BUSINESS PLAN

P. Box. 2392
KITALE.

DEPARTMENT : BUILDING AND CIVIL ENGINEERING

DEPARTMENT

BUSINESS NAME: FRIENDS HARDWARE AND HOLDINGS

COURSE CODE : 2707

PRESENTED BY: BOADICEA ASEKA

ADMISSION NUMBER:29280/22

SUPERVISOR: MR.ODENYO SIMON

PRESENTED TO: KENYA NATIONAL EXAMINATION

COUNCIL IN PARTIAL FULFILLMENT FOR THE AWARD OF

DIPLOMA IN CIVIL ENGINEERING

EXAM SERIES : NOVEMBER SERIES 2024

DECLARATION
I BOADICEA ASEKA declare that this business plan is my original work and it has never
been submitted to the KNEC for award of Diploma in Civil Engineering.

Signature:………………………………………………….

Date:……………………………………………………….

Supervisor’s name:SIMON ODENYO

Signature:…………………………………………………..

Date:………………………………………………………

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DEDICATION
I dedicate this Business Plan to my Mother Mrs.Christabel Opayi and guardians Mr and Mrs
Wycliffe Ongola for the encouragement, spiritual nourishment and financial support they offered
in all my undertakings during the course work. Special dedication goes to my friends for their
moral support, emotional and spiritual support just to mention but a few.

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ACKNOWLEDGEMENT
I acknowledge with abundant thanks to the support and assistance I got from my parents and all
the relatives. Special thanks goes to my lecturer and supervisor for imparting managerial skills in
me during moderation of this project.

May the almighty God bless you all.

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Contents
DECLARATION..........................................................................................................................................i
DEDICATION............................................................................................................................................ii
ACKNOWLEDGEMENT..........................................................................................................................iii
CHAPTER ONE..........................................................................................................................................1
EXECUTIVE SUMMARY........................................................................................................................1
1.1 BUSINESS DESCRIPTION..................................................................................................................1
1.2 MARKETING PLAN............................................................................................................................1
1.3 ORGANIZATION AND MARKETING PLAN...................................................................................1
1.4 PRODUCTION / OPERATIONAL PLAN...........................................................................................2
1.5 FINANCIAL PLAN..............................................................................................................................2
CHAPTER TWO.........................................................................................................................................3
2.0 BUSINESS DESCRIPTION..................................................................................................................3
2.1 LOCATION AND ADDRESS..............................................................................................................3
2.2 FORM OF OWNERSHIP......................................................................................................................4
2.3 TYPE OF BUSINESS...........................................................................................................................4
2.4 PRODUCTION AND SERVICE..........................................................................................................5
2.5 JUSTIFICATION OF OPPORTUNITIES.............................................................................................5
2.5 JUSTIFICATION OPPORTUNITY......................................................................................................5
2.6 INDUSTRY...........................................................................................................................................6
2.6.1 significant of the industry...................................................................................................................6
2.6.2 Industry Size.......................................................................................................................................6
2.6.3 Future of the Industry.........................................................................................................................6
CHAPTER THREE.....................................................................................................................................7
3.0 MARKETING PLAN............................................................................................................................7
3.1 CUSTOMERS.......................................................................................................................................7
3.2 MARKET SHARE................................................................................................................................7
3.3 COMPETITION....................................................................................................................................8
3.4 ADVERTISEMENT AND SALES PROMOTION.............................................................................10
3.7 DISRIBUTION STRATEGY..............................................................................................................11
3.7.1 Problems likely to be encountered during distribution......................................................................11
CHAPTER FOUR.....................................................................................................................................12
4.0 ORGANISATIONAL AND MANAGEMENT PLAN........................................................................12
4.1FRIENDS HARDWARE ORGANISATION STRUCTURE...............................................................12
4.2 EMPLOYEES.....................................................................................................................................12
4.2.2 SUPERVISORS...............................................................................................................................13
4.5 REMUNERATION AND INCENTIVES............................................................................................15
4.5.1 Fair remuneration.............................................................................................................................15
4.5.1 INCENTIVES...................................................................................................................................16
4.6 LEGAL REQUIREMENTS................................................................................................................16
4.6.1 License and permits..........................................................................................................................16
4.6.2 By laws the hardware will comply with the following by laws.........................................................16
4.6.3 Employment Act Cap 226.................................................................................................................16
4.6.4 Trade description Act Cap 505.........................................................................................................17
4.7 SUPPORT SERVICES........................................................................................................................17
CHAPTER FIVE.......................................................................................................................................18
5.0 PRODUCTION/ OPERATIONAL PLAN..........................................................................................18
5.2 REPAIR AND MAINTENANCE.......................................................................................................19
5.3 PRODUCTION STRATEGIES...........................................................................................................19
At the end of each year, the hardware will organize stock taking week to track of its record of stock and
to efficiently utilize the supplies of stock..................................................................................................20
5.4 LABOR AND SKILL REQUIRED..................................................................................................20
5.5 PRODUCTION PROCESS.................................................................................................................21
5.6 GOVERNMENT REGULATIONS AFFECTING THE BUSINESS..................................................22
CHAPTER SIX.........................................................................................................................................23
6.0 FINANCIAL PLAN............................................................................................................................23
6.1 PRE OPERATIONAL COST ESTIMATES.......................................................................................23
6.2 WORKING CAPITAL........................................................................................................................24
CHAPTER ONE

EXECUTIVE SUMMARY
The business will ensure that it adheres to all the requirement and services to all customers.
It should also offer good moderation in process of the commodities being sold.
The business intends to obtain revenue and profit by servicing its customers not only with
needed hardware but also with advise in the use of any product itself the company will sell its
product in the local market because will shall offer free advice on the use of all our product
and will also furnish a full refund warrant.

1.1 BUSINESS DESCRIPTION

The name of the business will be FRIENDS HARDWARE HOLDINGS. It will be located
along Kisumu- kapsabet road , its main location advantage being high demand for building
materials in construction projects going on in Kitale Town. Its form of ownership is sole
proprietorship. The owners business goal is to chain Holdings in town with the same name
FRIENDS Hardware Holdings. The business is to commence after the owner buys the
initial stock.

1.2 MARKETING PLAN

The business customers include consultancy firms around the area and construction firms
using machines for hire. The business tends to capture 32% of the total market share
with a lot of competition from nearby hardware’s namely SUAM, JALARAM and
BADHRI hardware Holdings . The mode of advertisement the business is going to use
includes newspapers , signboards , business cards . The business is going to offer 5%
discount on every product sold in the first month as a form of sales promotion. The sales
tactics the business is going to use include : offering high quality commodities and
offering transport facilities to machines bought on hire .
The channel of distribution will be:
Producer - retailer (FRIENDS HARDWARE) - consumer.
1.3 ORGANIZATION AND MARKETING PLAN.
The sole proprietor will be the manger if the hardware close to the superior who will be
the overall head of other employees like technicians, security guards and cleaners.
Recruitment procedures to be followed include , invitation of application short listing,
interviewing then final selection of employees . Employees selected will undergo training.
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Factors to be considered in staff promotion are working experience, hard work, leadership
qualities and communication skills. The hardware will offer fair remuneration to all its
employees and it will offer all groups based in natives and individual based in centimes .
The hardware will acquire a trade license from the local authority and the laws it will
comply with includes: regulation of wages and conditions of employment act cap 220,
employment act cap 226 , trade description act cap 505 , registration of business name cap
449.

1.4 PRODUCTION / OPERATIONAL PLAN

The production facilities required for effective operation include ; concrete mixers , brick
molds , vehicles and mobile phones calculators writing pens , tape measures , receipt
books , office chair premises and a computer.
The machines in the hardware are to undergo servicing after every 2 weeks.
The initial stock required for the business approximately totals up to 107,200
The hardware ill organize stock taking at the end of each year to keep track of its
records of stock. Salaries and wages of employees of the hardware totals up to 78000 and
hourly rate of labor is 316.10 shillings. Overhead costs totals up to 116, 500 shillings
Total cost of production process of the hardware will include manufacturing
transportation , stockings selling and consumption.

1.5 FINANCIAL PLAN

The pre operational cost estimates the hardware will incur like feasibility studies ,
business registration , license and permit, initial advertisement , rent deposits , installation
for power , initiation for water sums up to ksh 15500 in a year while the working
capital estimate is ksh 999,700.In the cash flow system , the hardware has a beginning cash
balance of ksh 568500 in year one, cash 568,500 in year two and ksh 4034200 in year three
.
the profoma income statement propjets a net profit of ksh in 138620 in year one, ksh
167151000 I year two and ksh 764680.40 in year three. The breakeven point is of which
revenue 9 income) equals the operation expenses of business for the hardware is
1137170.20.
The desired financing sums up to ksh 608200.
The proposed capitalization for the hardware will include loan from bank , personal savings ,
family contribution and sales and leaves which provides a total capital of ksh 20000.

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CHAPTER TWO

2.0 BUSINESS DESCRIPTION

The name of the business will be Friends Hardware Holdings. The reason for choice of the name
are:
 Its uniqueness in the business location
 Due to fair pricing of commodities
 Its ownership being a sole proprietor form

2.1 LOCATION AND ADDRESS

Hardware Holdings will be located at KITALE TOWN.
The main advantages to the location of the business are:
 Good transport and communication services
 Availability of security services
 Proximity of consumers and customers
 Few number of competitors
 Nearness to suppliers
 Availability of electricity and water supply
The address of the business will be
FRIENDS HARDWARE HOLDINGS.
P.O BOX 2392,KITALE.
T EL NO, 0728829441
[email protected]
Location sketch map

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 Elgon traveler’s
Police station
hotel

Friend’s hardware

Road to Kisumu town

Hospital Tea factory

To Safaricom house

2.2 FORM OF OWNERSHIP

Friend’s hardware Holdings will be sole proprietorship business registered under the sole
proprietorship act of Kenya. The reason for preparing this form of ownership was:
 Reduction of expenses in employing many workers
 Enjoying all business proof alone and also suffer the risks alone
 Flexibility and no consultation which leads to faster decision making
 Possible tax advantage.
 Secrecy of business is maintained

2.3 TYPE OF BUSINESS

The business is going to be a start-up. The general mode of operation in FRIENDS hardware is
going to be retail. Reasons for reference of startup include:
 Start up business are small hence easy to manage as compared to expansion type of
business
 Start up business enables an entrepreneur to know the hardships he is likely to fall in
business from incidences he experience when he starts operation as opposed to expansion
type of business
 Start up business requires less capital as opposed to expansion type which might be
expensive

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  Start up business require few laborers as opposed to expansion type hence it saves on
labor cost

2.4 PRODUCTION AND SERVICE

The key product that will be on offer will be building materials like roofing sheets, paints,
painting brushes, brick moulds, cement, reinforcement bars and glass being used in window
glazing. The products offered will be of high quality standards having been approved by the
Kenya bureau of standards, the business will also stock a variety of each every product for
example,
Roofing sheet-galvanized, corrugated iron sheet, box-profiled iron sheet and roofing tiles
Cement- blue triangle cement, Bamburi cement and Nguvu cement
Bricks- precast bricks, hollow bricks, perforated bricks and circular bricks
Reinforcement bars-both Y and R bars this will give consumers a wide variety to choose from
and will also cater for their taste and preference the business will also offer machine for hire e.g.
concrete mixers, compressors poker vibrators. The machines to be placed for hire are the ones
mostly used in the construction projects hence will ensure adequate returns on their investments

2.5 JUSTIFICATION OF OPPORTUNITIES.

The major concern of the community which the business will address will be unemployment
since it will employ labor from the community. The business will also portray a sense of self
employment hence it will make community members to be self-employed than to rely on white
collar jobs. To make operations convenient, the manager will employ three attendants who will
attend to the customers. In addition, though the owner has no experience in this business, she
will employ somebody who has done building and construction to help her run the business
effectively
The hardware will stock Machines for hire. Which will be frequently used e.g. concrete mixer,
poke vibrators, compressors, hence this will ensure adequate return on investment.

2.5 JUSTIFICATION OPPORTUNITY

The major concern of the community which the business will address is unemployment, since it
will employ labor from the community members. The business will also portray a sense of self
employment; hence it will encourage more community members to be self-employed than to rely
on the employment of white collar jobs. The building products from the hardware stock will be
on high demand due to the numerous ongoing projects in Kitale. To make operation convenient
the manager will employ the attendants to attend to the customers. For fair pricing of the
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products with regard to other competitors will also be a major strategy that the owner will use in
marketing. The area which the hardware is located is near banking institution only a few
kilometers away which will offer cheap banking services to the business. The area has a good
transport network for easy transportation of products stocking and offers accessibility to the
hardware to stock for customers

2.6 INDUSTRY
FRIEND’s hardware stock falls under construction industry

2.6.1 significant of the industry

The construction industry will ensure the construction of proper durable houses that can with
stand adverse weather conditions and last for longer period. The construction industry
knowledge has enabled the construction of industries which have prevented flooding in flood
prone areas and has assisted in the generation of electricity. The construction industry has
ensured effective transport and communication through the construction of tunnels and bridges.
Construction industry has given jobs to people working under various construction projects

2.6.2 Industry Size

The construction industry is one of the large industries in the country since housing is one of the
basic human wants. This factors has led the industry to be in constant growth over the years these
has been evidenced from news of unveiling the tallest high rise building having 160 floors in
dubai in the year 2010The technology currently in use in the construction industry has been auto
card which has now replaced drawing of architectural design by hand. The industry is highly
profitable since there are few individuals who are qualified as engineers hence there is room for
many opportunities
Problems facing the industry include
Preference for low quality take commodities which are cheaper compared to high quality
commodities which will be more effective during construction in order to cut costs
Clients prefer to employ ordinary workers in the field to carry out construction project rather
than engineers with the view that engineers are very expensive but in the end it leads to collapse
of buildings. Lack of modern equipment and machines that can provide better output

2.6.3 Future of the Industry

The industry is bound to grow in future due to the following; Government policies to increase
funds in the construction industry so as to improve infrastructure in the country
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Provision of training which automatically leads to the employment of youth especially in areas
like Sudan Vision 2030 whereby Konza city is on construction

CHAPTER THREE

3.0 MARKETING PLAN

The business will sell its product at a fair price which will be favorable to its customers hence making
them more satisfied and also offering quality services. The business will consider the pricing strategy like
government policy in and competitor’s price hence making its sells tom be higher from the competitors
within the industry. Friend’s hardware will have to display to attract passersby as a mean of sell tactic
also the business will distribute the goods and services to customers both directly and through offers

3.1 CUSTOMERS
The business customers include consultancy firms like Opondo consultancy firm, abuto
consultancy firm some of which have projects in Kitale. Other customers include: bridges tone
construction firm, which hire machine for their construction projects and other Individual
engineers who lack building items and know they can find them in the hardware. The customers
do value the fair prices of the products and services in the hardware. They do value the variety of
commodities that they might choose from the hardware.

3.2 MARKET SHARE

The business intends to capture 30% of the total market share with a lot of competition from
nearby hardware namely Suam and Jalaram Holdings,
Illustration

Enterprise No of customers
Friends hardware Holdings 80

Jaralam hardware Holdings 60

Suam hardware Holdings 65
Total 205
Percentage market share =no of customers in a particular Holdings x 100%
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 Total no of customers =360
Friend’s hardware Holdings 80/205 x 360
=140.49
Elgon hardware Holdings 55/245 x 360
=80.8
Five star hardware Holdings 60/245 x 360
= 88
Badhri hardware Holdings 65/245x360
=95.5

3.3 COMPETITION
Friend’s hardware Holdings has three major competitors namely
Elgon hardware Holdings
Five star hardware Holdings
Badhri hardware Holdings
Badhri hardware Holdings has been operating in the last two years, five star hardware has been
operating for the last one year and Elgon has been operating for the past four years
Strength and weakness of each competitor
Elgon hardware Holdings
The hardware has an advantage since it has been operating for many years. During those years, it
has been able to capture a lot of customers in the area. Its only weakness is that it has been
overpricing some of the products they stock.
Badhri hardware Holdings
Badhri hardware Holdings has an advantage of size since it is quite large and stocks a wide
variety of commodities. Its only weakness has been; since its operation, it has never done much
in marketing their products i.e. advertisement or offering any discounts.
Five star hardware Holdings
Since its operation, it has been able to capture a large market share, its only weakness is that it
has not been restocking its products when finished hence their customers have been lacking the
products they require.

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 competition

Friends
Elgon
Five star
Badhri

Competitive analysis
Criteria Elgon Badhri Five star Friends Average

Product range 4 3 5 2 3.5

Product 5 4 4 4 4.25
quality

Pricing 2 5 3 5 3.75

packaging 4 4 2 3 3.25

Accessibility 5 4 3 4 4

Customer 4 3 2 4 3.5
care

Total 24 23 20 22

Key
0-5 possible score
1. Poor 2. Fair 3. Good
4. Very good 5. Excellent
In view of the competitive analysis, the competitive advantage that Friends hardware has include
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Pricing advantage this is due to fair pricing of its commodities customer care efficiency. It’s
efficient in serving attending to customers.

3.4 ADVERTISEMENT AND SALES PROMOTION

The business is going to use newspapers as a made of advertisement it’s going to work to make
business cards which is going to be distributed to its customers the business is going to make
sing board s to show its location to customers and the kind of products sold.
The outer surface the business premises is going to be painted then the products sold in the
hardware will be drawn and listed on the outside wall. For sales promotion purposes the business
is going to offer 5 % discount on every product it stocks for the first one month from the time it
opens. To ensure effective implementation of this advertisement and sales promotion strategies
the business is going to allocate sufficient amount of money for the purpose. The impact of sales
promotion offer by the business will be determined by the sales the business will make .If the
business will increase its sales then there is a positive impact due to sales promotion effort. The
budget projection for advertisement and sales promotion is 30000 shillings.
3.5 PRICING STRATEGY
Pricing of products will depend on the cost of the product i.e. materials labor overhead and
indirect expenses profit margin or mark up
Selling price= cost of production + mark up
In order to be able to cope with competition discounts will be offered on some goods but from
the selling price i.e. when the business starts 5% discount will be on products price list product
offered discount. The credit policy of the business will be to offer credit on reliable trust worthy
who keep to their word

Product Price in Ksh

Brick mould 300

Paints 95

Cement bag 850

Iron sheet 950

Precast brick 200

3.6 SALE TACTICS

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Friends’ hardware stock plans to increase its sales though the following ways
1 though post and efficient service to the customers giving membership to the regular customers
who will enjoy credit facilities
Giving discounts to customers buying goods in large quantities i.e. goods over 1ooo
Fair pricing of product to be pocket friendly to customers
Employing experienced sales team that is highly motivated and which can lure customers to
buying products Holdings in the hardware
Researching on customer need hence stocking products which are highly demanded by
customers
Offering transport facilities to machines on hire or bought

3.7 DISRIBUTION STRATEGY

The channel of distribution will be
Producer [East African Portland cement own Dura coat paint
Retailer [Friends hardware Holdings]
Consumer [construction companies and consultancy firms]
Consumer will buy the products directly from the Holdings the hard ware will buy pick up which
will transport products in large quantities or take machines for hire.

3.7.1 Problems likely to be encountered during distribution

Possibility of damage to commodities which when damage occurs to commodities during
transportation then they cannot be sold
Delay in the delivery of the commodities in the hardware commodities should be able to reach
consumers at the required time delay can lead to a customer resorting to buy goods in another
hardware.
In availability of commodities in demand by the consumers. When a shortage of commodities
like paint occurs while they are in demand it becomes a hindrance to the distribution channel.

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CHAPTER FOUR

4.0 ORGANISATIONAL AND MANAGEMENT PLAN

Friend’s hardware Holdings being a small enterprise does not require much labor. The hardware
is on sole proprietorship hence the owner is hardware managers
The officer very close to the manager is the supervisor who will be overall head of the other
duties.

4.1FRIENDS HARDWARE ORGANISATION STRUCTURE

manager

supervisor

technician

accounts office security

cleaner
clerk assistant guard

4.2 EMPLOYEES
4.2.1 Manager
The manager of the proposed enterprise will be the sole proprietor Jepkemboi Carren.
Duties and responsibilities
 Makes all decisions concerning the business operations plans and coordinates business activities
 Staffing of employees in the hardware
 Making sure that the business accounts are accurate
 Pay the salaries of the employees
 Evaluate the overall performance of the employees and the business at regular intervals
 Set goals to be achieved by the business

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QUALIFICATION
Diploma in business administration
Provide capital for the business activities

4.2.2 SUPERVISORS
DUTIES AND RESPONSIBILITY
 Coordinates activities of the business
 Assists in implementing the plans of the business collect daily sales money and the cash
 Supervise the workers daily
Qualification
 Should have a diploma in building and construction or diploma in civil engineering
 Should have at least two years working experience
 Should be computer literate
4.2.3 Technicians
Friend’s hardware Holdings will employ three technicians
Duties and responsibilities
 Attending offering services to customer on the counter
 Arranging the goods to be stocked by the business selling the business name to consumer
s by having good relations with the consumers.
Qualification
 Should have at least a certificate in building or civil engineering or have done technician
course
 Should have good communication skills
 Should have at least two years working experience
4.2.4 Security guard
Duties and responsibilities
 Ensuring security of the business premises
 Protect customer vehicles.
Qualification
 Must have completed secondary education
 Must have at least two years working experience with a security firm
 Must always be alert and in the move
4.2.5 Cleaner
Duties and responsibilities
 Cleaning the floor of the business premises daily wiping the external window of the
business premises
 Wiping dust on the products counter and shelves
Qualification
 Should be an expert cleaner
 Should have worked as a cleaner somewhere before

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  Should be a person who values hygiene
4.2.6 Accounts clerk
Duties and responsibilities
 Keeps all the records of account
 Provides receipt for goods bought by customers
 Prepare budget for the items supplied to the hardware
Qualification
 Should have CPA II
 Should have at least one year working experience
4.2.7 Office assistant
Duties and responsibilities
 Prepare the daily work schedule for the manager
 Receive and make call for the manager.
Qualification
 Should have a diploma in secretarial studies
 Should be fast and efficient in typing
 Should be computer literate
4.2.8 Holdings keeping
Duties and responsibilities
 Keeping records of goods stocked
 Arranges goods in Holdings
 Keeping records of goods coming in and going out of the Holdings
Qualification
 Should have a mean grade of a c plain in KCSE
 Should have a diploma in stocking
 Should have a one year working experience
4.3 RECRUITMENT
The policy of Friends hardware Holdings is to employ hardworking and motivated staff so as to
lure more customer to the Holdings
Invitation of applications
This will be done though advertisement in the media newspaper and posters
Short listing
The application after being received will be critic ally analyzed
These who qualify will be short listed and called for interviews through mails and phone
Interview
Applicants who were called for interviewing will be interviewed by the manager
Selection
After the interview successful candidates will be selected and appointed
Training
Employees selected will have to be trained n offering quality services to customers and change in
technology
The mode of training is going to be tutorial by experienced persons
The other mode will be to allow employment to attend to seminars and apprenticeship

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4.4 STAFF PROMOTION
Employees will be promoted due to following reasons
Working experience i.e. workers who have worked for long known to handle work better than
inexperience personnel
The worker has to possess leadership qualities
He should have good communication skills
Hardware’s hardworking personnel will be promoted since he will contribute positively to the
growth of the hardware

4.5 REMUNERATION AND INCENTIVES

4.5.1 Fair remuneration

The business will remunerate its employees basing on qualification and position performance

ITEM POSITION GRADE NUMBER SALARY PER SUB TOTAL

MONTH
1 supervisor Diploma in civil 1 15000 15OO0
building
engineering

2 technician Certificate in 3 10000 30000

building and
construction
3 Security guard Security guard 1 4000 4000
training
4 Holdings Diploma in 1 6000 6000
keeper Holdings
keeping
5 Office Diploma in 1 8000 8000
assistance secretarial
studies
6 Accounts clerk CPA II 1 12000 12000
Statutory deduction
Nation social security funds
PAY AS YOU EARN

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4.5.1 INCENTIVES
The hardware will offer both group and individual incentives
Group based incentives include
Transport will offer transport to and from the work place t shirts
The business will offer two T shirts one blue one black, each employee’s T-shirt will have the
logo and name of the business.
Tours the hardware will offer business tours to its employees once in a year.
Individuals based incentives
Awards: Awarding the best employee of the year he or she will be awarded a cheque of ksh
20000

4.6 LEGAL REQUIREMENTS

4.6.1 License and permits

Friend’s hardware Holdings will require a trade license for its operation that is obtained from
local authorities in an annual basis

4.6.2 By laws the hardware will comply with the following by laws
Regulations of wages and contribution for employment act 229
This is a statute that states that working hours consist of not more than 52 hours spread over six
days of the week
No persons under the age of 16 years be require to work more than 6hours a day.
Every employee shall be entitled to one whole rest day per week
This cap safeguards the employee against unfair treatment

4.6.3 Employment Act Cap 226

This act provide from among others things set out contract for services summary dismissal
notice terminating services keeping of records by employees and specifically states that it is
criminal not to pay employee his wage or terminal benefits

17
This cap protects the employee against ill treatment.

4.6.4 Trade description Act Cap 505

This cap prohibits among other things misdescription of commodities and misleading indications
of the price of goods and protects the consumers against being overpriced.
4.6.5 Registration of business name cap 499
The business will conform to this by entering its name Friends hardware Holdings.
4.6.6 Food, drugs and chemical substances act cap 254
This is a statute providing for the prevention of alteration of food drugs and chemical
substances . It ensures customers are safeguarded against poor quality points and vanished
. 4.6.7 Public health act cap 242
This provides for Maintenance of security and health. This is done through maintenance of high
hygiene on the business. The hardware will ensure its compliance to this by law by
employing cleaners.

4.7 SUPPORT SERVICES

The business will receive support services from the following firms.
i. Banking Services - Barclays Bank Kapsabet.
ii. Insurance - Amaco Insurance kapsabet.
iii. Electricity - Kenya Power Company
iv. Security Services- Modern Security Kapsabet.
v. Auditing Services – Blue Auditors Kapsabet.
vi. Water Services - Kapsabet Water And Sewer Company
vii. Legal Services - Mutual An Co Advocates Kapsabet.
viii. Postal Services - Kenya Posta And Telecommunication
ix. Transport Services - Nybs Transporters.

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CHAPTER FIVE

5.0 PRODUCTION/ OPERATIONAL PLAN

In the propose business it contains the necessities which shall enable the business to start off.
This includes tools and equipment, raw materials and money for expenses of other cost. The
goods of the business will provide goods and services as per the demand at short period of time
in case of new product in the market concerning building, my customers will be introduced.
5.1 production facilities/equipment
The production facilities required for effective production include:
Item Description Specification/ Quantity Unit cost Subtotal
capacity
1 Concrete 0.2-0.3 cm 2 20000 40000
mixer
2 Brick mould 100 x90 x90 10 200 3000
3 Vehicle Double cabin 1 400000 400000
Isuzu
4 Mobile phones Motorola 2 5000 10000
5 Calculator Casio Fx- 82 2 1000 2000
MS
6 Writing pens Executive blue 20 10 200
pens
7 Tape measure 30 m joule 2 500 1000
8 Receipt books 2 150 300
9 Office chairs 3 2000 6000
10 Premise Business rental 2800 MS 5000 10000
premise
11 Computer HP compact 1 25000 25000
Total 458960 492500
Premise layout for Friends hardware Holdings

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5.2 REPAIR AND MAINTENANCE
Machines in the hardware are going to undergo servicing after every one month. Electrical and
other machines which are broken are going to be undertaken to the manufacturer or distributers
or dealers for repair
Electrical Holdings recommended by the hardware for electrical equipment is stima electrical
owned by an experienced expert and electrician
Very old machines will be sold
Depreciation schedule of assets Dep 10%
Item Initial DURATION Depreciation 1 year Net Year2 Year 3
description value OF USEFUL (PA) net value depreci
SERVCE value ation
Vehicle 400000 10 40000 360000 36000 324000 32400 291600
Computer 25000 5 2500 22500 2250 20250 2025 18225
Concrete 20000 8 2000 1800 1800 16200 1620 14580
mixer
Mobile 10000 3 1000 9000 900 8100 810 7290
scaffolds
Poker 30000 8 3000 27000 2700 24300 2430 21870
vibrator
Wheel 5000 10 500 4500 450 4050 405 3645
barrow
Furniture 100000 15 10000 90000 9000 81000 8100 72000
Total 5005000 68000 513000 53100 477900 44790 430110

5.3 PRODUCTION STRATEGIES

Stock
Summary of stock required for one month
Item description Specification quantity Cost Subtotal

Paint Dura coat 20 90 1800

Crown 20 95 1900

Galaxy 20 85 1700

Cement Nguvu 15 250 3750

Bamburi 15 250 3750

Blue triangle 15 250 3750

20
 Roofing sheet Dumu zas 10 700 7000

Gal sheet 10 700 7000

Corrugated roofing 100 100 1000

tiles

Flat roofing tiles

100 100 10000

Bricks Perforated bricks 100 70 7000

Hollow bricks 100 70 7000

Circular bricks 100 80 8000

Reinforcement R bars(R1R10,R1Z1 15 300 4500

bars R20

Y bars
(Y10,Y12,Y120 15 300 4500

Brick mould Metallic brick 30 250 7500

moulds

Fencing wire Nyati fencing 10 700 7000

Glass Fixed window glass 10 100 1000

Louvered window
glass
15 70 1050

Total 107200

Supplies are required to obtained directly from manufacturing firms e.g. wholesale prices
Crown paint –crown Paint Company
Blue Triangle Company –blue triangle Cement Company
Supplies ordered are to be recorded in records of stock books of hardware

At the end of each year, the hardware will organize stock taking
week to track of its record of stock and to efficiently utilize the supplies of stock

5.4 LABOR AND SKILL REQUIRED

Item Position Grade NO Salary Subtotals

1 Supervisor Diploma in civil 1 15000 15000

building
engineering
21
 2 Technician Certificate in 1 10000 10000
building and
construction
3 Security guard Security guard 1 4000 4000
training
4 Cleaners Cleaning 1 3000 3000
expert
5 Holdings Diploma in 1 6000 6000
keepers Holdings
keeping
6 Office Diploma in 1 8000 8000
assistant secretarial
studies
7 Accounts clerk CPA II 1 12000 12000
Total 58000

5.4.1 Overhead costs

Particulars Costs
Management staff salary 2500
Rent 5000
Water bill 1000
Telephone 2000
Repair and maintenance 3000
Depreciation 10000
Transport 1000
License and permit 1000
Employee benefit 5000
Insurance 3000
Protective clothes 6000
Gumboots and dust coats
Electricity 1500
Total 63500

5.5 PRODUCTION PROCESS

The production process will include the following

5.5.1 Manufacturing

Manufacturing is the process of changing raw materials into finished gods. This is done in manufacturing
firms/ companies like Dura coat Paint Company limited

Manufacturing company gets order for the supply of their finished products which they sell at whole
sale price

5.5.2 Transportation

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This is the distribution of the finished products to the wholesaler/ retailer i.e. in this case, Buyanzi
hardware Holdings transportation is mainly through vans and pick-ups or Lorries

Transportation medium used should ensure commodities reach in good conditions and at the required
time.

5.5.3 Stocking

When transporting finished products in form of supply, they are unpacked when they reach the
Holdings. They are then arranged neatly on the shelves to attract the consumers.

5.5.4 Selling

After stocking the commodities in the hardware, the consumers will demand for the commodities that
they require, the hardware attendants will come in and serve them with whatever commodities they
need and pay for them at the counter. The consumers will be given a receipt for the product they have
bought.

Flow diagram of the production process

Manufacturing
Transportation
Stocking
Selling
Consumption

5.6 GOVERNMENT REGULATIONS AFFECTING THE BUSINESS

Regulation of wages condition of employment act 229
This statute states that working hours should not exceed 52 hours spread over 6 days of the week.
No person under the age of 16 should be required to work more than 6 hours a day. Every
employee shall be entitled to one whole rest day. This cap safeguards the employees from unfair
treatment by the employers
Employment act cap 226
This cap provides from among other things set interacts, summary dismissal, and notice of
termination of services. Keeping records of employees and especially states that it is criminal to
fail to pay employees wages or terminal benefits. This cap protects employees against ill
treatment i.e. not being paid their due wages
5.6.2 Trade description act 505
This is an act prohibiting among other things misdescription of goods and services misleading
indication of price of goods. It guards against over pricing of commodities in the hardware
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5.6.3Public health act
This act provides for security and maintenance of high hygiene in the business
5.6.4 Other regulations
Other regulations include
The business premise is to be cleaned on daily basis
Expired products will not be sold to customers workers to wear dust coats when handling dusty
areas. Workers handling paint products to take milk after work

CHAPTER SIX

6.0 FINANCIAL PLAN

Pre operational cost and estimates
Working capital estimates
Proforma cash flow statement
Proforma income statement proforma balance sheets
Break even points
Profitability ratio
Desired financing
Proposed capitalization

6.1 PRE OPERATIONAL COST ESTIMATES

Particulars Amount

Feasibility study/business plan 200

Business registration 3000

License/ permits 2000

Initial advertisement 2000

Rent deposit 5000

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 Power installation 1500

Water installation 1500

Miscellaneous 1500

Total 18500

6.2 WORKING CAPITAL

Working capital =current assets –current liabilities
Current assets
Cash at bank 900000
Cash at hand 30, 000
Stock 107 200
Debtors 44,000
Prepayment 18 000
Total 1,099,700

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6.3 CASH FLOW STATEMENT

particulars JAN FEB MARCH APRIL MAY JUNE JULY AUG SEPT OCT NOV DEC TOTAL
BEG CASH
BALANCE 568500 676500 776700 889100 1002000 1103900 1216800 1103900 1474200 1596700 1738900 DEC 14271000
CASH FLOW 232000 1884400
CASH SALE 100000 210000 212000 214000 216000 220000 224000 226000 230000 23400 2558000
DEBT COLLECTION 2000 2000 5000 5000 10000 10000 240000 44000
120
LOAN 000 10000 120000
TOTAL CASH
INFLOW 220000 210000 212000 214000 216000 222000 226000 231000 23500 24200 244000 2722000
TOTAL CASH 1,103,10
AVAILABLE 788500 886500 988500 0 1218000 1325900 1442800 1575300 1709200 1837700 1982000 250000 16993000
CASH OUT FLOW 2134400
RENT 5000 5000 500 5000 5000 5000 5000 5000 5000 5000 5000 60000
SALARIES/WAGES 78000 78000 78000 78000 78000 78000 78000 78000 78000 78000 78000 5000 936000
ELECTRICITY BILL 1500 1500 1500 1500 1000 1600 1000 1400 1000 1200 1000 78000 14800
LICENSE 2000 1100 2000
ADVERTISEMENT 2000 2000 2000 8000
SALES
PROMOTION 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 24000
LOAN EQUIPMENT 10000 10000 10000 10000 10000 10000 10000 10000 10000 10000 10000 2000 120000
LOAN INTEREST 10000 10000 1000 1000 1000 1000 1000 1000 1000 1000 1000 10000 12000
PURCHASES 10000 10000 15000 10000 15000 1000 72000
WATER BILL 1500 1500 1300 1300 1300 1000 1000 1200 1000 1100 1000 1200 14300
MISCELLANEOUS 1000 800 800 800 800 500 500 500 5000 500 500 1100 8200
TOTAL CASH
OUTFLOW 112000 109800 996600 101100 114100 109100 985000 101100 113500 98800 985000 1000 1271300
NET CASH FLOW 676500 776700 889100 1002000 1103900 1246800 1344300 1474200 1595700 1738900 1884400 113200 15721700

26
27
6.4 PROFORMA INCOME STATEMENT
Details 31st December 2018 31st Dec 2019

Sales (cash) 2558000 3173000

Credit sales 44000 20000

Total sales 2602000 3193000

Less cost of
sales

Opening stock 107200 80000 110000

Add purchases 72000 100000 106000

Cost of good 179200 180000 216000

will

Less closing 80000 110000 140000

stock

Cost of goods 99200 99200 70000 70000 76000 76000

sold

Gross profit 2504800 3123000 322600

Expenses

Rent 60000 60000

Salaries 60000 936000 936000

Electricity 936000 13500 16400

License 14800 2000 2000

Advertisement 2000 4000 8000

Sales 8000 20500 24000

promotion

Water bill 24000 16200 15800

Loan interest 14300 18000 6000

Depreciation on 12000 53100 47790

assets

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 Miscellaneous 68000 9800 9200 1125190

Total expenses 8200 1147300 11331200 2100810

Net profit tax 1355500 1989900 33612060

Less tax 16% 216880 318384 176468040

Net profit tax 1138620 1671516

6.5 PROFOMA BALANCE SHEET FOR BUYANZI HARDWARE FOR YEARS

2018,2019,2020
Particulars 2018 2019 2020

Fixed assets

Motor vehicle 360000 324000 291600

Machines 81000 72900 65610

equipment’s
90000 81000 42900
Furniture & fittings
53000 477900 430110
Total fixed assets

Current assets
900000 1400000 1500000
Cash at bank
30000 100000 500000
Cash at hand
107000 80000 110000
Stock
44000 20000 45000
Debtors
1081200 16000000 2155000
Total current assets
1612200 2077000 2585110
Total assets

Liabilities
438580 366384 780429.60
Capital
1138620 167516 1764680.40
Add net profit

Loans
1577200 2037900 2545110
Total term liabilities

Current liabilities
35000 40000 40000

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 Creditors 35000 40000 40000

Total current 16121200 2077900 2585110

liabilities

Total liabilities

6.6 BREAK EVEN POINT

Particulars Year 2018

Fixed cost

Rent 60000

management staff salaries 25000

deprecation 68000

loan interest 12000

license 2000

total fixed cost 167000

variable cost 148700

electricity bill 14300

water bill 72000

purchases 8000

advertisement 24000

sales promotion 133100

total variable 1211100

total production cost 2558000

sales

BEP = fixed cost x sales / sales - variables costs

=167000x2558000/2558000-133100
=176166.44 Breakeven point

6.7 PROFITABILITY RATIOS

Ration
Net profit x100/sales =1138620x100/2558000=44.5%
Net profit x100/total cost of production =1138620x100/12111100=94.02%
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Net profit x100/working capital =1138620x100/999700=113.9%
Net profit x100/capital employed =1138620x100/999700+531000=74.4%
6.8 DIRECT FINANCING
Particulars Year 2018
Preoperational costs
Feasibility study/ business plan 2000
Business regulations 3000
Licenses / permits 2000
Initial advertisement 2000
Rent deposits 5000
Installation of power 1500
Installation of water 1500
Miscellaneous 1500
Total 18500
Fixed assets
Motor vehicle 400000
Machinery 90000
Furniture 100000
Total fixed assets 59000
Working capital 999700
Total desire financing 1608200

6.8 PROPOSED CAPITALIZATION

Particulars Year 2018

Loan form bank 120000

Own savings 888200

Family contributions 100000

Sales and leases 500000

Total capital investments 1608200

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