from the employees and customers

Despite the above advantages there are also short-comings which are likely to be experienced
among them

i. In case of death of the proprietor, the business collapses

ii. The proprietor suffers losses alone in case of any calamity which might strike the
business like fire and theft
iii. It is difficult in gaining confidence on the money from lending instructions where the
proprietor has to make a loan application to expand the business

To overcome the above shortcoming the proprietor is compelled to undertake the following tasks

i. Prepare good projected financial statement to earn the confidence of money from lending
institutions
ii. Insure the business fully against any risks like fire and theft
iii. Write a will to allow his younger brother to take over the business in the event of demise
of the proprietor

2.4 TYPE OF BUSINESS

The major activity of the business is the sale of bricks and stones other activities done in offering
of services i.e. the advisory services and dressing of stones to the required shapes.

2.5 THE PRODUCTS/SERVICES

The production available for sale in the business premise is bricks and natural stones “.
 a. FEATURES OF THE PRODUCT

The following sizes descriptions are available in the premise

STONES BRICKS
100 mm thick 100 mm thick
150 mm thick 150 mm thick
200 mm thick Grills and hollow bricks

The width and length of the stone vary according to the clients order and requirements. The most
available stones are of width 7 (175 mm) and 8 (200 mm) and these are mainly for walling
purposes.

The 9” X 9” (255 X 225) stones are used for foundation walls

b. BENEFITS OBTAINED FROM THE PRODUCTS

i. Earn income hence improve the living standard
ii. Create employment opportunities hence improve employees living standards
iii. Through taxation by local authorities the economy of the country is improves
iv. Through diversification, transport costs are reduced

2.5.1 INDUSTRY

The business aim is to create job to jobless people within the area. This business has not been
stared within the locality and hence will be monopoly type. The business aim at creating good
relationship with customers and hence profit.

The wish of MAX bricks and stone suppliers is to have five employees business manager,
accountants supervisor, driver.

2.5.2 JUSTIFICATION OF THE BUSINESS

From the Engineering the owner have done it has come to her notices that the business will be in
right position where there is ready market.
In the other hand the business location is in a place where there is availability of good
infrastructure to meet public need.

2.5.3 BUSINESS GOALS

Through hard work and determination, the business will run long and short term goals

i. SHORT TERM GOALS

These are goals for MAX bricks and stone suppliers intended to be achieved within a period of
one year

a. To satisfy customer and obtaining good will

b. To satisfy customers needs and obtain maximum profit
c. Employ more workers and offer training facilities to employees
ii. LONG TERM GOALS

For the business the long term goals are:-

a) To improve the technology used as much as the work is computerized. This will
reduce the cost of production as much of the workforce is reduced
b) To expand the business and establish other branches in the region.
c) Unique features of the products/services
d) Advice the clients on legal requirement before incurring any expenses on the
proposed projects
e) The dressing is done to the natural stones to different textures
f) Client is equipped with the required information i.e products of architectural drawings
to them who request for it

2.6 GROWTH STRATEGY

Trends signaling business growth;

i. Good quality products and or required standards offered to the market result into more
attraction of customers hence make the business to you
ii. The high quality services offered to the customers lead to growth of the business
iii. The good relationship between the owner and the clients increase sales hence make the
business grow

OPPORTUNITIES ARISING FROM THE TRENDS

i. It will be high profits level

ii. New branches are opened by use of profit generated from the business venture
iii. Market research is done so as to improve the services to be offered to the clients i.e
current design plans available in the market
iv. The client benefit from the business growth because there is a higher rate of credit and
discounts facilities
CHAPTER THREE

3.0 MARKETING PLAN

INTRODUCTION

Market plan is a way in which an entrepreneur can organize himself in a way that he knows
when he can market his products and to whom he will sell to and also to be well conversant with
the competition techniques in order to overcome his/her competitors from competition and for
him to maximize the profits

3.1 CUSTOMER
a. Principle customers and location of customer;
i. Institution and churches are within i.e. co-operative societies,
ii. Co-operatives societies located 10 km away.
iii. Self help groups located at nearby shopping centers, 300m away from the business
premises
iv. Contactors; some contractors are located about 1 km away
v. Individuals; many of them are those who work in town and other areas from the villages
surrounding the business premises
b. Amount be invested

Owners equity Kshs 22000

Inheritance Kshs 80000
Donation from family members Kshs. 500000
Contribution from friends Kshs 530000
Bank loan Kshs. 590000
TOTAL AMOUNT OF THE VENTURE Kshs. 230000
 c. Individual customers

Out of 200000 population of Homabay County 7000 are individual customers. These are
customers who reside around the business locality. These customers buy products for their own
use. Most of them are youths and middle aged men who buy/purchase bricks and stones from
MAX bricks and stones suppliers to build their own houses and business premises

i. Level of income

Most of them who buy are self-employed and unskilled earn salary ranging from Kshs. 2500 –
15000 per month

Those whom work in private and public section earn salary of Kshs. 5000 – 35000 per month

ii. Source of income

The individuals who have no skills are running the small business e.g. Hawking selling roasted
maize and selling second-hand –clothes (Mitumba)

d. Institutional customers

The town like Homabay, Kisumu together with their surrounding has a vast population leading to
a good number of learning institutions i.e. primary and secondary schools, colleges and
polytechnics. These institutions form major customers of Max bricks and stones suppliers

i. Amount of income

Those involved in the institutions are highly paid than individual customers whereby basic salary
ranges from kshs. 10000 – 50000 per month.

ii. Sources of finance

Most of them who work in the institution are localities from colleges and polytechnics, teachers
from primary and secondary schools and others are the skilled laborers who work in these
institution.
3.2 MARKET SHARE
Information about total market population is gathered and done using the following methods :-

 Observation

The method focuses in observing the behavior and action of population in a given area. Total
number of population is the area determined and potential customers also determined and the
ratio of the two multiplied by 100% to get the market share

Market share = Total potential customers X 100% / Total area population

i.e 105000 X 100 / 200000 = 52.5 = 53%

 Interviews

Interviews are carried out by the researcher who is the proprietor of the business in person and
using telephone. This is done to determine customers’ preferences to products quality and types
of services to offer. From this method, customers’ strength and weakness are known

 Questionnaire

This can be carried out on yearly basis. Questionnaires are set basing on the objectives of the
study and distributed to the sampled group

Return number X 100% / Total sent number

i.e 50 X 100 / 200

= 25%

 Total number of customers who buy the product

This is 53% of the total population of Homabay town i.e.

52.5 X 200000 /100

= 105000 customers
3.3 COMPETITION
For every existing business, competition is inevitable. The intended business has two competitors
one located within the surrounding and the other outskirts of the area. These competitors offer
bricks only

COMPETITORS

a. SHINE COMPLEX BRICKS

The business is located the southern direction of Max bricks and stone suppliers. It is about 5 km
away this business has become stable since it has for some years

Strength

i. The owner has an experience of more than 5 years

ii. Has many customers because it is widely known
iii. Good and quality bricks

Weakness

i. Decision take too long to be made

ii. Proprietor still have unskilled workers
b. SET YOUTH LAYERS

It is located in the northern part of Max bricks and stone suppliers. It is about 5 km from the
business. This a partnership form of a business. It also deals with bricks but longer and bigger
than those of Shine Complex Bricks.

Strength

i. The proprietor has more than 5 years experience

ii. The business is in partnership from hence duties should to maximize a lot of work
iii. The growth of the business is faster
Weakness

i. Decision making is difficult

ii. Profit are share thus reducing profit for individual partners
iii. Workers have limited skills and does not operate effectively

THE SWOT ANALYSIS TABLE

COMPETITOR STRENGTH WEAKNESS OPPORTUNITY THREATS

Shine complex Experienced Poor time Large number of Staff competition
bricks workers management customers from set youth
Large machinery Poor approach Large volume of layers
and equipments and handling of sales Wide market
customers Good pricing
No discounts to strategy
customers who
purchases in
large quantities
Set youth layer Many years of Irregular opening Large volume of Paltering of
bricks experience by and closing sales goods by
the partners hours Wide and large workers
Large machinery Slow decision market Strong
and equipment making Skilled employees establishment
Unskilled worker
hence poor
services

Coping with competition

Max bricks and stone suppliers can learn from their competitors and try to avoid their mistakes,
which they normally do. The proprietor must prepare for constant charge in conducting the
business in order to overcome his competitors he should;
 i. Develop products and services, of exceptional value such that they stand out and are
preferred to any other in the market
ii. Have regular opening and closing hours
iii. Offer promotion and advertising as well as offering products at fair price giving discounts
in order to minimize sales
iv. Employ qualified workers to improve the effectiveness of the business
v. Training to improve the effectiveness of the business this can be done by training his/her
personnel plus herself in relation, costing, pricing management etc.

3.4 METHODS OF PROMOTION AND ADVERTISEMENT

a. Advertisement

The owner has to employ various methods of advertisement to alert the public of new products
that they offer. The techniques include

 Posters

The business prints posters to be printed in all the corners, bus terminals, road junctions and on
higher rise building. It is effectiveness is noticed by getting new customers coming to purchase
the products and its objectives is to reach large and win new customers

 Signboards

This is installed outside the business i.e. along the route to the business and on the gate and
verandah. Its objective is to show direction, distance and type of product that MAX bricks and
stone suppliers deal with. Its effects is detected by getting new customers regularly

 Local media

The business also advertises through radios as a medial i.e. FM stations and Citizen Radio. The
frequently of advertising is done at a located period of time according to its cost. The objective is
to make MAX bricks and stone suppliers to be known even countrywide. Through this many are
aware of the existence of the business. It s effect is detected by getting customers from outside
the province.
 b. Promotion

Sales promotion is carried out using the following methods

 Trade shows

The proposed business will employ regular trade shows to promote its products in the market.
The salesman display some models to customers and participate in advertisement meeting,
industrial shows etc. this can be done annually to enable customers to know more about the
products.

3.5 PRICING STRATEGY

The sponsor of the business who is the proprietor carry out statistics on prices of the products
from different enterprises that assists her price the goods, we and not under price them. She
should also ensure that:-

Selling price = buying price + cost of production + profit – margin + VAT

a. Credit terms

Credit terms are made of customers who are well known and identified and they are purchasing
goods in bulk. The percentage of credit terms depend on the amount of the product purchased i.e
one who purchases goods worthy over kshs. 10,000 is given a credit or half of the price to pay
within the agreed period and which cannot affect the running of the business.

b. Discount

Discount is offered to customer who purchase goods in bulk the percentage discount is given
according to the price of the product considering the profits margin being aimed at

3.6 SALES TACTICS

Direct method of sales is adopted. The proprietor is selling the products directly to his customers
from the business, premises, the owner is moving out to look for market and tenders from
different sectors i.e schools, colleges and polytechnics. The strategies that the business owner vie
to attract customers include;
 a. Discount

The Business offers discount to a certain Civil of products sold, this limits are set by the business
proprietor.

b. Credit terms

A customer is allowed to take goods on credit after certain agreement and signing of documents

c. TRANSPORT

Stone suppliers hope to purchase a pick-up which is transporting goods to the customers
residents.

3.7 DISTRIBUTION STRATEGY

This is the channel where products flow production till the final utilization by the customer. The
owner of Max bricks and stone suppliers adopt direct channel of distribution. This is where the
products are sold to customers from the business premises some distribution strategies are.

i. Purchase a pinch up – The salesman use the car to distribute he products to customers
ii. Hired means – Those who purchase the product in bulk and have no means is provided at
a given fee
a. Distribution problem

Transport charges are verify high to customers

i. During raining seasons some roads are impossible

ii. Delayed delivery of goods and services due to transport barriers i.e. heavy rainy season
b. Solutions to problem
i. The business make sure that distribution/transport charges are lowered
ii. The business should be in a position to buy additional vehicle to meet the distribution
needs
CHAPTER FOUR

4.0 ORGANIZATION
This is the process of management during work among individuals into their duties or tasks and
co-ordinate the activities for the purposes of accomplishing the set goals. Max bricks and stone
suppliers look for ways and means of having a competent management structure so that the
enterprise run smoothly and set and accepted goals the business is managed by the owner being
helped by other subordinate

Organizational chart for bricks and stone suppliers

MANAGER

SUPERVISOR

SALESMAN ACCOUNTANT

a. Manager

MAX bricks and stones suppliers is a sole proprietor kind of business and therefore it employs
few who are competent and ready to work fro the common goods of the business and to grow
and achieve, customers requirement
 b. Supervisor

Qualities

i. Should be a K.C.S.E holder with a minimum grade of C and C in mathematics and

languages
ii. Should have at least 2 years working experience in related field

Duties and responsibilities

i. Assist the manager in running the business

ii. Ensures that the employees perform their duties as expected
iii. Contributes in the decision making over their issues regarding the business
iv. Carries out job evaluation of two employees worth
v. Co-ordinate with salesman in running the business
c. Accountant

Qualities

i. He/she must be aged between 27 – 35 years

ii. Should have qualified in KATC final level
iii. Should have at least 3 years experience in the final of accounts

Duties and responsibilities

i. Responsible for balancing the transaction of business

ii. Tells on the business performance in terms of profit and losses
iii. Pay workers
iv. Receive cash from the buyers
v. Tells on creditors and debtors for the business
vi. Maintains and keeps the office clean and tidy with each document in its position
 d. Salesman

Qualities

i. Should be mature aged 25 years and above

ii. Should have trained in the field on sales and marketing in a recognized institution
iii. Should have at least two years experience

Duties and responsibilities

i. Distributes goods and services to customers

ii. Communicates the business to the outside world
iii. Carry out market research which is essential to the products
e. Watchman

Qualifications

i. Should be at least a form four leaver having done K.C.S.E exams

ii. Should be energetic and physically fit for the job
iii. Should have good communication skills
iv. Should be aged between 25 – 36 years old

Duties and responsibilities

i. Guard the business premises between day and night

ii. Responsible in opening the business and closing after work
iii. Controls inflow and outflow of goods and services which enters and leaves the business
premises respectively
4.3 RECRUITMENT, TRAINING AND PROMOTION
 RECRUITMENT

Procedure

i. Advertisement of the required personnel is done through the radio.

ii. Application is done by those interested countrywide between the duration given.
iii. Short listing of selected candidate is done through newspapers having the dates for the
interviews.
iv. Interviewing is done to the selected personnel.
v. Appointment letters are given to the qualified people.
vi. Those given appointment letters are required to bring acceptance letter.
vii. New employees are oriented in the business in order for introduction and welcoming
them into the business.
 TRAINING
a. Direct sale operation
 Training salesman to identify different needs.
 Training salesman to have and maintain good relations with the customers.
b. Marketing
 Carrying out research in order to come up with appropriate prices for the products.
 Training the salesman on how to analyze the surrounding environment and identifying
people preferences and potential customers.
 The manager should train on how to develop and apply new ways of promotional
strategies.
c. PROMOTIONS

Employees are promoted in the business according to:

 Experiences, A more competent and experienced employee are given promotion after
working in the field at least 1 ½ years
 Qualification; Promotion is given to an employee who he/she undertakes a training in the
same field in order to upgrade his/her performance and qualifications
  Output; When the output of an employee increases with time he/she is promoted and
climbs the ladder to the next level

4.4 REMUNERATION AND INCENTIVES

i. REMUNERATION

PERSONNEL NO SALARY PER SALARY PER

MONTH YEAR
Manager 1 18200 218400
Supervisor 1 11200 134400
Accountant 1 7200 36400
Salesman 2 6200 74400
Watchman 2 3700 44400
TOTAL 7 46500 55800

ii. INCENTIVES

Employees are motivated using the following techniques:-

i. Recognition of ones effort; The employer tries to become liberal with praises of the
employees and if possible add them some allowance to cover up overtime
ii. Contact; Provide a tea break for workers which five room for productive decision making
and building good relations between the manager and the subordinate staff.

4.5 LICENSES, PERMITS AND BY-LAWS

The business is registered to the local authority under the district license board as a legal
business undertaking in the district. A registration fee of Kshs. 500/= is given out for the
business to be registered and to acquire municipal council license, on number of the business, is
issued to owner and open an account for him to invest the money in. the business is enrolled or
registered to the Kenya Revenue Authority so that the owner pay some tax. The renewal of the
license is done after is expires.

4.6 SUPPORTIVE SERVICES

i. Insurance

The business is insured against fire, theft and natural disaster i.e earthquakes and lands slides
ii. Legal services maximize the use of functional computers and minimize those which are
not so much involved and only do so if need be. A lawyer for the business inquires
services from him when needed and also he handles legal matters i.e signor contract,
property owing, payment of debtors and other legal matters pertaining the business
undertaking
CHAPTER FIVE

5.0 OPERATIONAL PLAN

The business enterprise mould bricks and dress stones for different customers to meet the wide
demands of the market. The business requires facilities and labor which ensures its operational
process and the manager who is the proprietor of the business plans for them.

5.1 OPERATIONAL FACILITIES

These facilities include the machinery and equipment which Max bricks and stone suppliers use
in order to operate efficiently. These facilities should include;

FACILITIES CIVIL SOURCE UNIT TOTAL

PRICE PRICE(KSHS)
(KSHS)
Chairs 5 Kibisem carpentry 750 3750
Computers 2 Oroba stockers 21500 43000
Cell phone 1 Samchii 4200 4200
communications
Tables 5 Kibisem carpentry 1500 7500
Cleaning Jambo supermarket 1200 1200
materials
TOTAL 14 29150 59650

5.2 OPERATIONAL STRATEGY

It is a way of coordinating all business activities gathered well to ensure maximum profit and
minimum costs. During the weekdays, the business start from 7:00 a.m. to 5:00 p.m., 1:00 p.m.
to 5:00 p.m on weekends and 9: 00 a.m. to 6:00 p.m. on public holidays.

Max bricks and stone suppliers review its operational process at the end of each month so as to
improve its services and acquire more customers. All members of the staff require to follow the
set rules and regulation well in order for the business to run effectively
5.3 COST OF LABUOR
The business require direct source labor which provide by the employees

POSITION NO SALARY PER SALARY PER

MONTH YEAR
Manager 1 18200 218400
Supervisor 1 11200 13400
Accountants 1 7200 86400
Salesman 2 6000 7200
Watchman 2 3700 44400
TOTAL 7 46300 555600

5.3.1 COST OF OVERHEADS

Max brick and stone suppliers incur some expenses at the end of each financial year and it is as
shown below

ITEM COST PER MONTH

Electricity 450
Transport 8000
Water 1000
Rent 5000
Advertisement 500
Telephone 1200
Insurance 5000
TOTAL 21150

5.3.2 COST OF OPERATION

Cost of operation = Cost of labor + Cost of overheads

= 46300 + 21150
 = kshs.67450

5.3.3 WORKING SCHEDULE

This refers to allocation of activities of Max bricks and stone suppliers to time of opening and
closing of the business

DAY OPENING HOURS CLOSING HOURS

Monday – Friday 7:00 a.m 5:00 p.m
Saturday – Sunday 1:00 p.m 5:00 p.m
Public holidays 9:00 a.m 6:00 p.m

5.3.4 OPERATIONAL PROCESS

Max bricks and stone suppliers offers in product directly from the business premises. The
customers served by the business include individual, institutions, private and public owned
companies

Customers served by salesman and those who do not have transport means are provided at some
cost because the means are provided at some cost because the hired also at some cost

The supervision ensure that customers are served well and should see that there are no delays
during the service thus creating conducive environment for both customers and the salesman
because there is no collision and things run smoothly

5.4.0 REGULATIONS AFFECTING OPERATION

Those are legal requirements in which the business cannot run without the government enact
them and any business must adhere to them. Those legal requirement are as follows:-

 Health regulation

MAX bricks and stones suppliers should maintain good hygiene in its operation. The product
offered should not affect the customers and workers health. The machinery and equipment used
by the business should be served more often to ensure its efficiency and make sure that there is
no harmfully effects to users

 Local payable tax

The business is established in the owners land whereby its subject to paying some amount of tax
to local municipal council

 License

For each and every year MAX bricks and stones suppliers is renewing its license for it to
continue legality and avoid any termination to the business

 Trade mark

Max bricks and stone suppliers posses its own trademark in order to be recognized as an
operating business in the community.
CHAPTER SIX

6.0 FINANCIAL PLAN

This shows all the transition that are done to ensure effective operation of MAX bricks and stone
suppliers. It directly shows finance, financial statement and financial calculations involved in the
business

It comprises of the following parts:-

a. Pre-operational cost
b. Working capital
c. Projected cash flow statement
d. Pro-forma income statement
e. Pro-forma balance sheet (6)
f. Calculation of profitability ratios
g. Desired financing
h. Proposed capitalization

6.1 PRE-OPERATIONAL COSTS

These are cost incurred before the business starts to operate pre-operational costs of Max bricks
and stone suppliers is as shown below

ITEM AMOUNT PER MONTH AMOUNT PER YEAR

(KSHS)
Premises 5000 60000
Registration - 1000
Trade license - 2000
Electricity installation - 8000
Transport 600 72000
Water 600 7200
Advertisement 500 6000
Furniture fittings - 3000
Renovation - 4000
Operating stock 150000 1800
Insurance 2000 24000
Salary 52500 630000
Operational - 45000
TOTAL 2662200
6.2 WORKING CAPITAL
This is the cash needed each and every day work is 2000 MAX bricks and stone suppliers. It
shows the first three years operation

ITEMS YEAR
2021 (1) 2022 (2) 2023 (3)
Cash in hand 282000 220000 210000
Cash at bank 500000 550000 600000
Debtors 200000 130000 320000
Stock 250000 300000 320000
Total c/l 1282000 1200000 129000
Current liabilities
Creditors 12500 14400 35000
Loans 950000 - -
TOTAL C/L 962500 14400 35000

Working capital = Current assets – Current liabilities

First year = 1282000 – 963500 = 319500

Second year = 1200000 – 14400 = 1189600

Third year = 1290000 – 35000 = 1255000

Assumptions

i. Bank interest is the rate estimated by Max bricks and stone suppliers
ii. Debtors pay back their debts before the end of each financial year
iii. Government policies don’t change during each financial year
iv. Rice does not change at the end of financial year unless slightly
6.3.1 PROJECTED CASH FLOW STATEMENT AS AT 2021 FIRST YEAR
ITEMS JAN. FEB. MARCH APRIL MAY JUNE JULY AUG. SEPT. OCT. NOV. DEC. T
Cash inflow
Cash b/f - 1159650 1363600 1565400 1845350 1920150 8086400 2441900 244900 2552400 2714550 2811950 22

Cash sales 300000 350000 320000 370000 330000 355000 376000 410000 312000 385000 315000 320000 41

Cash in hand 4500 12000 38000 12200 18500 2500 18700 19600 15000 29000 13200 14500 28

Cash at bank 20000 15000 33000 57600 18500 36500 62000 55600 38200 42600 63200 25900 46

Loan 950000 - - - - - - - - - - - 95

Debtor 15000 20000 15000 20000 20000 20000 10000 8000 31000 20100 20500 400 20

Total cash inflow 1330000 1556650 1769600 2025250 2233350 2333650 2553100 2735100 2846000 302900 3126450 3172750 28

Cash outflow
Purchases 100000 120000 130000 95800 118300 46000 115000 90050 102000 12000 123000 330000 14

Water bill 600 600 600 600 600 600 600 600 600 600 600 600 72

Telephone bill 1200 1200 1200 1200 1200 1200 1200 1200 1200 1200 1200 1200 14

Electricity bill 450 450 450 450 450 450 450 450 450 450 450 450 54

Advertisement 500 500 500 500 500 500 500 500 500 500 500 500 60

Rent 4000 4000 4000 4000 4000 4000 4000 4000 4000 4000 4000 4000 48

Transport 6200 - - - - - - - - - - - 62

Insurance 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 24

Licenses - 2000 - - - - - - - - - - 20

Salary/wages 52500 52500 52500 52500 52500 52500 52500 52500 52500 52500 52500 52500 63

Creditors - - - 6250 - 6250 - - - - - - 12

Loan repayment - - - - 118750 118750 118750 118750 118750 118750 118750 118750 95

Miscellaneous 3000 4000 2900 3300 4100 3200 3600 3500 3500 3800 3200 3700 41

Loan interest 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 50

Total cash outflow 170450 193050 204150 179900 312200 274250 311200 285300 293600 214500 31450 528670 33

Net cash flow 1159650 1363600 1565450 1845350 1920150 2086400 2241900 2249800 2552400 2714550 2811950 2264480 25
 6.3.2 PROJECTED CASH FLOW STATEMENT AS AT 2022 SECOND YEAR
ITEMS JAN. FEB. MARCH APRIL MAY JUNE JULY AUG. SEPT. OCT. NOV. DEC. TOTAL
Cash inflow
Cash b/f 264408 2956130 3136280 3852930 4028280 4122030 4389080 4462330 4655300 4669400 5276700 5205250 49721790

Cash sales 500000 350000 820000 310000 304000 370000 385000 320000 315000 420000 380000 820000 4952000

Cash in hand 34600 38000 12000 18500 12000 17600 35100 15000 19400 11300 13350 31000 357850

Cash at bank 33000 15000 54600 18000 58000 40000 38000 54600 91500 6300 51520 25900 541320

Debtor 15000 15000 20000 - 10000 10000 8000 7000 11250 11200 11250 11300 55602960

Total cash 32226880 3374130 4043880 4199430 4408280 4560630 4855480 4858930 5122450 5569200 539063 6093250 55602960

inflow
Cash outflow
Purchases 200000 160000 118000 100000 214000 970000 320000 101600 83000 120000 115000 4500 1663100

Water bill 600 600 600 600 600 600 600 600 600 600 600 600 7200

Telephone bill 1200 1200 1200 1200 1200 1200 1200 1200 1200 1200 1200 1200 14400

Electricity bill 450 450 450 450 450 450 450 450 450 450 450 450 5400

Advertisement 500 500 500 500 500 500 500 500 500 500 500 500 6000

Rent 4000 4000 4000 4000 4000 4000 4000 4000 4000 4000 4000 4000 48000

Transport 5800 6200 8100 5200 6700 4900 7600 6880 8200 850 5220 12050 84900

Insurance 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 24000

Licenses - 2000 - - - - - - - - - - 2000

Salary/wages 52500 52500 52500 52500 52500 52500 52500 52500 52500 52500 52500 52500 630000

Creditors - 4800 - 4800 - 4800 - - - - - - 14400

Miscellaneous 3400 3500 3500 3800 3200 3500 4200 3800 3500 3900 3800 3000 14400

Total cash 270550 237850 190950 175150 285250 171550 393150 173630 156050 192500 185370 80900 2512.90

outflow
Net cash flow 2956130 3136280 136280 4024280 4123030 4389080 4462330 685300 4966.40 5276700 5205250 6012350 53090060
 6.3.3 PROJECTED CASH FLOW STATEMENT 2023 THIRD YEAR
ITEMS JAN. FEB. MARCH APRIL MAY JUNE JULY AUG. SEPT. OCT. NOV. DEC. TOTAL

Cash inflow
Cash b/f 6012350 6729000 7223950 7694520 8180170 8714320 9252820 9591070 9970620 10337370 1067620 11026170 105408580

Cash sales 657000 473000 470000 453000 450000 560000 480000 552000 530000 48000 520000 500000 62155000

Cash in hand 160000 190000 167000 173000 172000 168000 187000 165000 17000 23000 17500 18000 1140700

Cash at bank 1200000 45000 39000 63000 38000 55000 51500 50000 52700 64000 40000 - 6082000

Debtor 20000 23000 24000 22700 25000 - 21300 - 6000 6500 6500 5000 160000

Total cash 6969350 7460000 7923950 8406220 8955170 9497320 9824320 10290570 10566320 10910870 11260220 11559170 113532480

inflow
Cash outflow
Purchases 160000 162000 158000 145000 170000 163000 160000 157000 155000 163500 158500 199000 1951000

Water bill 600 600 600 600 600 600 600 600 600 600 600 600 7200

Telephone bill 1200 1200 1200 1200 1200 1200 1200 1200 1200 1200 1200 1200 14400

Electricity bill 450 450 450 450 450 450 450 450 450 450 450 450 5400

Advertisement 500 500 500 500 500 500 500 500 500 500 500 500 6000

Rent 4000 4000 4000 4000 4000 4000 4000 4000 4000 4000 4000 4000 48000

Transport 5800 6200 8100 5200 6700 4900 7600 6880 8200 850 5220 12050 84900

Insurance 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 24000

Licenses - 2000 - - - - - - - - - - 2000

Salary/wages 52500 52500 52500 52500 52500 52500 52500 52500 52500 52500 52500 52500 630000

Creditors 8000 - - 6000 - 3200 - 8600 - 4200 35000 - 65000

Miscellaneous 2900 3600 3300 3800 3300 3700 3000 4400 3500 3400 4000 2900 41400

Total cash 240350 236050 229430 226060 240850 244500 233350 238950 228950 234650 234050 276650 2864730

outflow
Net cash flow 67729000 7223950 7694520 8180170 8714320 9252820 9591090 9970620 10337370 10676220 11026170 11270520 110667750
6.4 PRO-FORMA INCOME STATEMENT
The pro-forma income statement is to show cash flow in and out of the business, shall be as
follows:-

ITEMS FIRST YEAR 2021 2ND YEAR 2022 3RD YEAR 2023
Sales 4143000 4952000 6215000
Purchases 1490600 1633100 1951000
Gross profit 2652400 3318900 4264000
Expenses
Salaries and wages 630000 630000 630000
Rent 48000 48000 48000
Insurance 24000 24000 24000
Advertisement 6000 7200 6000
Telephone bill 14400 14400 14400
Electricity 5400 5400 5400
Water bill 7200 7200 7200
Transport 71920 84900 100330
License 2000 2000 2000
Miscellaneous 41800 42300 41400
TOTAL 850720 865400 878730
NET PROFIT 1801650 2453500 3385270
BEFORE TAX
16% 288268.80 392560 541643.20
NET PROFIT 1513411 2060940 2843646
AFTER TAX

Assumptions

i. Taxes are constant throughout the year i.e. 16%

ii. Government policies on the prices cannot affect the business during its financial year
iii. No effect on risks i.e. fire and earthquakes
6.5 PRO-FORMA BALANCE SHEET
Pro-forma balance sheet at start up and at the end of operation by MAX bricks and stone
suppliers

ITEMS FIRST YEAR 2021 2ND YEAR 2022 3RD YEAR 2023
Assets
Current assets
Cash in hand 647600 541320 608200
Cash at bank 238000 257850 1140700
Debtors 200000 130000 160000
Stock 350000 300000 320000
Total current assets 1225600 1229170 2228900
Fixed assets
Equipments 1200 - -
Furniture 11250 - -
Premises 48000 48000 48000
Machines 1994718 1534790 1414743.20
Total fixed assets 2055168.80 1582790 1462.20
Totals 3310768.80 2811960 3691643.20
Liabilities
Current liabilities
Creditors 12500 144000 35000
Tax 288268.80 392560 541643.20
Total current 300768.80 406960 576643.20
liabilities
Long term liabilities
Bank loan 950000 - -
Owner’s equity 2060000 2405000 3115000
Total long term 3010000 2405000 3691643.20
liabilities
Totals 3310765.80 2811960

6.6 BREAK EVEN POINT

This is the point at which the business is neither making profit nor loss. At this point income and
expenditure are balancing

ITEMS FIRST YEAR 2021 2ND YEAR 2022 3RD YEAR 2023
Variables 6000 7200 6000
Transport 7920 48900 100000
Miscellaneous 4800 42300 41300
TOTAL 119720 134400 147730
 FIXED COSTS
Salary insurance 630000 630000 630000
License 24000 24000 24000
Insurance 2000 2000 2000
Rent 48000 48000 48000
Electricity bill 5400 5400 5400
Telephone bill 14400 14400 14400
Water bill 7200 7200 7200
TOTAL 731000 731000 731000

Break even point B.E.P = Fixed costs –sales

Sales –variation costs

B.E.P for year 1 = 731,000 - 4143000 = 752 752.23

4143,000 – 119,720
B.E.P for year 2 = 731,000 + 4952000 = 751393.22
( 6215000 – 119,720)

B.E.P for year 2 = 731,000 + 6215000 = 748798.88

( 6215000 – 119,720)

Contribution margin

Contribution margin = sales-variables

Contribution margin for year 1 = 4143000-119720

= 4023,280

Contribution margin for year 2 = 4952000-134,400

= 4817600

Contribution margin for year 3 = 6215000-147730

= 6,067,270

(ii) Contribution margin percentage

Contribution margin % = Contribution margin x 100
Sales

Contribution margin for year 1 = 4023280 x 100 = 97.11%

4143000

Contribution margin for year 2 = 4817600 x 100 = 97.29%

495,200

Contribution margin for year 3 = 4067270 x 100 = 97.62%

6215000

(iii) Break even points of sales

B.E.P = Fixed cost x 100

Contribution margin %

Break even point of year 1 = 731,000 x 100 = Kshs.752754.61

=97.29%

Break even point of year 2 = 731,000 x 100 = Kshs.752754.61

=97.29%

Break even point of year 3 = 731,000 x 100 = Kshs.748,821.96

=97.62%

6.7 PROFITABILITY RATIO

The expected profitability rates for the business areas

Gross profit percentage = Gross profit X 100

 Sales

Gross profit percentage for year 1= 2652400 X 100

4143000

= 64.02%

Gross profit percentage for year 2 = 3318900 X 100

4143000

= 67.02%

Gross profit percentage for year 3= 4264400X 100

6215000

= 68.61

RETURN ON EQUITY

(ROE) = net profit after tax X 100%

Owner’s equity

(ROE) year 1= 1513411.20 X 100%

206000

= 73.3%

(ROE) year 2= 2060940 X 100%

2405000

=
(ROE) year 3= 2843626.80 X 100%
3115000

= 91.3%

RETURN ON INVESTMENT

R.O.I =Net profit after tax X 100%

Total investment

R.O.I year 1= 1513411 X 100%

54.42%

= kshs. 2750108.88

R.O.I year 2 =2060740 X 100%

2362108.88

= 87.25%

R.O.I year 3=2843626.80 X 100%

3101010.69

= kshs. 91.70

6.8 DESIRED FINANCE

ITEM AMOUNT
Pre-operation cost 2662200
Working capital 2760100
TOTAL 5422300
6.9 PROPOSED CAPITALIZATION
ITEM AMOUNT
Persona savings 765000
Fund from borrowers source 2280000
TOTAL 3045000