MINISTRY OF EDUCATION

STATE DEPARTMENT OF VOCATIONAL AND TECHNICAL TRAINING

MOLO TECHNICAL AND VOCATIONAL COLLEGE-
ELBURGON
P O BOX 405-20106, MOLO-KENYA. Tel: +254796-044-225
website: Email: molotvce@[Link]
MOTTO: POSITIONING YOUR FUTURE
ENTREPRENEURSHIP EDUCATION

BUSINESS PLAN
BUSINESS PLANNING.

Business planning is the systematic development of actions aimed at reaching business

objectives through analyzing, evaluating and selecting of a viable business opportunity.

BUSINESS PLAN

Definition

 It is a written document that describes the goals and objectives of a business and lists
the steps that will be taken to achieve these goals and objectives.
 It is a written exposition of a venture’s goals and plan of action for the subsequent
three to five years.
In the case of a start-up, the plan is a written statement of the proposed ventures. Its

a) Purpose
b) Positioning and
c) Ambitions
It is a management tool that is used to organize and analyze information collection by an
entrepreneur.

The business plan spells out the;

a)Goals, vision, mission and core values of the business.

b)Describes and quantifies the market in which it will operate.
c)Analyses the competition
d)Examines operational and manufacturing strategies.
e)Reviews human resources or other supporting functions and
f)Brings everything together into financial statements such as:
 Income statements
 Balance sheet
 Cash flow statements.
To summarize, the function of the business plan is two fold:

1. To guide management – the plan shows the company’s future prospects and defines
goals and the strategies to accomplish them.
2. To raise funds for launching or growing the business – the plan helps educate
investors about the opportunity’s potential by providing information about the size of
the market, its growth and competitiveness.

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LIMITATIONS IN BUSINESS PLANNING

Business planning is often weighed down by several dangers.

a) Unrealistic goals – Vague goals inspire loose interpretation. Overambitious or

unreasonable goals render the integrity of the overall plan questionable while goals
without time frame provide no useful benchmark. The goals should be SMART.
Specific
Measurable
Attainable
Realistic
Time bound.
b) Insufficient Environmental Analysis- plans that are not based on an environmental
analysis lack an awareness of potential problems and opportunities. Forewarned as the
saying goes is being forearmed. E.g. competition, funding, legalities.
c) Lack of commitment- Often businesses are started as a hobby or to supplement ones
income. Part-time entrepreneurs often lack the time and passion to focus their
energies.
d) Inexperience- Entrepreneurs who plan for business in industries they hardly
understand lack the necessary expertise and experience.
e) Poorly defined market – if the target market is not clearly identified, the
entrepreneur will lack an understanding of consumers and their needs.
GUIDELINES FOR BUSINESS PLAN PRESENTATION.

In preparing and submitting the business plan, the entrepreneur should bear in mind the
importance of visual presentation and extent.

a) Visual Presentation
 A final plan should be neatly packaged and business-like.
 It is often the first point of contact between the entrepreneur and potential
investors ( or between the candidate and the examiner)
 First impressions count: a positive image grants a foot in the door.
 A professional looking document (clear, concise, self-explanatory and neat) the
venture capitalist’s eye.
b) Extent
 A concise but informative plan, properly laid out with a clear index will
probably command the attention of the investors or bank agent.
 An extent of between 40-60 pages , excluding appendices is often
recommended.
 Only the essential information should be compiled to the exclusion of long-
winded verbiage.
IMPORTANCE OF A BUSINESS PLAN.

 Acts as a roadmap
 Explains the business to interested outsiders
 Helps in anticipating problems that are likely to occur and how to handle them.
 Acts as an indication of your ability and commitment.
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  Enables one to test his ideas on paper.
 Acts as a communication tool.
 Forces one to justify his plans and actions.

ARRANGEMENT OF BUSINESS PLAN

1. COVER PAGE
Be properly set to include the following: -
Title - BUSINESS PLAN
- Business Name, address and Phone Number
- Name, Titles, address and Phone No. of lender (in our case...
Presented to: Kenya National Examination Council)
- Name, Titles, address and Phone of the owner(s) (in our case use, proper
Registered Name with KNEC and index Number)
- Data on which the plan was prepared our case July or Nov - YR e.g. July 2007 or
November 2007,
- Institute Name and address. E.g. Rift Valley Institute of Science & Technology
box 7182 NAKURU
2. Declaration form (to be issued by the institute)
3. Acknowledgement
4. Table of contents
1. Executive summary
2. Business Description Chap. 1
3. Marketing Plan Chap.2
4. Organization and Management Plan Chap. 3
5. Operation/Production Plan Chap. 4
6. Financial Plan Chap.5
7. Support document (Appendices)
5. EXECUTIVE SUMMARY
Describe briefly the five chapters in summary form with chapter headings as
subheadings of the summary (I 12 to 2 pages)
6. Writing style: Will depend on the nature of the business at point of writing
i. Potential Business (New business)
ii. Existing Business
-Illustrations from already written ones.
iii. Write in the present tense and present continuous tense
iv. 1-7 employees
v. Up to Ksh. 1 (one) Million Value of business
vi. Lettering size 12/13 double space
vii. No. of pages- at least between 40 and 60 pages
viii. Use standard cover page
ix. Bound booklet
x. Hand in 3 copies.

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 CHAPTER ONE

1. BUSINESS DESCRIPTION

PURPOSE
In this phase you will describe your own background and explain how it prepares you to
venture into business. Then you will describe the nature of the business you wish to start.
You will explain, in detail, the product(s) or service(s) you will offer. Finally, you will
explain how you intend to make an entry into the Market and outline your plans for
growth.

A) THE SPONSOR(S)

i. Describe your background If the business will be sponsored by more than one person,
give the names of the other sponsors and their background.
- What is your name?
- What is your age?
- Where do you reside?
- What is your present occupation?
- What are your educational, technical, and professional qualifications? (State when and
where the qualifications were obtained).
- What is your relevant experience in the business you wish to start? (State when and
where the qualifications were obtained)
- How will you compensate for your lack of experience (if any) in the business you
plan to start?

NATURE OF BUSINESS

ii. Describe you proposed business:

- What will be the name of your proposed business?
- Where exactly will your business be located? (Indicate the urban/rural area, trading
center, plot number, land registration number, name of building /house, ward, street or
avenue)
- When do you intend to start your business?
- Will you operate as a sole proprietor, partnership or company?
- What will be the major activity of your business?
- What will be the other activity of your business?
- Who will be your principal customers?

B) BUSINESS LOCATION AND ADDRESS

Describe in details of the choice of your business location.

- In relation to your chosen business location, what will be your market area?
- What infrastructure exists in your planned business location? (Indicate the availability
of roads, railway Airport, telephone, water and electricity)
- To what extent is your identified business location close to sources of raw materials,
potential markets, employee's houses, potential suppliers and critical business
services?

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C) FORM OF OWNERSHIP

Describe the proposed ownership structure of the business. If there will be more than one
sponsor, clearly indicate the expected individual contributions.
- How much will you contribute to your business?
- How much will others (name them) contribute to your business?
- What percentage of your business will you finance?
- What percentage of your business will be financed by outside sources? (e.g. bank
loan)

D) TYPE OF BUSINESS:

- State the type of Business (consider wholesale, rental or service).

- State the status of the business (stage in ) start-up, growth etc.
- State image you want to create and how?
- What will your merchandise (Product(s)/services) ?
- Who will be your potential customers, employees, advertising methods and price
policy to be used in the business?

E) THE PRODUCTS/SERVICES:

Describe the product( s) or service( s) of your business.

- What products(s) or service(s) will your proposed business offer?
- What will be the main feature(s) of your product(s) or service(s) (Indicate the size,
colour, shape, texture, Materials, quality and packaging of the product(s)
- What benefits will customers obtain from your product(s) or service(s)? (Consider the
performance, convenience, economy, comfort, durability, usage flexibility, servicing
and warranties of the product(s) or service(s)
- What unique features of your product or service will give it advantage over the
competitors?
- What patent, trade secrets or other proprietor features will you require for your
product(s) or service(s)

F) JUSTIFICATION OF OPPORTUNITY

Justify the need for your business venture.

i. What specific needs will your business venture satisfy?
ii. (Consider the unsatisfied local demand, export orientation, import substitution,
subcontracting or potential in a growth industry.
iii. What contribution will your business make to the local community? (Consider points
like: unemployment creation use of local resources, promotion of indigenous
technology or provision of good(s) and service (s).

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G) THE INDUSTRY

i. Describe the size of the industry of your proposed business.

- What is the name of the industry of your proposed business (business (Example:
A 'Matatu" business belongs to the transport Industry)
ii. Describe the key characteristics of the industry of your proposed business.
- What is the size of firms in the industry (Indicate whether small. Medium or large)
- What kind of technology is used in the industry? (Indicates labour intensive or
capital intensive)
- What level of technology is applied in the industry? (Indicate whether modem,
obsolete, sophisticated, or single)
- What is the average number, of employees in the firms of the industry?
- What is the basic capital requirement for entry into the industry?
- What is the general level of sales/profitability for firms operating in the industry?
- What are the seasonal factors experienced in the industry?
iii. Describe the industry trends and prospects.
- What are the trends and prospects of sales in the industry? (Indicate signs of
growth, stability or decline)
- What are the trends and prospects of technological development in the industry?
- What are the competitive trends in the industry (e.g. product innovation?)

H) BUSINESS GOALS

List them in point form and focus on market, organization and management,
operation/production and financial projection.
- Goals should be both 'short' and 'Long' term
- Give strategies of how to achieve the goals.
[Link] goals should be 'SMART'
S - Specific
M - Measurable
A - Attainable
R - Realistic
T - Time Bound (Be achieved at a Specific time or duration)
Example.
By the end of the 2nd Year, the business aims to capture and maintain 15% of the market
share. Capture and maintain - Specific
15% - measurable
15% - is attainable & Realistic 2nd Year- Time bound.

I) The entry and growth Strategy:

ENTRY: Strategy.
Key factors to success
e.g. acquire tenders and quotations etc. (Consider the following areas for both entry &
growth)
- Marketing, Management, Supervisory, Operators, capabilities, physical resources,
production process, sources of supply, financial resources and social environment).
- Describe your entry and growth strategy.
- How will you penetrate and gain acceptance in your market area? (Consider your
competitive advantages, weaknesses among competitors, pricing, distribution,
advertising or promotion)
- What will be the growth opportunities for your business?
- What are your plans for growth and expansion beyond the entry product(s) or
service(s)?

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 CHAPTER TWO

1. MARKETING PLAN

PURPOSE:
The marketing plan is the second phase of preparing a business plan. This phase is highly
critical because if provides the basis for the variables in the organizational, operational and
financial plans.
You will need to conduct a market survey and an in-depth analysis of your intended market.
This will enable you to describe your market and their challenges. Then, you can develop
marketing strategies, tactics and policies required to exploit the market opportunities. You
should reference all your sources of market data and present your facts convincingly.

(A) CUSTOMERS

Describe your potential customers.

- Who will be your potential customers? (Classify your customers into homogeneous
groups)
- What are the characteristics of your potential customers? (Indicate the customers' age,
income, gender, education, occupation, religion or ethnicity - where applicable)
- What will the potential customers be looking for in your product or service?
(Performance, economy, Convenience, comfort, safety or durability of the product or
service)
- When will the potential customer purchase your product or service? (Consider the
time of the day, week or month) - What are the purchasing patterns or characteristics
of your potential customers? (Indicate the quantity purchased at a given time, the
frequency of purchases and the desired mode of payment)

(B) COMPETITION

Describe your potential competitors. SWOT analysis should be used.

- Who will be your potential competitors?
- In relation to your proposed business location, where are your potential competitors?
- How will the location of your competitors be advantageous or disadvantageous to
your business?
- What is the size of your potential competitors? (Are they small, medium or large in
relation to your business size?) - If you will use distributors or agents, how will you
select and motivate them?
- Which geographical areas will they cover?
- How will be your film's size in relation to its competitors?
i. How will the size of your firm be advantageous or disadvantageous?
ii. Compare your proposed product(s) or service(s) with the Competitors.
- What is the comparison between your product(s) or service(s) with the competitors?
For each area of comparison, give your competitors a score on a scale of I (low) to 5
(high)
- What will be the competitive advantage(s) or your product(s) or service(s) over your
competitors)? .
iii. Describe the overall strengths and weaknesses or your potential competitors?
- What is your realistic assessment of the overall strengths and Weaknesses of your
competitors? For each area of comparison give your competitors a score on a scale I
(low) to 5 (high)
- With reference to your competitors' overall strengths and weaknesses, why will it be
easy or difficult to compete with them?

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(C) MARKET SHARE
Describe the market size of product(s) or service(s).
- What is the approximate number of people (or firms) who require your product(s) or
service(s)
- What is your estimate of expected total sales in units (units) per purchase x frequency
of purchases per month (Number of customers * quantity) May use charts / pie charts,
graphs etc.

(D) ADVERTISING AND PROMOTION STRATEGY

(i) Describe the methods you will use to advertise your product(s) or service(s) to potential
customers.
- Which advertising media will you use?
- Which image will you portray about your product(s) or service(s)
- What will be the frequency of your advertisements?
- How much cost will you incur per advertisements?
- How will you measure the effectiveness of your advertisements?
(ii) Describe the methods you will employ to promote your products or service(s)
- What promotional campaign will you undertake when introducing the product(s) or
service(s) (Consider using free product samples or free introductory service(s)
- Which promotional methods will you employ on a regular basis? (Consider using
trade shows, sponsorships or competitions)
- How much will each method of promotion cost you per event?
- How will you measure the effectiveness of your promotional campaigns?

E) PRICING STRATEGY

Describe your pricing strategy.

- How will you calculate the selling price of your product(s) or service(s)
- What factors will you consider in setting your selling prices (Government price
control?
Competitors' selling prices?)
- Will your selling prices be fixed or variable?
- What will be the selling price of your product(s) or service(s)
- What credit terms will suit your product(s) or service(s)
- What criteria will you use for determining who gets credit?
- What will be your discount policies?
- What will you charge for after-sales service(s) (Show the cost of the services?)

F) SALES TACTICS
Describe the methods you will use to make sales.
- What selling methods will you employ? (Selling direct to customers, personal selling
or selling indirectly to customer)
- If you will sell directly to customers, how will you recruit, retain and remunerate your
sales force?
G) DISTRIBUTION STRATEGY
(i) Describe the channels of distribution that you will utilize
- How will you get your product(s) or service(s) to the consumers? (Consider using
sales representatives, wholesalers, franchises or distributions).
- What means of transport will you use? (Road, railway or air)
- - How much will the means of transport cost you per month?
- What special problems do you anticipate in distribution?
- How will you solve the anticipated problems?

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CHAPTER THREE

3. ORGANISATIONAL AND MANAGEMENT PLAN

PURPOSE.

In the organizational plan of the business, you will develop policies regarding staffing and
management of common resources for efficient production of goods its effective performance
of services. You will present, in detail, the job analysis, job descriptions, employee
evaluations, training plans and compensation plans for your staff. You will also indicate the
supporting staff and services required for your business.
Have an introduction and then draw the organizational chart.

A) ORGANIZATION

Describe the proposed organization of your business

- Will you manage the business?
- What will be your duties and responsibilities?
- How much salary will you draw per month?
- What will be the compensation of your management team?

B) KEY MANAGEMENT PERSONNEL, NUMBER AND DUTIES

Describe who the management team of the business will be: Name, Age, Experience,
Qualification, Responsibilities (individual details), Remuneration.
Describe the duties and responsibilities of key members of your proposed management team.
- What will be the exact duties and responsibilities of each member of your proposed
management team? (Indicate the salaries which they will receive commensurate with
their duties and responsibilities).
- What incentives will you provide to members of the Management team?

OTHER PERSONNEL
- No, Age, Qualification & Activities, Remuneration, Between 25- 36 yrs,
Qualification.
- Identify the other personnel you will require.
- How many employees will you require?
- What will be their job titles and job descriptions?
- What skills should the employees possess?
- Where will you obtain qualified employees?

C) RECRUITMENT, TRAINING: AND PROMOTION

Describe how you will evaluate, develop your employees.

- How will you evaluate the performance of your employees?

- What are your training plans for your employees?
- Discuss each separately although they will appear under the same subtitle.

Discuss each separately although they will appear under the same subtitle.

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D) REMUNERATION AND INCENTIVES

- How will you remunerate your employees?

- What incentives will you provide to your employees?

E) LICENCES, PERMITS AND BY-LAWS (LEGAL REQUIREMENTS)

(a) Address the legal formation of the business

(b) Address the legal aspects that need to be in place.

Consider:

- Business formation, Government Regulation e.g. Trade Licenses, Labour Law,

Taxation, Insurances, Building Regulations (those that are special to 'your particular
business)
- Local Authority Regulation & Licenses and Taxation, contracts, Litigation and
Arbitration.
* Give description of above list. Include - where to get assistance.
- Fee Payable
- Remarks

c) Business control of assets, contracts and agreement, succession, arbitration etc.

F) SUPPORT SERVICES.

Indicate the supporting staff and services you will require for your business.
- Who will be your banker?
- Who will be your accountant?
- Who will be your business or management adviser?
- Who will be your other supporting staff or adviser?
- Where will you obtain your postal services?
- Where will you obtain other (specify) services?
- Include services to be given and source - Fee chargeable.

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CHAPTER FOUR

4.0 OPERATIONAL /PRODUCTION PLAN

It implies both manufacture of goods and provision of services. What to include in this
section: -
a) Product design and development.
b) Product facilities and capacity
c) Production strategy
d) Production process
e) Government regulations.
f) External rules and regulations

A) PRODUCT DESIGN AND DEVELOPMENT

Describe your intended product design and development

B) PRODUCT FACILITIES AND CAPACITY

i. Describe the machinery and equipment you will require for your production.
ii. Explain your plans for repairs and maintenance of the machinery and equipment.
iii. Describe the features of your proposed workshop/shed/factory layout.
iv. Describe the other fixed assets you will require for your business.

C) PRODUCTION STRATEGY

i. Describe your monthly material requirements.

ii. Describe your monthly labour requirements.
iii. Describe your monthly production expenses.
iv. Calculate the cost of production.

D) OPERATIONAL/PRODUCTION PROCESS

Describe, in detail, the production process.

E) GOVERNMENT REGULATIONS AFFECTING OPERATIONS.

Indicate the government regulations, compliances and approvals that will affect your
business. These includes, health regulations, trade marks patents copyrights safety regulations
and environment regulations.

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CHAPTER FIVE

5.0 FINANCIAL PLAN

The financial plan will consists of the following:

1. Pre-operational costs.
2. Working capital requirements
3. Projected Cash flow statement.
4. Pro-forma Income statement.
5. Pro-forma Balance sheet
6. Break-even level
7. Expected profitability ratios.
8. Desired financing
9. Proposed capitalization.

A) PRE-OPERATIONAL COST

List your expected pre-operational costs; State the amounts to be incurred.

ITEM AMOUNT (KSHS)

Purchase of fixed assets (specify the assets) xxx
Installation of Electricity, water etc. xxx
Advance rent payment (if using rental premises) xxx
Business permit/Trade licence xxx xxx
Legal fees xxx
Insurance Policy Payment xxx
Consultancy fees
TOTAL xxx

B) WORKING CAPITAL REQUIREMENTS

Indicate your capital requirements for the first three years of operation. State any assumptions
you have made in arriving at the figures.

ITEM YEAR: Kshs YEAR; Kshs YEAR; Kshs

Stock of raw materials xxx xxx xxx
Work in progress xxx xxx xxx
Stock of finished goods xxx xxx xxx
Debtors xxx xxx xxx
Cash in Hand xxx xxx xxx
Cash at bank xxx xxx xxx
…………. ………….. ……….
Assumptions

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C) PROJECTED CASHFLOW STATEMENT
Prepare your projected Cashflow statement on a monthly basis for the first year of operation using the following format
below.

X Y Z LTD.
PROJECTED CASHFLOW STATEMENT FOR THE FIRST YEAR
ENDING………………………………………
JAN FEB MAR APR MAY JUN JUL AUG SEPT OCT NOV DEC TOTAL
SHS SHS SHS SHS SHS SHS SHS SHS SHS SHS SHS SHS SHS
CASH IN FLOW
Cash sales
Collection from
debtors
Others (specify)
Total Cash in flows
CASH
OUTFLOWS
Cash purchases
Payments to
creditors
Rent
Salaries & Wages
Telephone
Elec. & water
Total cash outflow
Net cash Bal. C/d
Cash bal. B/F
Accumulative cash

Assumptions

D) PRO-FORMA INCOME STATEMENT

Prepare your pro-forma income statement for the first three years using the format below:
XYZ LTD
Pro- forma Income statement
For year Ending.. .......................………..

Kshs Kshs.
Sales xxx
Less: Cost of sales xxx
Opening stock xxx
Add: Purchases xxx
xxx xxx
Less: Closing stock xxx
Gross Profit
Less: Expenses
Salaries & Wages xxx
Rent xxx
Water xxx
Telephone xxx
Advertising xxx
Stationery xxx
Postage xxx
Transport xxx
Depreciation of fixed Assets xxx
Interest xxx
Repairs Maintenance xxx
TOTAL EXPENSES xxx
NET PROFIT BEFORE TAX xxx
Less: Provision for Tax (percentage) xxx
NET PROFIT AFTER TAX xxx

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E) PRO-FORMA BALANCE SHEET
Prepare your pro- forma, Balance sheet at start up and at the end of the first year of operation.

(XY Z LTD)
Pro-forma opening Balance sheet

AS AT 1ST AS AT 31ST
JAN………………… DEC………………….
Kshs. Kshs. Kshs. Kshs.
FIXED ASSET
Land and Building xxx xxx
Less: Acc. Depreciation - xxx xxx
Plant and Machinery xxx xxx
Less: [Link] - xxx xxx
Motor vehicles xxx xxx
Less: [Link] - xxx xxx
Furniture & Fittings xxx xxx
Less: [Link] - xxx xxx
TOTAL FIXED ASSETS xxx xxx

CURRENT ASSETS
Stock of Raw materials xxx xxx
Stock of finished Goods xxx xxx
Stock of work-in-process xxx xxx
Debtors xxx xxx
Cash at Bank xxx xxx
Cash in hand xxx xxx
TOTAL CURRENT ASSET xxx xxx

LESS: CURRENT LIABILITIES

Creditors xxx xxx
Bank overdraft xxx xxx
Total current Liabilities xxx (xxx) (xxx) xxx
Net working capital - xxx xxx
TOTAL ASSETS xxx xxx
xxx
FINANCED BY:
Owner's Equity xxx xxx
Add: Net profit - xxx
xxx xxx
LONG -TERM LIABILITIES
Loan from Bank (specify) xxx xxx
Loan from Co-operative xxx xxx
xxx xxx

-Assumptions

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D BREAK-EVEN LEVEL

Calculate the break - even level for your business.

(i) Determine the sales and total variable costs. Calculate the total contribution margin.
Total contribution Margin = Sales - Total variable costs.

(ii) Calculate the contribution margin Percentage.

Contribution Margin % = Contribution Margin x 100
Sales

(iii) Determine the total fixed costs i.e. operating expenses for year
Total fixed costs = KShs.................

(iv) Calculate the break-even level of sales in shillings.

Break-even level (in shillings) = Total fixed costs

Contribution Margin %

G) EXPECTED PROFITABILITY RATIOS

Calculate the expected profitability ratios of your business~

(i) Gross profit percentage = Gross profit x 100

Sales

(ii) Return on Equity = Net profit after tax x 100

Owner's Equity

(iii) Return of Investment = Net profit after tax x 100

Total investment

H) DESIRED FINANCING

Indicate the total amount of money required to start off you business.

Item Amount (Ksh)

Pre-operational costs xxx

Working capital xxx
Fixed Assets (specify) xxx
Other (specify) xxx
____
Total Desired Financing xxx

I) PROPOSED CAPITALISATION

Provide a brief description of your proposed Capitalization

Total investment = Kshs............…….

Your own contribution = Kshs…………….
Funds from borrowing sources = Kshs…………......

THANK YOU!

PREPARED BY NGARUIYA SAMUEL

EXAMINATION OFFICER: MOLO TVC
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