TITLE: BUSINESS PLAN

PAPER NUMBER: 1920/108

CENTRE NAME: RIFT VALLEY INSTITUTE OF SCIENCE AND TECHNOLOGY
CENTRE CODE: 511101
COURSE: CERTIFICATE IN INFORMATION COMMUCATION TECHNOLOGY
PRESENTER: GEOFFREY KIPROTICH YEGON
INDEX NO: 5111010447
PRESENTED TO: KENYA NATIONAL EXAMINATION COUNCIL IN PARTIAL
FULLFILMEHE AWARD OF CERTIFICATE IN INFORMATION COMMUNICATION
TECHNOLOGY
SUPERVISOR: MRS.SANGA
EXAM SERIES: NOVEMBER SERIES 2019

i
TABLE OF CONTENTS

declaration..................................................................................................................................................iv

dedication....................................................................................................................................................v

Acknowledgement......................................................................................................................................vi

Chapter one.................................................................................................................................................1

1.0 business description....................................................................................................................1

1.1 THE SPONSOR....................................................................................................................................1

1.2 business name...................................................................................................................................1

1.3 Business location and address...........................................................................................................1

1.4 form of ownership.............................................................................................................................2

1.5 types of business...............................................................................................................................3

1.6 product AND services........................................................................................................................3

1.7 industry..............................................................................................................................................4

Objectives of the business.......................................................................................................................4

1.8 Justification of opportunity................................................................................................................5

1.9 the entry and growth strategy...........................................................................................................5

Chapter two.................................................................................................................................................7

2.0 marketing plan...................................................................................................................................7

2.1 CUSTOMERS.......................................................................................................................................7

2.2. Market share....................................................................................................................................8

2.3. Competition......................................................................................................................................9

2.2. Plan to motivate on competitors weakness....................................................................................10

2.4. Advertising and promotion strategy...............................................................................................11

2.5. Pricing strategy...............................................................................................................................12

2.6. Sales tactics.....................................................................................................................................13

2.7. Distribution.....................................................................................................................................14

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CHAPTER THREE........................................................................................................................................16

3.0 ORGANIZATION AND MANAGEMENT PLAN.....................................................................................16

3.1 ORGANIZATION CHART FOR THE PROPOSED BUSINESS..................................................................17

3.2 RECRUITMENT, TRAINING AND PROMOTION..................................................................................21

3.3 REMUNERATION AND INCENTIVES..................................................................................................22

3.4 LICENSE, PERMITS AND BY-LAWS....................................................................................................23

3.5 SUPPORT SERVICES..........................................................................................................................24

CHAPTER FOUR..........................................................................................................................................25

4.0 OPERATIONAL/PRODUCTION PLAN.................................................................................................25

4.1 PRODUCT DESIGN AND DEVELOPMENT..........................................................................................25

4.2PRODUCTION FACILITIES AND CAPACITY..........................................................................................25

4.3 production STRATEGY......................................................................................................................27

4.4 production PROCESS........................................................................................................................31

4.7 GOVERNMENT REGULATIONS.........................................................................................................34

CHAPTER FIVE............................................................................................................................................35

5.0 FINANCIAL PLAN..............................................................................................................................35

5.1 pre-operational cost........................................................................................................................35

5.2 estimation of working capital..........................................................................................................36

5.3 projected cash flow for the year ending 31st December 2019.......................................................37

5.4 pro-forma income............................................................................................................................38

5.5 pro-forma balance sheet.................................................................................................................39

5.6 break-even level..............................................................................................................................40

5.7 expected profitability ratio..............................................................................................................41

5.8. Desired financing............................................................................................................................42

5.9. Proposed capitalization..................................................................................................................42

APPENDIX I................................................................................................................................................43

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DECLARATION

I declare that this is my original work and has been never been presented by any other candidate
for the same or equivalent award

NAME: ……………………………………………………..

Signature ………………………………………………….. Date: …………………………

This project has been submitted with the approval of my supervisor

NAME:……………………………………………………………………

Signature …………………………………………….. Date: ………………………………

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DEDICATION

I dedicate this business plan to my beloved parents Mr. and Mrs. Joshua Nicodemusfor their
moral and financial support during my entire course in kiambu Institute of Science and
Technology toward better living.

I will never forget my sister and brothers, relatives and relatives for the encouragement they
offered.

May they live to be God fearing.

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ACKNOWLEDGEMENT

I take this opportunity to thank all those who took part in the completion of this work. I am

greatly indebted to my supervisor MRS SANGA; for her valuable professional support. I also

extend my gratitude to my FRIEND who assisted me with his computer which made the whole

process of typing the business plan a lot easier. I also thank my course mates whom we worked

together to the success of this work.

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EXECUTIVE SUMMARY

BUSINESS DESCRIPTION

The name of the business will be Elegance Beauty Parlour and Clothe Line which will be under
the business name act through the local authorities. The name id derived from the owners’ first
name.

It will be start up sole proprietorship business where the owner will anticipate a one in decision
making through the employees will first give their suggestion and the business owner will make
the final judgment. The business will offer both services and cosmetic industry dealing in salon
and sale of products for beauty.

MARKETING PLAN

The proposed potential customers of the business include hospitals, individual customers
surrounding the business and institutions. The business will face competition from the
surrounding but will specialize mostly on the needs of customers by employing skilled and
qualified workers and also the business will try to make the weakness of the other business a
success for it. Increase the operation hour’s proper management skills and create popularity.

ORGANIZATION PLAN

The management team includes the manager, supervisor and the accounts clerk will be reviews
depending in the expansion and growth of the business. They will be employed on the basis of
their knowledge and leadership qualities and abilities. Other personnel will include the
saleslady/man, receptionist and security officer. As the business expands, it will need to employ
labour and recruitment will be done through advertisement; newspapers and also by word of
mouth.

Payment of salary will be done at the end of every month by the accounts clerk. Some of the
employee’s incentives include house allowance, transport and national Hospital insurance fund

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(NHIF). The business will obtain a trade license as a required by the government and other
supportive services will be include auditing, insurance, banking and communication services.

PRODUCTION PLAN

The business will obtain all the required production facilities for effective convenience. Some of
the facilities include; shelves fable, shaving machines, driers, wall mirrors, hair conditioners. It
will have a fixed asset which is the premises.

In case of any breakage of the facilities repair will be done by the suppliers and a list of
precaution will be displayed on the notice to avoid breakages. The production will depend on the
capacity of the requirements, the date of production and also the seasonal variations in the year.

The required materials will be bought at the beginning of every month after stock taking.
Customers will be received at the receptions, explain their needs and the receptionist will direct
them to where they will be served well i.e. services or buying products.

Government policy will be followed by the business and will include compensation policies,
health safety and labour laws.

FINANCIAL PLAN

This is the cost incurred by the business before its operation commences. The direct working
capital that will give the business and profitability ratios of the business.

viii
CHAPTER ONE

1.0 BUSINESS DESCRIPTION

1.1 THE SPONSOR

The owner is YEGON, he resides in Kericho County. He is currently pursuing certificate in Information

communication Technology at the Rift Valley Institute of Science and Technology.

The experience gained in beauty and clothing by the proprietor and entrepreneurship education gave him

interest and need to venture into this particular business. Areas where he has inadequate skills will employ

competent specialist to cater for those field special. Screening of the employees will be conducted in order

to come up with personnel of proven abilities and capabilities on the tasks.

1.2 BUSINESS NAME

The proprietorship intends to start a business called YEGON Beauty Parlour and Clothe Line the name is

derived from a basic idea and intention of the owner to create a unique identity.

1.3 BUSINESS LOCATION AND ADDRESS

YEGON Beauty Palour And Clothe Line is situated in Kericho town, Kericho county . According to

market research, he decided to start the business and situate it in town because of the following:

a) Because of the number of customers within the area. The demand of the goods such as trousers,

tops, Earnings, bungles, necklace, rings among others which are highly needed in urban centers.

b) The town is rapidly growing thus goods will be moving faster.

c) The town is situated where there are many institutions and business. The supplier who supplies

them is 20km away from the town; the institution s will reduce material cost hence the business will be

expanding quickly.

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 d) Due to availability of raw materials like water, clothes, cosmetics, electricity, and adequate

professionals within, hence many proprietor site in the town.

The plot number of the enterprise is 78 ha. Land registration number 002/97, sinendet plaza.

The address of the business is:

YEGON Beauty Palour and Clothe Line,

P.O BOX 1155,

KERICHO

Tel: 0718615723

Email; yegongeoffrey@gmail.com

1.4 FORM OF OWNERSHIP.

The business will be of sole proprietorship.

The proprietor proposed capitalization is as follows:

Sources Kshs Percentage

Owners contribution 350,000 46.67

Loan from equity bank 100, 000 13.33

Family and friends 300,000 40.00

contribution

Total 750,000 100

It is business basically greatly influenced by accrued in the business as highlighted below:

 It requires little capital to start.

 Less legal formalities to set up.

 It is quick to make decision

 Freedom of action and control.

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1.5 TYPES OF BUSINESS.

The business will trade both in retail and wholesale basis. Due to introduction of new technology the

business will be expected to expand hence improving its production capacity. The business owner will

create good image in the business by being close contact with the customers and giving financial

assistance to them. The employee will come from within the location of enterprise.

Advertising methods which will be used will be posters, billboards,Television and radio. The price policy

will depend on some factors which are associated with production i.e.Inputs and services offered.

The firm is secondary and service production. It produces products and sells them to customers directly or

through retailers.

1.6 PRODUCT AND SERVICES.

The firm will be able to produce different kinds of clothes and beauty products such as:

 Trousers and skirts in cloth line.

 Facial attires and products.

 Clothes for different occasions.

 Pedicure services.

 Stick ons.

 Acrylics.

 Manicure services .

The products will be of different sizes, colors, shape, and texture: they will be of high quality.

The packing will depend on the customer’s orders.

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Benefits obtained from the products/services.

As a proprietor she gets employees from within, they will improve their living standards. The proprietor

will also enjoy profit alone able to reach self-specialization since she is satisfied. Through taxes, the

proprietor will raise revenue for the country. Customers will get quality products.

1.7 INDUSTRY

The proposed business falls under beauty and clothe processing. It is classified under beauty and clothe

industry for production service since they produce the products and sell them to the customers. The

business is medium compared to others in the same industry. The firm will experience seasonal factors

e.g. fall in water suppliers in drought seasons.

Objectives of the business

Short Term Goals

o To generate a break-even within six months as the main of the successful business.

o To manage to penetrate the market capture at least a quarter of the market share by producing

o Quality products, advertisement and good promotion

o To have consistent improvement in each flow and profitability through strong and good

Long Term Goals

o Opening of new branches within the region in five years time.

o To buy her owner plot and construct own premises.

o To hold a large market share through offering high quality products and services at reasonable

price competitors.

o To minimize in the area and neighboring regions by creating jobs in five years of operation.

o To buy a Toyota pick-up for transportation of products from the premises to customer destination.

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1.8 JUSTIFICATION OF OPPORTUNITY

The sole proprietorship will help the owner create income, for personal needs and expanding the

business .she will recognize the community customers and the surrounding through the creation of

employment.

As a result of creating employment, the standard of living will improve and change people’s lifestyle. The

business is able to market the community since more people who are out are able to identify and as a

result they become customers thus enhance the ability of the community production

The entrepreneur will come up with different ideas regarding improving the existing methods of

production, thus the use of new ideas to produce quality products as a result leading to innovation of

technology. Due to the enterprise, there will be urbanization since number of workers will have to change

their living environment also the community promotion

1.9 THE ENTRY AND GROWTH STRATEGY.

Competitive advantage

The firm has a lot of advantage in marketing products and services; there are minimum competitors.The

competitors available are not professionals, Inexperienced compared to the firm.

Weakness of competitors

i. skills

They got inadequate skills hence producing low quality products and services which don’t satisfy the

customers .Inadequate managerial skills make them unable to run the business effectively . The

entrepreneur skills may also determine the competitors because of inability to study the environment and

perceive opportunities, inability to identify the necessary resources to take advantage of existing

opportunity and take action to utilize the opportunity.

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 ii. Public relation

Some entrepreneurs have inadequate skills in communicating with customers. As a result ran away from

them to other entrepreneurs. In most cases those factors arise as a result failure to Evaluate oneself in

valuation to the customers and inability to set a way of approaching customer’s language wise.

The proprietor will expand business by use of sale promotions posters and media when advertising .they

will create reliability to customers at the time in need. The proprietor has to attend workshops and

seminars for greater effective and efficiency of the business.

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CHAPTER TWO

2.0 MARKETING PLAN

2.1 CUSTOMERS

Customers are classified into different categories.

a) Individual customers
b) Retail customers
c) Institution customers
Institutional

The targeted institutions are schools,hospitals, banks attendants and ladies within the town

In the institutional students teachers and sub- ordinates staff are potential customers to the business

Hospitals

Private and public hospitals require their employees to be decent by making their finger nails and face,
those hospitals include; -Nairobi district hospital and Siloamhospital,Kenyatta general hospital.

Banks

Employees in the banks within Nairobi are required to be decent and they were offered those allowances
for the same. They include equity bank and commercial bank. These will be the potential customers for
the business.

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Individual customers

These will include all residents within KERICHO TOWN. The neighboring areas majority of the
customers will include female and their age won’t differ much.

Some customers are employed and the rest are farmers. Their monthly salary may range from five
thousand and above. Their level of education ranges from graduate and above. The potential customers
will be looking for the performance on how hair will be treated and the safety of durability of the service
and the products used.

Potential customers will purchase at any time but mostly at the end of the month. The customers can
purchase their needs all the time since they are weekly and monthly earners. The sponsor of the business
will stock and offer discount at the end of the month to ensure high sales of service and products. The
appropriate number if individual customers to the business range between three hundred to six hundred
monthly.

2.2. MARKET SHARE

The customers’ number in this area is quite large. There are several schools that surround the area,
hospitals, banks and other citizen making an approximate of 1000 customers.

Table showing population with converted percentage

Business name Population Percentage

YEGON BEAUTY PARLOR 8000 80

CLASSIC QUEEN CLOTH LINE 2000 20

The overall market share is shown below using a pie chart:

8
 Market share

20%

YEGON CLOTHLINE
Kate Clothe Line

80%

2.3. COMPETITION

The high competition is there but the business will face no challenges at all because it has the basic skills
compared to others.

The likely competitors are:

CLASSIC QUEEN CLOTH LINE

Its major activities are selling cosmetics and offering services related to beauty.

Business strength

- Have adequate workers

- Has well service equipment and provide quality service and goods have a lot of development.

Weakness

- Workers are unskilled

- Their prices keep on fluctuating not fixed.

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The potential competitors are a bit far away from the sponsor location of the business. This will be an
advantage to the sponsor of the business and also they sell their products and offer the business service at
a high price. In relation to the sponsors business size, the competitors are smaller that is, there will be an
advantageous to the sponsor business because therewill be proper displaying of products and enough
space when the customers are being served.

2.2. PLAN TO MOTIVATE ON COMPETITORS WEAKNESS

After analyzing its strength and weakness of the competitors, YEGON has come up with the following
solutions.

i) Operational hours

The business will be operating from 0800hrs to 1800hrs to cater for all customers.

ii) Qualified workers

YEGON CLOTHLINE decided to employ qualified staff who will have experience in that field.

iii) Managerial skills

The manager will apply all around manageable skills including public relations discounts and offers
during festive seasons.

iv) Popularity

Posters and mass media will be employed by the sponsor in order to popularize the firm.

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2.4. ADVERTISING AND PROMOTION STRATEGY

i) Advertisement

The major methods are:

a) Posters and sign posts: they will be placed in strategic points to ensure many people read them.
b) Mass media: this will be done through the radio, newspapers and magazines like Chanukah and
Parents.
c) Portraying image: YEGON’S beauty Parlor and cosmetic will like to portray the film image of as
shown below.

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PROMOTION

This will be done through the following:-

Discount: this will be awarded to customers and those who buy in bulk

Shoes and exhibitions: this can be done through agricultural shows of Kenya and buy other public
exhibition which include different salon showing how they offer different services.

Free samples: will be given to different customers according to the amount of goods one buy e.g. If one
buys goods worth 2000 will get a gift.

Since the advertisement will be done locally the possible cost of advertisement will not be large amount
about Kshs. 5000 and will be made four times per month.

2.5. PRICING STRATEGY

The selling of the products or service will be:

Price = (cost of production/service) X 150%

Since it is difficult to fix prices due to external influence, prices of products and services will depend on
the basis of the cost of buying.

Factors to consider:

a) Demand

Price of products/services will fluctuate due to demand when demand is high the price of
product/service will also rise and when demand is low the price will also be lowered.

b) Transport cost

The goods to be used will be bought from the manufacturing industry in Kericho to the premise. This
has to be considered when calculating/ pricing the products.

12
c) Government policy

Government policy like taxation affects the price of the products and services.

d) Economic status of the country

e) The other competitors prices

2.6. SALES TACTICS

Most of the sales of products will be at the premises.

Types of sales tactics

a) Direct sales service:

After buying products from Yegon’s Beauty parlor, the customers will be given advice on how to use
and precaution to be taken in each product.

b) Follow up

The business will follow up after selling the products to ensure that it’s used correctly and causes no
harm to the customers.

c) Indirect selling
i. Discounts

Customers who buy products amounting to Kshs. 800 and above will be offered a small percentage
discounts.

ii. Lowering of prices a product services

In order to attract the customers the prices of products will be lowered regardless of other factors like
transport. Lowering of prices will not make the business to run at a bus to attract more customers hence
more sales.

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iii. Offers

Free services will be offered to the first ten customers like nail polishing and pedicure during holidays
like Christmas valentine and New Year also children will be given gifts to attract them.

2.7. DISTRIBUTION

YEGON’S CLOTHLINE will consider the following before defining the channel for distribution

i) Cost

The distribution channel is required to be cheap but not costly so that the business does not run a loss.

ii) Effectiveness

Thechannel of distribution should be one that reaches most of our customers in good time in order to meet
the demand.

iii) Readily available

The channel of distribution will be readily available whenever products or services are required.

14
Channel Distribution

Agents will distribute the products from door to door hence earning commission.
Incase need arises, a vehicle will be hired. The approximate transport cost will be 22000 per month.

Roads and communication network are perfect throughout the district but in cases of rainy seasons some
areas do not have access of roads.

Anticipated distribution problems

i. Breakdown

This involves the car whereby puncture and accidents might occur in the process of distribution.

ii. Rainy Seasons

The problem mainly occurs due to heavy rains roads which are not tarmacked are damaged by rains hence
vehicles get stuck in mud.

iii. Theft

When travelling at night delay might occur hence some goods may be stolen as some areas are prone to
risks.

Possible solutions

The problems can be solved through:-

a) Security should be maximized so that incase of anything like delay, there is enough protect.
b) The vehicle tires should be filled with mud chain to overcome these problems during rainy season.
c) In case of any breakdown, moving along with machine to repair is an added solution.

15
CHAPTER THREE

3.0 ORGANIZATION AND MANAGEMENT PLAN

The organization and management of YEGON’S Beauty Parlour shop will be views depending on the
expansion of the business in future. The proposed business will have three positions;

i) Manager

ii) Supervisor

iii) Accountant

Duties and responsibilities of the manager

 Setting the objectives

 Controlling the work of the entire business.
 Dividing work among the staff
 Allocating of the resources.

The sponsors will be drawing Kshs. 10,000 per month allowance from the profits. The team of the
management will comprise the manager, supervisor, an accountant, secretary and the staff.

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 3.1 ORGANIZATION CHART FOR THE PROPOSED BUSINESS

MANAGER

ACCOUNTANT SUPERVISOR

SALES PERSON SECRETARY SECURITY

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DESCRIPTION OF THE DUTIES OF THE KEY MEMBERS OF THE PROPOSED BUSINESS

1) MANAGER

 Aged between 25years and 29 years

 Setting the objectives of the business
 Dividing work among the staff
 Allocation of resources

2. SUPERVISOR

 Aged between 23-26 years

 Distribution of work and extending time i.e. overtime.
 Giving out leave and permission to others.
 Have a diploma in library and information studies

3. ACCOUNTANT

 Giving out salaries and wages

 Dealing with financial status of the business
 Keeping financial records
 Aged between 22-26 years
 Attained the highest grade in certified public accountants (CPA) Section three.

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The payment given to workers for jobs they are doing is as follows:

TITLE AMOUNT KSH PER MONTH

Manager 15,000
Supervisor 9,000
Accountant 8,000
Receptionist/secretary 7,000
Salesperson 3,000
Security 3,000
TOTAL 45,000

INCENTIVES

There are other benefits occurred to workers on top of their salaries. This will motivate the workers to
work more efficiently.

INCENTIVES PER MONTH IN KSH

Allowance Manager Supervisor Accountant Secretary Salesperson Security

NHIF 1,000 900 700 500 400 400

TRANSPORT 1,000 700 700 400 400 300

HOUSE 900 600 600 400 400 300

TOTAL 2,900 2,200 2,000 1,300 1,200 1,000

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OTHER PERSONNEL

RECEPTIONIST

Qualifications

 Aged between 22-25 years

 Should possess a certificate in secretarial
 Should be fluent in English and Kiswahili
 Should be presentable.

Duties and responsibilities

 Telephone control
 Typing data
 Keeping records

SALES PERSON

Qualification

 A certificate in sales study

 Aged between 20-25 years
 Has experience in the same firm
 Duties and responsibilities

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  Forecasting sales
 Implementing and developing firm sales
 To undertake activities higher and maintain sales forces.

SECURITY OFFICERS

Qualifications

 Aged between 25-30 years

 Should understand Kiswahili and English
 Should be a form four leaver
Duties and responsibilities
 Guard the business firm
 Identify any visitor entering the firm
 Keeping simple records of incoming and outgoing items.

3.2 RECRUITMENT, TRAINING AND PROMOTION

The firm ensures that recruitment of employees is only done when there is a lot of work and in the
replacement of retired employees

This will be done by the following methods;

i) Word of mouth

ii) Advertising for job vacancies through radio and magazines

Those interested will send their applications which will be accessed by the management and those who
will be shortlisted will be invited for interview. Then those who qualify will be employed. The following
will be done during training.

Seminars will be done after sometime to educate the workers.

Training of workers will be done to maintain accuracy

21
The business will be promoting the workers by increasing their salaries. This will only be possible if the
production of the firm is high. There will be exercised to motivate the workers.

3.3 REMUNERATION AND INCENTIVES

YEGON’S Beauty Parlour will remunerate their workers for the jobs they are doing in a monthly
installments. This will be done by the accountant who will set a day every month when he will be paying
the workers.

The following is the salary scale for employees at YEGON’S Beauty Parlour.

POSITION AMOUNT IN KSHS.

Manager 15,000

Supervisor 9,000

Accountant 8,000

Receptionist 7,000

Salesperson 3,000

Security 3,000

Total 45,000

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The employees giving services to customers like applying make ups and plaiting hair will be paid
commissions at the rate of 10% of the total work done every day. This will be a way of encouraging the
employees to work extra hard since everyone would like to have the highest commission possible.

INCENTIVES

These include

a) Allowance

The business will provide its employees with:-

i) House allowance: this will be given to employees at 20% every month.

ii) Medical allowance: this will be strictly given at 15% subsidy.
iii) Transport allowance: this will be given to employees to ensure that they arrive in the premises
at the right time and there is enough security when going back home.
b) Training

The business will sometimes sponsor its employees to seminars thus enabling them to increase their
knowledge and skills on the growing beauty and cosmetic field. This will be determined by the
performance of a particular worker and time keeping.

c) Annual parties and rewards occasion

The business will hold annual parties for employees and award certificate of service hence in such parties
hardworking employees will be promoted and encouraged.

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3.4 LICENSE, PERMITS AND BY-LAWS

The business will require licenses to make sure it operates legally. It will obtain a certificate of registration
firm the registrar of business name act. A trading license will be obtained from Kisii town council. All
laws of the Ministry will adhere to insurance services will be obtained from station company. This is to
insure loss of business property through theft and accusation due to employee which might occur e.g.
burn.

3.5 SUPPORT SERVICES

a) Banking services

Equity bank will provide banking services like the payment of bills e.g. electricity bills, telephone,
payment of salary and security loans where necessary. Also deposits of our daily sales.

b) Auditing services

YEGON’S Beauty Parlour book of account will be audited every year in order to ensure that proper use
of finances so as to maximize profit. This will be done by Bosom Auditing Firm in Nairobi.

c) Communication services

Telephone and postage services will be offered by Telkom Kenya while for E-mail services, the firm will
purchase computers connected to the internet to offer mail services and get information from the website
on the new products in the market.

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CHAPTER FOUR

4.0 OPERATIONAL/PRODUCTION PLAN

4.1 PRODUCT DESIGN AND DEVELOPMENT

The proposed business intends to offer goods and offer goods and services concerning beauty to the
customers and facial therapy.

The firm intends to sell cosmetics for free and hair which are of high quality as compared to the
competitors

4.2PRODUCTION FACILITIES AND CAPACITY

The tools and equipment required for YEGON’S Beauty Parlor and Clothe Line salon are as follows:

25
 ITEM QUANTITY CAPACITY PRICE SUB-TOTAL SUPPLIERS
SPECIFICATION KSH. KSH.
Driers 1 240 volts 10,000 4,000 Classic
Ear 6 DC-volts 500 3,000 Classic
shooter
Shelves 10 1x2m 200 2,000 Joska
Nail file 6 10cm 50 3,000 Classic
Wall 3 2 x 1.5 1,200 300 Joska
mirrors
Tables 2 1.5 x 1m 500 3,600 Joska
Shaving 2 240 volts 3,000 1,000 Classic
Machines
Hair 2 240 volts 1,500 6,000 Classic
conditioner
Chairs 1 0.5 x 0.5m 250 3,000 Joska
Bicycles 3 Avon size ‘24’ 3,000 2,500 Joska
TOTAL 28,100

The layout of the proposed business will have one small room for reception at the main door, waiting
room and the main room for both services and the scales of products and a small store.

The layout of the business will be shown as below.

Store
Mirror

Washro
Mirrors Driers om

PRODUCT FOR SALE

Reception

26
Other fixed asset required for production to commence is premises. The business will be rented at
SINENDET PLAZA in Kericho Town.

Repair and maintenance

In case of any tool and equipment damage and needs repair, they will be required by the suppliers and this
will be organized early in advance during the purchasing time.

Maintenance

The following precautions will be taken so that the tools and equipment can last longer.

 All the tools and equipment will be cleaned after use.

 Loose screws must be tightened.
 All movable parts should be lubricated frequently
 The power should be kept away from water and excess heat.
 Electronics should be kept away from water and easy reach by customers.

27
4.3 PRODUCTION STRATEGY

The production will depend on the capacity of equipment. The rate of production and seasonal variations
in the year and short term variations are recorded values due to different time of the year.

The monthly raw materials required for production in one month are as follows:

RAW MATERIALS QUANTITY UNIT PRICE SUB-TOTAL

KSH. KSH.
Nail polish 20 40 800
Hair food 50 50 2,500
Hair braids 100 50 500
Hearings 40pairs 50 200
Polish remover 15 50 750
Hair spray 5 200 1,000
Lip stick 20 50 1,000
Spirits 3 60 180
Grease 2 120 240

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 Creams 55 100 5,540
TOTAL 18,970

The required monthly raw materials will be purchased at the beginning of every month i.e. between the
second and sixth month. The materials will be received by the manager from the suppliers where he will
sign the invoice and make the payments immediately.

They will be stock in the store and hence incase anything will be required, both the manager and the
employees will sign in the stocks control book to proof that the same material was given out. This will
enhance effective and efficient use of the raw materials thus avoiding unnecessary wastage and incase of
any loss or wastage the employees will be responsible for it. Monie’s cosmetic will supply the firm with
raw materials and will be given a lead time of five days. YEGON’S PARLOUR prefer Monie’s to be
their supplier since they have a wide range of distribution and they will offer free transport irrespective of
the distance and also they are punctual in their distribution.

Monthly labour Requirements

EMPLOYEE AMOUNT KSH.

Manager 15,000

Supervisor 9,000

Accountant 8,000

Secretary 7,000

Salesperson 3,000

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 Security 3,000

TOTAL 45,000

All the salaries will be paid by the accountant on a monthly basis at the last day of every month. He will
be withdrawing the total amount required for payment the same day he/she is to make the payments. Thus
is for security reason

YEGON’S Beauty Parlour will prefer this mode of payment since it will reduce other expenses like
using pay slips and wastage of time by the employees going to withdraw at the bank.

In case the employee makes any damage, he/she will be dealt with and then do the compensations of
damages.

The approximate average monthly overheads costs will be as follows

ITEM AMOUNT KSH.

Water and electricity 3,500
License and permits 5,000
Telephone 1,200
Postage 1,000
Rent 2,000
Advertising 1,500

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 Transport 2,000
Staff services 4,000
TOTAL 20,200

Cost of production per month

ITEM AMOUNT KSH.

Monthly raw materials requirements 19,000

Monthly labour requirements 45,000

Average monthly overhead cost 20,200

TOTAL 84,200

4.4 PRODUCTION PROCESS

YEGON’S Beauty Parlour will offer both services and products for sale. The customers will report to
the receptionists where he/she is welcomed by the receptionists. The customers then explain the details of
what she/he wants while receptionists’ record.

The customer is then directed to where he/she wants e.g. if she wants a product, she is directed to where
beauty products are.

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The process of making hair

i) Perm

Chemical is applied on dirty hair to prevent the chemical from reacting with the skin.

It’s messaged well on every part of the hair without touching the face or other skin parts

It is then left to relax for some minutes in order to get a good end product.

It is then washed first with cold water then with warm water and shampoo and conditioner.

It is then rolled on rollers and dried for 45 minutes in the dryer and then it is styled and sprayed to
maintain the style.

ii) Straight kit/ curl kit

The hair is washed with warm water

Chemical is applied and messaged to every part of the hair.

It is then left to relax for some minutes depending on the texture of the hair as the water warms.

Then it is washed properly with warm water, shampoo and conditioner to remove all chemicals.

For straight kit, hair gel is then applied and styled.

For curl kit, curling is applied after washing out the entire chemical.

It is rolled on rollers and dried in the drier for 45 minutes then it is styled.

iii) Blow out

Chemical is applied on dirty hair.

It is messaged and then combed continuously to remove out the entire chemical. It is washed in warm
water and hair gel is then applied and styled.

iv) Plaiting

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The customer explains the style he/she wants.

He/she is then taken to the expert of the style

v) Blow dry

The hair is washed thoroughly with warm water and shampoo to remove dirt and oil.

It is combed with a blow drier while still wet.

Then it is straightened and oil is applied

It is blow dried again until it is straight.

PRECAUTIONS TO BE TAKEN WHEN APPLYING CHEMICALS ARE:

i) The person applying should wear gloves.

ii) Customer should be covered with towels on their shoulders to avoid vitrifying or spoiling their
clothes.
iii) The employees should first know the chemical which the customer has been using before and
the effects of changing one chemical to another.
iv) The chemical should be applied strictly on the hair and not the skin.

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Yegon’s Beauty Parlour will put in place the following measures in order to achieve efficiency and
satisfy the customers.

i) The right chemical is used for right hair

ii) All the chemicals are washed out properly to avoid a continued processing which may cause
falling of the customer’s hair.
iii) After applying the chemicals and styling the hair, it is sprayed so that the style can last longer.
iv) After serving the customer he/she will be advised on how to take care of the hair i.e. should not
be rained on.
v) When piercing the ears, the ear lobes should be cleaned properly and spirit applied on it.

Some external factors that are highly likely to affect the process of production include:

i) Delay in supply of products by the distributor

ii) Weather changes since there are chemicals which should be exposed to the sun thus when there
is no sunshine such productions are affected.
iii) Power failure- since there are those hair which needs to be dried and when there is no power it
becomes a problem
iv) Blow dryer uses electricity and cannot be done without electricity.

4.7 GOVERNMENT REGULATIONS

The government put in place the regulations that must be followed by every business operator and failure
to do so can lead to imprisonment, some of the regulations are:

a) Health

i) Every worker must have an apron white in colour while at work

ii) Every employee must have a letter from health doctor showing that he/she is fit for the type of work.

iii) The business premises must have proper drainage without blockage for sewages and other wastes.

b) Safety

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i) Every employee should have a minimum working space to avoid congestion which can lead to
suffocation.

ii) The room should be well ventilated and should have enough light.

iii) The floor should be kept dry to avoid accidents

c) Labour laws

i) The employee should not be paid below the basic salary

ii) An employee should be given a one month notice before being fired.

iii) After working for three months as a casual worker, an employee should be permanently employed.

d) Compensation

i) Age benefits should be given to any person above 55 years.

ii) An employee is compensated in case of long-term illness or death i.e. when an employee dies,
beneficiaries will be compensated, in case an accident occurs at work place.

iii) Retirement benefits will be given to employees.

CHAPTER FIVE

5.0 FINANCIAL PLAN

The main objectives of any business are to make the profit out of invested capital. Yegon’s Beauty
Parlour will prepare a financial plan to indicate the breakdown of how the invested capital will be utilized
in order to generate to profit it. It is from this that the investors will be able to access the reliability other
capital. This will include estimation of working capital, cash flow and balance sheet.

5.1 PRE-OPERATIONAL COST

These are cost incurred before the business starting its operation

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 Item Cost (Kshs)

Business 15000
Electricity and water 2000
Repair and maintenance 450
Insurance 6000
Permit and trade license 6000
Total 28450

5.2 ESTIMATION OF WORKING CAPITAL

This is said to be calculating capital and is used in the financing day-day activities of the business. It helps
the business to pay off current liabilities or debt in the short term and also used to make purchase of goods
when prices are low

Working capital= total current assets- total current liabilities

This is the estimated amount of the proposed business for one year of operation.

Working capital of the year

Items Cost
Current assets
Stock 80000
Cash in hand 6000

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 Debtors 16000
Total 112000

Current liabilities
Creditors 8000
Short term loan 22000
3000

Total working capital = current assets – current liabilities

=112000-30000

=82000

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 5.3 PROJECTED CASH FLOW FOR THE YEAR ENDING 31ST DECEMBER 2019

Particular Jan Feb Mar Apr May Jun July Aug Sept Oct Nov Dec Total
Balance brought 10905 179350 248550 226650 321650 341550 3333350 393550 418850 432250 424250 3420050
forward 0 4
Cash flow
Cash sales 40000 90000 42000 45000 80000 400000 40000 40000 15000 20000 10000 29000 451000
Debt collection 3000 5000 4000 3000 2000 2000 3000 3000 1000 1000 2000 29000
income from 105000 35000 30000 35000 20000 21000 10000 25000 15000 10000 10000 45000 361000
training
Total cash inflows 145000 23705 256350 332550 329650 384650 393550 401350 426550 449850 453200 500250 4310050
0
Cash outflow
Pre-operational 28450 28450
cost
Wages and salaries 45000 45000 45000 45000 45000 45000 45000 45000 45000 45000 45000 45000 540000
Electricity and 1500 1500 1500 1500 1500 1500 1500 1500 1500 1500 1500 1500 18000
water
Loan 4000 4000 4000 4000 4000 4000 4000 4000 4000 4000 4000 4000 48000
Repair and 200 300 400 500 600 700 300 200 100 500 400 4200
maintenance
Total cash out flow 78950 50700 50800 50900 51900 51100 51200 50800 50200 50600 51000 50900 638650
Net cash 66050 18635 205550 281650 278650 333550 342350 350350 375850 399250 402250 449350 3671400
0
Accumulative cash 66050 25240 457950 739600 101825 739600 169400 2044700 242055 3819800 322200 3671400
0 0 0

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5.4 PRO-FORMA INCOME

Yegon’s Beauty Parlour and Clothe Line preformed income statement for the year ending 31 st
December 2019

Particular amount Amount (Kshs)

Income
Sales 451000
Stock 28450
Gross profit 399550
Expenses/ overhead costs
Wages and salaries 540000
Water and electricity 18000
Insurance 4000
Telephone 3000
Advertising 6000
Hire purchase 50000
Repair and maintenances 4200
Total 1504200

Net profit 1104650

Tax at 10% 110465
Net profit 994185

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5.5 PRO-FORMA BALANCE SHEET

Yegon’s Beauty Parlour pro-forma balance statement

As at 1st JAN 2019 As 31ST DEC 2019

Fixed assets Kshs Kshs Kshs Kshs

Equipment 20000
Less depreciation at 10% 20000 18000
Furniture and fittings 48000
Less depreciation at 20% 48000 192000

Total assets 68000 68000 372000

Current assets
Stock 400000 400000
Debtors 100000 100000
Cash in hand 100000 100000
Cash in bank 200000 200000

Total assets 800000 800000 372000 + 809000 172000

Current liabilities 96000

Creditors 984000
Working capital 96000
(96000 + 984000) 1080000
92000
Financed by owner equity 228395
Add net profit 994185
Long term liabilities 300000
Bank loan

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5.6 BREAK-EVEN LEVEL

The sales of the business for the first one year will be 451000

Variables Costs (Kshs)

Electricity 18000

Repair and maintenance 4200

Telephone 3000

Advertising 6000

Total 312000

Therefore

i. Total contribution margin

= total sales – total variable cost

=451000-31200

= Kshs 419000

ii. Contribution margin

= contribution margin x 100/sales

= 419800 x 100/451000

=93.08%

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 iii. Total fixed cost

Operating expenses Cost (Kshs)

Equipment 20000

Wages and salaries 54000

Total 560000

iv. The breakeven level of sales

Breakeven level =total fixed costs/contribution margin %

=560000/93.08%

=Kshs 6016133

5.7 EXPECTED PROFITABILITY RATIO

I. Gross profit percentage= gross profit x 100/sales

= 419800 x 100/451000

=93.08%

ii. Return n equity = net profit after tax x100/ owner equity

=994185 x100/288395

=43.5%

ii. Return on investment = net profit after tax x 100/total investment

=994185 x 100/ 1284500

=77.4%

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5.8. DESIRED FINANCING

The total amount of money required to start the business:

Item Amount
Pre operational costs 28 450
Working capital 82 000
Fixed capital
Wages and salaries 45 000
Electricity and water 18 000
Loan 48 000
Other investments 20 000
Total desired financing 251 450

5.9. PROPOSED CAPITALIZATION

The proposed business enterprise needs a grand total of Kshs. 500 000 to start its operations but
then

Total investment 25 450

Own contribution 200 000

Funds borrowed 271 550

Total 500 000

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