NAME OF BUSINESS: LINET TEXTILE AND GARMENT

MAKING SHOP

EMAIL ADDRESS: linetakoth30@gmail.com

POSTAL ADDRESS: P.O BOX 68 RONGO

PHONE NUMBER: 0746547824

BUSINESS LOGO:

PRESENTER: OJWANG LINET AKOTH

INDEX: 7121010053

CENTRE NAME: ST. JOSEPH`S TECHNICAL INSTITUTE

FOR THE DEAF, NYANG’OMA

CENTRE CODE: 712101

SUPERVISOR: MR. PAUL AWAMBO

PRESENTED TO: THE KENYA NATIONAL

EXAMINATIONS COUNCIL FOR THE

AWARD OF DIPLOMA IN FASHION

DESIGN AND GARMENT MAKING

EXAM SERIES: NOVEMBER 2024

1
 DECLARATION

Students’ declaration.

I declare that this business plan is my original work and has never been presented to any other

institution for the award of an Undergraduate, Diploma, Craft of Artisan certificate

Name: Ojwang Linet Akoth

Signature……………………

Date…………………………………...

Supervisors’ declaration

Other than the source materials, this entrepreneurship report in its entirety is the original work

of Miss Ojwang Linet Akoth

Name: Mr. Paul Awambo

Signature……………………...

Date…………………………………...

i
 ACKNOWLEDGEMENTS

I sincerely take this opportunity to thank those who helped me to come up with this business

plan. First, I thank the Almighty God for granting me the knowledge, wisdom and

understanding that has enabled me to complete my project. I also take this chance to express

my gratitude to my parents and friends for their moral and financial support till the

completion of this work.

ii
 DEDICATION

I dedicate this work to my teachers for they’ve always encouraged and supported me until the

completion of this project. I also dedicate this work especially to my parents and siblings;

indeed, I owe you a lot.

iii
 LIST OF TABLES

Table 1Analysis of the potential customers ............................................................................... 4

Table 2 SWOT analysis of the potential competitors ................................................................ 4

Table 3 Calculation of prices ..................................................................................................... 5

Table 4 Market share analysis .................................................................................................... 5

Table 5 Remuneration of workers ............................................................................................ 12

Table 6 Incentives offered to employees ................................................................................. 13

Table 7Production facilities and capacity ................................................................................ 14

Table 8 Monthly costs of materials .......................................................................................... 16

Table 9 Monthly labor costs..................................................................................................... 17

Table 10 Monthly overhead costs ............................................................................................ 17

Table 11 Preoperational costs .................................................................................................. 19

Table 12 Working capital ......................................................................................................... 19

Table 13 Cashflow statement for the first year, 2024 .............................................................. 20

Table 14 Projected cashflow statement for the second year 2025 ........................................... 21

Table 15 Projected cashflow statement for the second year, 2026 .......................................... 22

Table 16 Income statement for the first three years ................................................................. 23

Table 17 Proforma balance sheet for the first three years ........................................................ 23

Table 18 Protected revenue analysis ........................................................................................ 24

iv
 TABLE OF CONTENTS

DECLARATION ........................................................................................................................ i
ACKNOWLEDGEMENTS ....................................................................................................... ii
DEDICATION .......................................................................................................................... iii
LIST OF TABLES .................................................................................................................... iv
EXECUTIVE SUMMARY ....................................................................................................viii
CHAPTER ONE ........................................................................................................................ 1
BUSINESS DESCRIPTION ...................................................................................................... 1
1.1 BUSINESS OWNERSHIP .............................................................................................. 1
1.2 BUSINESS LOCATION AND ADDRESS .................................................................... 1
1.3 PRODUCTS AND SERVICES ....................................................................................... 2
1.4 INDUSTRY ..................................................................................................................... 2
1.5 JUSTIFICATION ............................................................................................................ 2
1.6 BUSINESS GOALS ........................................................................................................ 2
1.6.1 Short term goals. ....................................................................................................... 2
1.6.2 Long term goals ........................................................................................................ 3
1.7 ENTRY AND GROWTH STRATEGY .......................................................................... 3
CHAPTER TWO ....................................................................................................................... 4
MARKETING PLAN ................................................................................................................ 4
2.1 POTENTIAL CUSTOMERS .......................................................................................... 4
2.2 COMPETITION .............................................................................................................. 4
2.3 PRICING.......................................................................................................................... 4
2.4 METHODS OF PROMOTION AND ADVERTISEMENTS ......................................... 5
2.5 SALES TACTICS ............................................................................................................ 5
2.6 MARKET SHARE........................................................................................................... 5
2.7 DISTRIBUTION STRATEGY ........................................................................................ 6
2.7.1 Distribution channel .................................................................................................. 6
2.7.2 Distribution method .................................................................................................. 6
2.7.2 Factors that shall affect distribution process ............................................................. 6
CHAPTER THREE ................................................................................................................... 7
ORGANISATION AND MANAGEMENT PLAN .................................................................. 7
3.1 INTRODUCTION ........................................................................................................... 7
3.2 ORGANIZATIONAL AND MANAGEMENT CHART ................................................ 7

v
 3.3. THE MANAGEMENT TEAM....................................................................................... 8
3.3.1 Managing director ..................................................................................................... 8
3.3.2 Production manager .................................................................................................. 8
3.3.3 Designer .................................................................................................................... 9
3.3.4 Accountant ................................................................................................................ 9
3.3.5 Driver ...................................................................................................................... 10
3.3.6 Salesperson ............................................................................................................. 10
3.3.7 Security officer........................................................................................................ 10
3.3.8 Tailors ..................................................................................................................... 11
3.4 RECRUITMENT TRAINING AND PROMOTION .................................................... 11
3.4.1 Recruitment ............................................................................................................. 11
3.4.2 Placement ................................................................................................................ 11
3.4.3 Training ................................................................................................................... 11
3.4.4 Promotion................................................................................................................ 12
3.5 REMUNERATION........................................................................................................ 12
3.6 INCENTIVES ................................................................................................................ 13
3.7 LEGAL REQUIREMENTS........................................................................................... 13
3.7.1 Licenses................................................................................................................... 13
3.6.2 Permit ...................................................................................................................... 13
3.6.3 By- laws .................................................................................................................. 13
3.8 SUPPORT SERVICES .................................................................................................. 13
3.8.1 Legal services.......................................................................................................... 13
3.8.2 Banking services ..................................................................................................... 13
3.8.3 Insurance Services .................................................................................................. 13
CHAPTER FOUR .................................................................................................................... 14
PRODUCTION/ OPERATION PLAN.................................................................................... 14
4.1 INTRODUCTION ......................................................................................................... 14
4.2 PRODUCTION FACILITIES AND CAPACITY ......................................................... 14
4.3 PRODUCTION PROCESS ........................................................................................... 15
4.4 PRODUCTION OBJECTIVES ..................................................................................... 15
4.5 PRODUCTION STRATEGIES ..................................................................................... 15
4.5.1. Materials required by month .................................................................................. 16
4.5.2 Labor costs per months ........................................................................................... 17

vi
 4.5.3 Overhead cost per month ........................................................................................ 17
4.6 FACTORS AFFECTING OPERATION ....................................................................... 17
4.6.1 Health regulations ................................................................................................... 18
4.6.2 Safety ...................................................................................................................... 18
4.6.3 Taxes ....................................................................................................................... 18
4.5.4 Labour ..................................................................................................................... 18
CHAPTER FIVE ..................................................................................................................... 19
FINANCIAL PLAN................................................................................................................. 19
5.1 INTRODUCTION ......................................................................................................... 19
5.2 PRE-OPERATION COST ............................................................................................. 19
5.3 WORKING CAPITAL .................................................................................................. 19
5.4 PROJECTED CASH FLOW STATEMENTS .............................................................. 20
5.4.1 The first year, 2024 ................................................................................................. 20
5.4.2 The second year 2025 ............................................................................................. 21
5.4.3 The third year 2026 ................................................................................................. 22
5.5 INCOME STATEMENT AS AT DECEMBER 2024, 2025 AND 2026 ...................... 23
5.6 PROFORMA BALANCE SHEET AS AT DECEMBER 2024, 2025 AND 2026 ....... 23
5.7 PROJECTED SALES REVENUE ................................................................................ 24
5.8 BREAK EVEN ANALYSIS.......................................................................................... 24
5.9 FINANCIAL RATIOS................................................................................................... 24
5.9.1 Gross profit ratio ..................................................................................................... 24
5.9.2 Net profit ratio......................................................................................................... 25
5.9.3 Return on equity ...................................................................................................... 25
5.9.4 Return on assets ...................................................................................................... 25
APPENDICES ......................................................................................................................... 26
APPENDIX A: BUSINESS LOCATION ........................................................................... 26
APPENDIX B: BUSINESS LAYOUT ................................................................................ 27

vii
 EXECUTIVE SUMMARY

My business name will be Linet Textile and Garment making shop located in Rongo opposite

Rongo success Academy. Reasons for choosing the location is because of the nearness to the

customers, availability of security and space for the business. I've come up with this idea due

to lack of quality garment shops around the place.

My business will offer products such as fabrics, readymade garments, upholsteries e.g.

curtain shears and services such as garment making, training on garment making and

delivery to customers. My target market will be girls, ladies and women. My shop in garment

will be dealing with women's wear and children's wear. The key positions in my business

will be the general manager who'll be me followed by my assistant and the in charge of

delivery.

I will access capital from bank loans, my personal savings, family and friend’s contribution.

Personal savings -1,000,000, bank loan - 1,000,000, family and friend’s contribution -

800,000 which will bring a total of Ksh 2,800,000.

My shop will have competitive advantages such as good customer care services, strategic

positioning, advanced technology for example using electric machines during production

providing neat work and in time, delivery of products to customers as per their orders also in

time, affordable values of products and services to the customers and discounts.

viii
 CHAPTER ONE

BUSINESS DESCRIPTION

1.1 BUSINESS OWNERSHIP

Linet Textile and Garment making shop shall be owned and managed by Ojwang Linet Akoth.

The owner has pursued and succeeded in fashion and design and garment making at Diploma

level, having numerous ideas which are going to be advantageous to the business. She has

worked in the field for two years and gained a lot of practical experience.

The business will be a sole proprietorship form of business where the owner is likely to enjoy

all the benefits. The owner will be her own boss, set rules and regulations by herself. Will be

in charge of employing and firing workers. The business owner shall be assisted by a deputy

director who shall check all or any shortcomings a cashier who shall keep records and receive

payments on behalf of the business.

1.2 BUSINESS LOCATION AND ADDRESS

The business shall be located in Rongo opposite Rongo Success Academy. The reason why I

have chosen this location is because presence of market niche in the area, good infrastructure,

nearness to major roads hence easy transport or access of materials and presence of Rongo

police station around the place which will offer enough security to the business.

The business shall be addressed as,

Linet Textile and garment making shop

Rongo town

P.O. Box 68-Rongo

linettextile@gmail.com

0746547824

1
1.3 PRODUCTS AND SERVICES

The business shall deal in products and services of high quality. Despite stiff competition, the

business shall put various strategies to deal with its competitors honestly and successfully as

it will engage in direct marketing, social media marketing, create awareness and offer freed

delivery of products to those living within the precincts, selling pocket friendly products and

employing qualified staff from within the area.

Products offered shall be designer wear, uniforms, upholstery e.g. curtains, bedsheets and

covers, cushion covers, pillow cases and many others. Services shall include designing, repair,

embroidery services, printing of garments and drying, laundry and dry cleaning, fabrics e.g.

Cotton, Nylons, Chiffons etc.

1.4 INDUSTRY

The business shall fall under textile industry currently dominated by the small – scale

producers. To cope or catch up with the large-scale producers, the business shall engage in

massive training of subordinates to reinforce appropriate strategies.

1.5 JUSTIFICATION

My business shall succeed because it shall get well trained, experienced employees, security

being high, my business hall shall also deploy full time security and protection since it will be

near Rongo patrol base. Producing high quality products and services shall lead to the success

of the business and also strategic positioning.

1.6 BUSINESS GOALS

1.6.1 Short term goals.

• Market penetration,

• Increasing stock

• Achieving break-even.

2
1.6.2 Long term goals

• Expansion in terms of increasing the number of employees.

• Widening the target market base, production capacity

• Opening branches.

1.7 ENTRY AND GROWTH STRATEGY

The business shall make its production in phases, step by step as dictated by demand. It shall

take insurance against uncertainties so that in case of loses, the business hall seeks

compensation. It will also recruit employees in phases majorly on key essential employees for

the start. It will invest capital in bits depending on return on equity investment.

3
 CHAPTER TWO

MARKETING PLAN

2.1 POTENTIAL CUSTOMERS

My shop targets local tailors, schools and individuals that may want my products and services.

The table below shows the percentage of each of my customers.

Seg 1 Local tailors 25%

Seg 2 Schools 10%
Seg 3 Direct customers 40%
Seg 4 Retailers 20%
Seg 5 Churches 5%
Table 1Analysis of the potential customers

2.2 COMPETITION

Many shops in Rongo town deal with tailoring, that is, making of garments only and most of

them are not able to do many designs. I discovered that as a gap during my research.

Competitor Distance from Strength Weakness Competitive

my location advantage
Gracie’s 300m Good business Poor time Affordable cost
tailoring shop site management Good time
Wide stock High cost of management
base product and
service
Becky`s fashion 150m Low prices Poor quality Quality
Flexibility products products and
Unsatisfying services
services
Tripple J 500m More stock Unqualified Qualified and
Textile More employees skilled
employees High costs employees
Table 2 SWOT analysis of the potential competitors

2.3 PRICING

I shall consider the following when setting prices for my products;

• Method of production

• Cost of production

4
 • Prevailing market price

• Source or means of getting raw materials

• Government policies

• Demand of the services

• Number of competitors

Pricing shall be based on both mark-up price and price based on prevailing market price,

making it advantageous to the firm and will also help the shop to easily and faster penetrate

the market. The business mark-up price will be 25% of the market price.

Item Buying price Mark-up based Prevailing Actual selling

price (25%) market price price
Cotton fabric 130 160 190 175
Chiffon 200 250 300 280
Table 3 Calculation of prices

2.4 METHODS OF PROMOTION AND ADVERTISEMENTS

The business shall promote and advertise the business using social media like Facebook,

YouTube, Instagram etc. and posters since they are cheaper and covers a wide area.

2.5 SALES TACTICS

My shop will employ methods of personal selling so that I can present my products direct to

prospective buyers or customers face to face with the aim of making sales.

2.6 MARKET SHARE

My shop shall have a market share of 55%. It shall offer good customer services to increase

the market share.

Shop Market share in %

Linet Textile and garment making shop 55%
Becky`s fashion collection 25%
Gracie`s tailoring shop 12%
Abdul`s collection 8%
Table 4 Market share analysis

5
 Market
Gracies tailoring share analysis
shop
12%
Tripple J textiles
8%

Linet textile and

garment making
shop
Becky`s fashion
55%
collection
25%

2.7 DISTRIBUTION STRATEGY

2.7.1 Distribution channel

Linet garment
making and Wholesalers Retailers Consumers
textile shop

2.7.2 Distribution method

Distribution and transport of materials, goods shall be done by a motorcycle, pickup trucks.

The business shall stock enough materials can be used within a period of time.

2.7.2 Factors that shall affect distribution process

• Weather condition, e.g. rainy seasons will make transportation difficult.

• Insecurity while transporting.

• Motorcycle breakdown.

6
 CHAPTER THREE

ORGANISATION AND MANAGEMENT PLAN

3.1 INTRODUCTION

This is the arrangement of activities and framework which brings the activities necessary to

Achieve the objectives of the business. Employees will be allocated duties and a duty roster to

enhance a flow of shift. The proprietor shall be the managing director. This chapter as well,

analyses the incentives and remuneration due to the staffs, the licences and permits and the

qualifications and responsibilities of our staff.

3.2 ORGANIZATIONAL AND MANAGEMENT CHART

Managing director

Production manager Designer

Salesperson Tailor

Accountant

Security Driver

7
3.3. THE MANAGEMENT TEAM

The business shall be managed by the following personnel to operate successfully.

3.3.1 Managing director

The managing director shall be Linet who will be managing all the activities within and outside

the premises.

Qualifications

• Must have diploma in fashion design and garment making.

• Must have work experience of at least two years

• Must have intermediate knowledge of ICT.

• Must have under minimal supervision.

• Must have certificate of good conduct.

Duties and responsibilities

• Should ensure good and conducive environment for working.

• Should ensure that employees are paid on time.

• Should plan for the future success of the business to encounter risk.

• Maintain and controls the work in order to meet the standard specifications.

3.3.2 Production manager

Qualifications

• Must have certificate in fashion design and production management.

• Knowledge in ICT.

• Work experience of at least three years.

• Certificate of good conduct.

Duties and responsibilities

• Should decide which resources are required.

• Should estimate costs and set quality standards.

8
 • Ensures that production is cost effective.

• Oversees the production process, drawing up a production schedule.

3.3.3 Designer

Qualifications

• Must have certificate of good conduct.

• Must have worked in a similar position for at least two years.

• Knowledge of ICT.

• Must have a KCSE certificate.

Duties and responsibilities

• Should be able to create different types of designs.

• Should be responsible for achieving results through the development of the designs.

3.3.4 Accountant

Qualifications

• Should poses a degree in business management from a well-known institution.

• Should have knowledge of ICT.

• Be honest.

• Work experience,

Duties and responsibilities

• Monitoring accounts

• Reviewing financial reports

• Analyses markets for business opportunities

• Preparing activity reports and financial forecasts

• Returns filing for organization

• Carrying bank accounts.

9
3.3.5 Driver

Qualifications

• Should possess a valid driving license.

• Should have work experience.

• Should have a certificate of good conduct.

• Should be fluent in English or Kiswahili.

Duties and responsibility

• Monitors The condition of the vehicle and cleans the vehicle.

• Transports goods to customers.

• Takes the vehicle for service.

3.3.6 Salesperson

Duties and responsibilities

• Attends to customers at all given working time.

• Carry out market research

3.3.7 Security officer

Qualifications

• Fluent in English and Kiswahili

• Should have, work experience of more than three years

• The age should range 30yrs to 40yrs.

• Should poses a good medical letter.

Duties and responsibilities

• Responsible for security

• Knows how to raise alarms in case of any danger.

• Should have a heart of welcoming customers

10
3.3.8 Tailors

Qualifications

• Should have a work experience of more than two years.

• Should have a grade certificate/NITA accreditation.

• Should have skills to pursue the work.

Duties and responsibilities

• Should be responsible for garment making

• Cleans the working areas

3.4 RECRUITMENT TRAINING AND PROMOTION

3.4.1 Recruitment

The method that will be used to recruit the management team will use of,

1. Advertisement whereby the information will be passed through social media,

newspapers and posters

2. Promotion of junior employees to senior positions

3. Personal consultants

3.4.2 Placement

The business shall carry out the following steps and placing of employees of employees.

1. Offering standard training to the qualified people

2. Conducting oral and written interview

3. Conducting interview on skills

3.4.3 Training

The business shall use the following training strategies.

1. Employees shall be trained on how to use machines available in the firm.

2. Promoted employees shall be trained on their new rank

The following shall be the importance of training employees

11
 1. Improving productivity and efficiency

2. Improving level of employee skills

3. Producing high quality goods

3.4.4 Promotion

The following shall be the factors to consider when promoting employees

1. Education background.

2. The skill that employee has

3. Innovativeness.

4. Loyalty.

5. Discipline.

The business shall use strategies in creating promotions for those who displayed exceptional

skills in their areas of duty will be recognised through promotion in terms of;

1. Salary increase.

2. Improving on their skills.

3. Expansion of ranks among the employees who have high level of qualifications.

3.5 REMUNERATION

Title No. of Basic pay Allowance Gross salary

workers
Managing director 1 30,000 10,000 40,000
Production manager 1 25,000 5,000 30,000
Designer 1 20,000 4,000 24,000
Accountant 1 25,000 5,000 30,000
Sales person 1 15,000 2,000 17,000
Tailors 3 15,000 1,000 16,000
Security officer 1 10,000 1,000 11,000
Driver 1 10,000 1,000 11,000
Total 10 150,000 29,000 169,000
Table 5 Remuneration of workers

12
3.6 INCENTIVES

Overtime allowance 5,000

Meals 10,000
Airtime 3,000
Bonuses 10,000
Business trips 5,000
Total 33,000
Table 6 Incentives offered to employees

3.7 LEGAL REQUIREMENTS

3.7.1 Licenses

The business has license from county government which cost Kshs. 1,500, trading license and

a certificate of good conduct

3.6.2 Permit

The business shall acquire permits from the Migori county government in order for it to carry

on with the business for the machine and equipment that it has hence allows the business to

run effectively and smoothly.

3.6.3 By- laws

The business will follow the bylaws issued by the county government of Migori

3.8 SUPPORT SERVICES

The business shall have support services which enables it to operate effectively.

3.8.1 Legal services

The business hire services of Ben wa Cyber and co advocate limited company to represent the

business in the court of law whenever the business is disputed

3.8.2 Banking services

The business is to open an account with equity bank, Rongo to ensure safe custody of funds

and important documents

3.8.3 Insurance Services

The business will be insured against accidents, fire and theft and destruction of property.

13
 CHAPTER FOUR

PRODUCTION/ OPERATION PLAN

4.1 INTRODUCTION

The business shall require some machines and equipment. These shall help to improve

production and operation to move smoothly in the business. The business shall ensure that the

employees to be employed are of skilled labour in dealing with the machines and equipment

that are used in the business. The business shall order its products from regional company

where large variety of products are produced in large quantity as this shall be done on a

smoothly basis depending on the quantity of products available in the store in order to minimise

shortage of products.

4.2 PRODUCTION FACILITIES AND CAPACITY

N Machine & Outsource Source/ Function Frequenc Unit Total

o Equipmen / buy/hire supplie y of use price price
. t r
1 Sewing Buy Smart Sewing Daily 50,00 50,00
machine industry 0 0
2 Embroider Buy Smart Embroidery Daily 70,00 70,00
machine industry 0 0
3 Knitting Outsource Spirit ltd Knitting On order 90,00 90,00
machine 0 0
4 Overlock Buy Apex ltd Overlockin Daily 60,00 60,00
machine g 0 0
5 Cutting Buy Apex ltd Cutting Daily 40,00 40,00
machine 0 0
6 Iron box Buy Tumaini Ironing Daily 3,000 3,000
ltd
7 Threads Buy Tumaini Daily 500 500
ltd
8 Bobbins Buy Tumaini Hold thread Daily 400 400
ltd
9 Bobbin Tumaini Holding Daily 100 100
case ltd bobbin
10 Printing Buy Apex ltd Printing On order 10,00 10,00
machine 0 0
Table 7 Production facilities and capacity

14
4.3 PRODUCTION PROCESS

The product will be manufactured on daily basis depending on the already designed and valid

job card. The business will be operating from 8.00am – 6.30pm There are steps put in place in

order to ensure the products are ordered and reaches the business safely,

1. The business shall make an order

2. The business shall then send the letter of inquiry to the industry of the production where

variety of garments shall be ordered

3. The business shall ensure that the garments ordered are the right ones and of good

quality

4. The business shall then give the driver and hand over to transport

5. The goods once reach the business, there will be manpower which will help in

offloading of goods

6. The products shall be therefore received in the business as they shall be taken to the

store.

4.4 PRODUCTION OBJECTIVES

The business prioritises the following objectives,

• Setting production capacity target

• Achieving the uniqueness stated in competitive advantage

• Achieving break-even point in terms of unit produced

• Client’s feedback and comments on items produced

4.5 PRODUCTION STRATEGIES

The business shall make sure that the machine and equipment provided are suitable for the

specific task that they are supposed to perform in order to maximise operational process as this

shall lead to the improvement of production in the business.

The business shall target to achieve objectives in the business by;

15
 1. Increasing manpower.

2. Improving the working area operation.

3. Expanding the quantity of products.

4. Creating more branches dealing in fashion design

There will be strategies of minimising production cost and maximising utilization of business

resources i.e.

Reduction of labour cost.

Extension of the working hours,

Usage of cost-efficient tools.

4.5.1. Materials required by month

The business shall ensure that the machines and equipment are maintained on monthly basis

as shall require total amount of Kshs. 50,000 as this shall be scheduled in order to improve the

lifespan of the machine and equipment

This shall be done by acquiring skilled technician who shall be responsible for the repair and

maintenance of machines and equipment as this shall be obtained from smart Industry

Monthly cost of materials, labour and the production overhead shall be,

Item Amount (in Kshs.)

Sewing threads 3,000
Canvas gum 1,000
Fabrics 10,000
Buttons 500
Zips 300
Elastics 200
Belting 500
Total 15,500
Table 8 Monthly costs of materials

16
4.5.2 Labor costs per months

Personnel Salary (in Kshs)

Technician 10,000
Cleaners 5,000
Loading and offloading workers 5,000
Total 20,000
Table 9 Monthly labour costs

4.5.3 Overhead cost per month

Item Amount
Electricity bills 1,000
Transport bills 5,000
Water bills 500
Telephone bills 500
Total 7,000
Table 10 Monthly overhead costs

4.6 FACTORS AFFECTING OPERATION

The following are factors that will affect the business;

Internal

• Equipment used can be damaged.

• Human resources like employees.

• Source of income.

• Physical resources like location of the business.

External

• Economic factors.

• Political factors.

• Social factors where changes may occur leading to increase in spending power on one

group.

• Technological factors.

• Government rules and regulations

17
4.6.1 Health regulations

The requirement of the public health will be adhered to in handling all the enterprise products.

The business shall be required to report to their health insurance.

4.6.2 Safety

The business will ensure that when handling any tool, protective garment must be put on to

avoid injuries in the business i.e. overcoat, gloves, face mask.

4.6.3 Taxes

The business shall be required to pay taxes monthly since it’s a legal requirement from

government

4.5.4 Labour

Under the act of fair labour standards, the business shall ensure that the employees are paid are

paid as required.

18
 CHAPTER FIVE

FINANCIAL PLAN

5.1 INTRODUCTION

Linet Textile and garment making factory shall budget and maintain its accounts in a way that

ensures the business stays afloat and that the business generates profits.

5.2 PRE-OPERATION COST

Below is the amount the business is going to use for the operational cost

Items Cost
Business registration 20,000
License 500
Insurance 10,000
Electricity 500
Water 500
Telephone 1,000
Wages and salaries 25,000
Business permit 2,000
Rent 5,000
Machines and equipment 50,000
Stock 20,000
Transport 5,000
Sign post 1,000
Total 140,500
Table 11 Preoperational costs

5.3 WORKING CAPITAL

Below is the capital that the business shall incur in day-to-day operating expenses
Item Feb March April
Transport 6,000 4,000 5,000
Rent 5,000 5,000 5,000
Wages & salaries 35,000 35,000 35,000
Advertisement 15,000 10,000 20,000
Stock 25,000 30,000 20,000
Telephone 2,000 1,500 1,000
Electricity 700 1,000 800
Total 88,700 86,500 86,800
Table 12 Working capital

19
5.4 PROJECTED CASH FLOW STATEMENTS

5.4.1 The first year, 2024

Item Jan Feb Mar April May June July Aug Sept Oct Nov Dec
Opening bal - - - - - 2800000 406000 419000 1881000 9775000 14770000 19700000
Cash in flow - - - - - 450000 500000 2000000 10000000 15000000 20000000 25000000
Cash sales - - - - - - - - - - - -
Total Cash - - - - - 450000 500000 2000000 10000000 15000000 20000000 25000000
inflow
Credit outflow - - - - - - - - - - - -
Salaries - - - - - 5000 10000 15000 30000 35000 45000 50000
Rent - - - - - 5000 5000 5000 5000 5000 5000 5000
Transport - - - - - 2000 10000 20000 50000 50000 70000 80000
Taxes - - - - - 30000 40000 50000 70000 70000 80000 85000
Water - - - - - 1000 3000 4000 10000 10000 10000 12000
Electricity - - - - - 1000 3000 5000 10000 10000 10000 10000
Stock - - - - - - 10000 20000 50000 50000 80000 80000
Total c.o - - - - - 44000 81000 119000 225000 230000 300000 32200
Net profit - - - - - 406000 419000 1881000 9775000 14770000 19700000 24678000
Close balance - - - - - 406000 419000 1881000 9775000 14770000 19700000 24678000
Table 13 Cashflow statement for the first year, 2024

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5.4.2 The second year 2025

Item Jan Feb March April May June July Aug Sept Oct Nov Dec
Opening 2467800 2964900 3961000 4959500 6458000 6958500 8457500 8956000 8953500 9454000 9452000 1045000
bal 0 0 0 0 0 0 0 0 0
Cash in 3000000 4000000 5000000 6500000 7000000 8500000 9000000 9000000 9500000 9500000 10000000 10500000
flow 0 0 0 0 0 0 0 0 0 0 0 0
Cash 4000 - - - - 5000 - - - - - 5000
sales
Total 3000400 4000000 5000000 6500000 7000000 8500500 9000000 9000000 9500000 9500000 10000000 10500500
cash 0 0 0 0 0 0 0 0 0 0 0 0
inflow
Credit - - - - - - - - - - - -
outflow
Salaries 60000 70000 70000 75000 75000 75000 80000 90000 90000 90000 95000 95000
Rent 5000 10000 10000 10000 10000 10000 10000 10000 10000 10000 10000 10000
Transport 80000 90000 90000 95000 90000 95000 100000 10000 100000 105000 105000 110000
Taxes 90000 95000 95000 100000 100000 105000 105000 110000 105000 110000 115000 120000
Water 15000 15000 20000 20000 25000 20000 30000 25000 30000 35000 25000 35000
Electricit 15000 20000 25000 30000 25000 25000 20000 30000 25000 30000 30000 30000
y
Stock 90000 90000 95000 90000 90000 100000 95000 100000 105000 100000 105000 105000
Total 355000 390000 405000 420000 415000 430000 440000 465000 460000 480000 485000 505000
cash
outflow
Net profit 2964900 3961000 4959500 6458000 6758500 8457500 8956000 8953500 9454000 9452000 99515000 10450000
0 0 0 0 0 0 0 0 0 0 0
Close 2964900 3961000 4959500 6458000 6758500 8457500 8956000 8953500 9454000 9452000 99515000 10450000
balance 0 0 0 0 0 0 0 0 0 0 0
Table 14 Projected cashflow statement for the second year 2025

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5.4.3 The third year 2026

Item Jan Feb March April May June July Aug Sept Oct Nov Dec
Openin 246780 104457 199550 199425 199430 204414 209407 204380 214375 219350 219340 224325
g bal 00 000 00 000 000 000 000 000 000 000 000 000
Cash in 105000 200000 200000 200000 205000 210000 205000 215000 220000 220000 225000 230000
flow 00 000 000 00 000 000 000 000 000 000 000 000
Cash 4000 - - - - 5000 - - - - - 5000
sales
Total 105007 200000 200000 200000 205000 210000 205000 215000 220000 220000 225000 230000
cash 000 000 000 00 000 000 000 000 000 000 000 000
inflow
Credit - - - - - - - - - - - -
outflow
Salaries 100000 100000 105000 100000 105000 105000 110000 110000 115000 120000 120000 125000
0
Rent 20000 20000 20000 20000 20000 20000 20000 20000 20000 20000 20000 20000
Transp 115000 115000 120000 120000 125000 125000 130000 130000 135000 140000 140000 145000
ort
Taxes 125000 125000 130000 130000 135000 135000 135000 140000 140000 140000 145000 145000
Water 40000 40000 45000 45000 45000 45000 50000 50000 55000 55000 55000 60000
Electric 40000 40000 45000 40000 45000 50000 50000 50000 55000 55000 60000 60000
ity
Stock 110000 110000 115000 115000 120000 120000 125000 125000 130000 130000 135000 140000
Total 550000 550000 575000 570000 585000 600000 620000 625000 650000 660000 675000 695000
c.o
Net 104457 199550 199425 199430 204415 209407 204380 214375 219350 219340 224325 230010
profit 000 000 000 000 000 000 000 000 000 000 000 000
Close 104457 199550 199425 199430 204415 209407 204380 214375 219350 219340 224325 230010
balanc 000 000 000 000 000 000 000 000 000 000 000 000
e
Table 15 Projected cashflow statement for the second year, 2026

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5.5 INCOME STATEMENT AS AT DECEMBER 2024, 2025 AND 2026

Items Year 1 Year 2 Year 3

Sales 72950000 915000000 2230000000
Opening stock 49751000 834927000 2223132000
Purchases 15500 20000 22000
Less closing stock 24678000 104500000 230010000
Cost of goods sold 25088500 730447000 1993144000
Gross profit 47861500 810500000 236856000
Expenses
Salaries 190000 965000 1315000
Transport 282000 1160000 1540000
Tax 425000 1250000 1620000
Water 50000 295000 585000
Electricity 49000 305000 590000
Rent 35000 115000 240000
Total expenses 1031000 4090000 5890000
Net profit 46830500 80641000 230966000
Table 16 Income statement for the first three years

5.6 PROFORMA BALANCE SHEET AS AT DECEMBER 2024, 2025 AND 2026

Assets Year 1 Year 2 Year 3

Fixed
Sewing machine 50,000 80,000 150,000
Cutting machine 40,000 60,000 100,000
Printing machine 10,000 30,000 50,000
Total 100,000 17,000 300,000
Current
Cash at hand 1,000,000 1,500,000 2,800,000
Total assets 1,100,000 1,670,000 3,100,000

Liabilities
Current 50,000 70,000 200,000
creditors
Long term liability
Long term loan 1,000,000 1,000,000 2,000,000
Total liabilities 1,050,000 1,070,000 2,200,000

Capital 50000 600000 900000

Total =C + L 1100000 1670000 3100000
Table 17 Proforma balance sheet for the first three years

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5.7 PROJECTED SALES REVENUE

Items Month 1 Month 2 Month 3 Month 4 Month 5

Cash 1,000 1,500 1,700 2,000 2,300

sales 800 1,200 1,500 1,800 2,200
Credit 1,800 2,700 3,200 3,800 4,500
sales
Total
sales
% cash 1,000 × 100 1,500 × 100 1,700 × 100 2,000 × 100 2,300 × 100
sales 1,800 2,700 3,200 3,800 4,500
55.6% 55.6% 53.1% 52.6 51.1%

% credit 800 × 100 1,200 × 100 1,500 × 100 1,800 × 100 2,200 × 100
sales 1,800 2,700 3,200 3,800 4,500
=44.4% = 44.4% = 46.9% 47.4% 48.9%

Table 18 Protected revenue analysis

5.8 BREAK EVEN ANALYSIS

𝐶𝑜𝑛𝑡𝑟𝑖𝑛𝑢𝑡𝑖𝑜𝑛 𝑚𝑎𝑟𝑔𝑖𝑛
𝐵𝑟𝑒𝑎𝑘 𝑒𝑣𝑒𝑛 𝑝𝑜𝑖𝑛𝑡 =
𝑇𝑜𝑡𝑎𝑙 𝑓𝑖𝑥𝑒𝑑 𝑐𝑜𝑠𝑡

2,426,600
=
100,000

Contribution margin = sales – total variable

=72950000 – 48684000

=24,266,000

Total variable cost = opening stock – expenses = 48,684,000

5.9 FINANCIAL RATIOS

5.9.1 Gross profit ratio

𝐺𝑃 × 100
𝐺. 𝑃 =
𝑆𝑎𝑙𝑒𝑠

24
 47,861,500 × 100
= = 65.6%
72,950,000

5.9.2 Net profit ratio

𝑁𝑃 × 100
𝑁𝑃 =
𝑆𝑎𝑙𝑒𝑠

46,830,500 × 100
= = 64.2%
72,950,000

5.9.3 Return on equity

𝑆𝑎𝑙𝑒𝑠 × 100
𝑅𝑒𝑡𝑢𝑟𝑛 𝑜𝑛 𝑒𝑞𝑢𝑖𝑡𝑦 = =
𝐶𝑎𝑝𝑖𝑡𝑎𝑙

10,000 × 100
= 20%
50,0000

5.9.4 Return on assets

𝑆𝑎𝑙𝑒𝑠 × 100
𝑅𝑒𝑡𝑢𝑟𝑛 𝑜𝑛 𝑖𝑛𝑣𝑒𝑠𝑟𝑚𝑒𝑛𝑡 =
𝐶𝑎𝑝𝑖𝑡𝑎𝑙

10,000 × 100
= 14.3%
70,000

25
 APPENDICES

APPENDIX A: BUSINESS LOCATION

LINET TEXTILE AND

GARMENT MAKING

SHOP

RONGO – HOMABAY ROAD

RONGO SUCCESS

ACADEMY

26
APPENDIX B: BUSINESS LAYOUT

Managing director’s

Washrooms office

Factory

Reception

Accounts office

Production
managers officer

Store

Security guard

27