NAJMALD AGRO FARM

[Link] 64, SONDU –KERICHO

TEL: 022-118060404100
Email:
Title : Business Plan
Presented By :
Course Code : 2908
Subject code : 107B
Paper Number :
Index Number :
Centre ;
Examiner Council: Kenya National Examination Council

Plan Submitted To: The Kenya National Examination Council In partial Fulfillment for the
Award of Diploma in

Supervisor :
Date of Presentation :

1|Page
DECLARATION
I hereby truthfully declare that this business plan is my original work and it has never been
presented anywhere to any examination board.

AUTHOR :

SIGNATURE : ………………………………

DATE : ………………………………

SUPERVISOR:

SIGNATURE ………………………………..

DATE: ………………………………..

2|Page
DEDICATION

I kindly dedicate this business plan to my family for their moral and financial support during the
entire project section.

Special dedication to African Institute Of Research and Development Studies for academic
guidance and entrepreneurial skills they imparted on me.

3|Page
ACKNOWLEDGEMENT

My special thanks and gratitude for assistance and preparation and presentation of the business
plan goes to my lecturer. I wish to extend my appreciation to my supervisor for his professional
guidance and advice on preparation of the business plan.

4|Page
 TABLE OF CONTENTS
ACKNOWLEDDGMENT
PREFACE
INTRODUCTION
COVER PAGE
PRELIMINARY PAGE
PAGE
CHAPTER ONE
Executive summary 6
Business description 6
Marketing plan 6
Organization/management plan. 6
Production/ operational plan 6
Financial plan 7

CHAPTER TWO
Business description 8
Business name 8
Business location and address 8
Form of ownership 10
Type of business 10
Products/ services 10
Justification of opportunity 11
Industry 12
Goals of bussines 13
Entry and growth strategy 14

5|Page
CHAPTER THREE
Customers 15
Market share 16
Competition 17
Methods of promotion and advertising 18
Pricing strategy 19
Sales tactics 20
Distribution strategy 20

CHAPTER FOUR
Organizational/ management plan
Organizational structure
Key management personnel
Other bussines personel
Recruitment training and promotion of personnel
Renumeration and incentives for personnel
Licenses, permits and by laws
Other support services

CHAPTER FIVE
5.0 Operational / production plan
Production facilities and capacity
Production strategy
Production process
Regulations affecting operations

CHAPTER SIX
6.0 FINANCIAL PLAN
Pre-operational costs
Working capital
6|Page
Proforma income statement
Proforma balance sheet
Break even point
Profitability ratios
Desired financing proposed capitalization
Projected cash flow statement
appendices

7|Page
 CHAPTER ONE
1.0 EXECUTIVE SUMMARY
It briefly describes the business nature in respect to business description, marketing plan,
organization and management plan and financial plan of the business.

1.1 BUSINESS DESCRIPTION

The business will be a sole proprietorship ownership, which will sell farm products and vet nary
services such as agrochemical and animal feeds.
It will be located in Sondu town Kericho County on the first floor Koin-eel plaza

1.2 MARKETING PLAN

The business environment will provide ready market and favorable market share due to high
population of potential customers such as individual, institution;, commercial customers and
competitors. Promotion and advertisement of the farm products will be done through media,
exhibitions and educational literature. The business will operate in discounting, market pricing
with a zero channel distribution method and over counting purchasing.

1.3 ORGANISATIONAL AND MANAGEMENT PLAN

The business will be owned and managed by single general manager with the help of other
personnel such as accountant, sales clerk, production assistance manager and veterinary doctor.
The management will ensure licensing of the business, remuneration of its employees will be
done according to employees qualifications and working experience.

1.4 PORDUCTION AND OPERATIONAL PLAN

The business will commence it`s early daily operation from 6:00 a.m-8:00 p.m modern
technology machinery will be used to ensure efficiency in production.
The business will incur monthly expenses for production such as labour cost, raw materials cost
and production on finished goods and distribution.

8|Page
Rules and regulation that bind the business will be catered for to ensure maximization of sales
cost of production.

1.5 FINANCIAL PLAN

Cash required starting and progress the business is approximately Kshs 500,[Link] will be
used to purchase machinery products and equipment, fixed assests, production cost and purchase
raw materials. This includes pre-operational and registration of the business, the business will be
financed by:
Bank loan from equity bank =Sh 120,000
Personal savings =Sh 200,000
Family and friends contribution =Sh 180,000
In return of the financial gross profit this will be 60% of services offered to customers and goods
return on investment.

9|Page
 CHAPTER TWO
2.0 BUSINESS DESCRIPTION
2.1 BUSSINESS NAME
The name of the proposed business will be NAJMALD AGROVET; the name is derived
from the owners’ first name. The heading victory is used to show that anyone who is
going to be associated with the business will be victorious. The name of the business is
also easy to read and remember. The business name will be registered as NAJMALD
AGROVET after making a lot inquires from the registrar of the business. This will ensure
no other business portrays the same name as identified by business owner. The business
owner will acquire a certificate of registration from the Regional office within Kericho
town.

NAJMALD AGROVET is a business owned under sole proprietorship. The business will sell
farm products and services such as agrochemical, animal feeds and seed crops. It will also
provide vetenary services such as deworming, cleaning and vaccination of livestock and animals
like cows, horses, chickens, pigs, dogs and cats.
The business will be financed by owner`s and friend`s contribution which after sale will use the
profit and return to venture by opening other branches.
It`s main objective is to ensure effective supply and availability of farm products and services to
its customers.
2.2 BUSINESS LOCATION AND ADDRESS
The business will be located within Kericho town in Kericho county. It will be situated on Koin
eel Plaza building ground floor door number three next to agha khan hospital. The business will
be directly opposite mishkam Krishna on your way to Kericho district hospital
The business address will be:
NAJMALD AGROVET
P.O. BOX 64, KERICHO.
TEL:022-000054678

10 | P a g e
 MOBILE:0722701098
EMAIL:ianrotich17@[Link]

SHELL PTRLM
TO NAKURU EMMANUEL MWANAINCHI HTL AIRADS

TO KISUMU

VICTORIAN AGROVET
→→COUNTY OFFICES ARDHI HOUSE

KERICHO DISTRICT HOSP

MISHAH KRISHNA TEMPLE

GURU NANAK

11 | P a g e
 2.3 FORM OF OWNERSHIP
The business will be sole proprietorship type of business .There are many factors and
reasons why the business is preferred as a sole proprietorship form of ownership:
The business is easy to form and dissolve it does not require many people to start and
maintain is the owner himself.
There is freedom in decision making and implementation of policies, strategies of how
the business is supposed to be run and the activities involved.
The business owner enjoys all the benefits that is occurred in the business alone since is
the person to integrates and co-ordinate the business and account for the loss incurred and
the profit gained.
It fosters creativity and innovation enabling the proprietor to exploit his talents, abilities
without limitation or from wherever source. He/she is the one to see how well he can
venture and get market for the business sustainability.

Contributor Amount (Kshs.) Percentage (%)

Personal savings 120,000 24
Friends and family contribution 200,000 40
Loan from Bank 180,000 36
Total 500,000 100

2.3.1 THE SPONSOR

NAJMALD AGROVET will be owned and managed by Rotich Kipkemoi Ian aged twenty two
years. He hales from Kericho county. He is currently a student in AFRICAN INSTITUTE OF
12 | P a g e
RESEARCH AND TECHNOLOGY Kericho campus pursuing a diploma in HUMAN
RESOURCE MANAGMENT
He attended Crystal hill Academy and later joined Agoro Sare Boys High School. After attaining
his form four level he helped his father who is a farmer and a agricultural officer who also
happens to own a agro vet at kapkatet town and with his farming activities where he gained
interest in farming and livestock rearing.

2.4 TYPE OF BUSINESS

The business will be a trade and service enterprise. The business is a trade and service
enterprise because It deals with selling animal feeds, agrochemical, seed crops and offer
vet nary services.
It`s target customers will be dairy farmers, poultry farmers and the general public.
The business will ensure positive image is fostered throughout by providing good
interpersonal relationship and quality products to it`s customers and competitors.
Providing agricultural knowledge, skills and pamphlets on it`s product and services to
individual groups and members.
Provide discount to some of its products that are on offer from particular manufacturers.

2.5 THE PRODUCT AND SERVICES

NAJMALD AGROVET will sell animal feeds, agrochemical, seed crops and will also sell farm
inputs like pangas, mowers, slashers. The business will also offer vet nary services
The business is also going to connect its customers with the manufacturers of farm machinery
tools like tractors, grain dryer, farm trucks, rice huller, tea picking machines and many more at
an affordable price.
The products will be high quality and charged at a reasonable price. The business will
provide preventive products and help cub the diseases and crop infection. Products such
as milk salve.
Most of the business products will be as per customers needs and the trend in the market.
We will ensure we sell durable suitable and economically friendly products.

13 | P a g e
 The goods we will sell will be mostly bought from the direct manufactures of the
products so as to avoid buying fake products.

2.6 JUSTIFICATION OF OPPORTUNITY

Few competitors
few competitors is one of the factors that favor my choice of business that is agro vet business.
Kericho town so far has few agro vets, they are less than eight in number and so am sure of
getting customers
Raise living standards
The is need to cut cost of repairing infrastructure due to rise in living standards, the need for
good quality materials for building permanent infrastructure will provide a ready market to
venture.
Self employment
Due to high population which leads to unemployment in the country, the business will create self
employment and will enable to earn a living to sustain my life for other people in the area.
Population
Being an urban area, there are higher possibilities of being putting up a new infrastructure which
might create a high demand of the product services.
Infrastructure
The availability of roads, electricity will enable the business to transport the products without
any problem..
Industrialization
The town and the surroundings industries which might require the products and services in
putting up their neat structure, local authority to ensure production of quality products and proper
disposal of waste that are harmful to the environment.
14 | P a g e
 In today’s world especially in Kenya there are cases of unemployment. The High Tech
computer Service shall provide employment.
The business also shall bring services near people hence the customers taste is satisfied.

2.7 THE INDUSTRY

The business is under Agricultural and it`s an Agricultural industry. The industry satisfies the
demand for products pertaining its operation to expand, the business as it grows to satisfy the
demand fully. Employees will be assigned various responsibilities. However, they will depend
with the intensity of work as business progress.
Basic capital requirement are approximately Ksh 500,000.00 which is the amount to be invested
for the business. It will make the requirements of the business operation successfully. The
demand for products to increase indicates prosperity of the business, due to high rate of sales the
business since the demand of its products is an increasing demand.
The type of technology used in the business will be capital intensive.
Most of the business sales will be high during rainy seasons this is because this season is when
most farmers will be planting and also the crops will need preventive products

2.8 GOALS OF THE BUSINESS

The business is striving towards becoming the most successful agro-dealer in the region it will
provide quality products services and will base it`s products on all agricultural spheres.
2.8.1 LONG TERM GOALS
Expansion
By the end of one year the business will grow and enlarge and this will be sustained on its
advancement.
Income generation
15 | P a g e
 By the end of the 2nd year, the business aim to earn more income which can be used to
pay more salaries to the employees thus increasing standards of living
Popularity
By the end of 2nd year the business aims to capture and maintain 15% of the market share
and this business name will be known.

Salary increment
By the end of 3rd year the business aims to increase employees’ salary and this will be a
great favors to the employees.
2.8.2SHORT TERM GOALS
Improve customer relationship
By the end of the five months, the business aims at improving and main customer`s
relationship.
the businesses will create more jobs opportunities by increase of 20%

2.9 THE ENTRY AND GROWTH STRATEGY

For the entry strategy the NAJMALD AGROVET is planning to use very competitive ways of
advertising its products and services. For the penetration and gaining of market of the newly
established business Agro farm is planning to use some competitive advantage e.g. advertising of
the business and it`s products through media, posters, sign posts it wil use local stations like
chamgee fm, kitwek fm and milele fm.
The business will offer transport facilities to customers who buy in bulk and also discount to
those customers.
The business will straightly observe on good customers relationship with the employing skilled
workers and holding seminars and training of employees on good relationship with customers.
Employees will be provided with protective gumboots, helmet, aprons e.t.c for identification and
hygiene purpose.

16 | P a g e
17 | P a g e
 CHAPTER THREE
3.0 MARKETING PLAN

3.1 CUSTOMERS
The environment where the business will be located has different classes of people who
contribute positively to the development and growth of the business. They include:

Individual customers
These are small scale farmers and the general public, who are destined to buy agro farm products
who have high purchasing powers act like occasional customers who will enjoy economic of
scale, this will allow them to make a profit .Their mode of payment will be mostly cash.

Institutional customers
These are factories such as Kericho Factory, James Finlay limited. It will also be adjacent to
kericho office of agriculture. The business will have business personnel and agents within the
institutions

Commercial customers
These are customers who will purchase the products for selling in their businesses. These
customers will be mostly be sold goods at wholesale price.
3.2 MARKET SHARE
The business location is in densely populated area surrounded by offices, banks, schools and
agro-vets. The population is approximated to be 30,000 people with potential customers.
Approximately 14,000 people are NAJMALD AGROVET customers with the 1 7,000 units to its
competitors.

3.2.1 AMOUNT OF UNITS SOLD AND SALES AVAILABILITY

With the approximated population of people, the amount of units sold will be 15,000 units which
amount to 3600 units a month. This can be illustrated as

18 | P a g e
NAJMALD AGROVET
8000 X 100% = 53.33% (360 degrees) = 190 degrees
15,000
.The competitors will share the following part of the potential customers as follows;

5000 customers for mashambani agro vet

5,000 x 100%
15,000
= 33.33% (360 degrees) = 120 degrees
2,000 customers for WAKULIMA ANIMAL FEEDS AND POULTRY LAYERS
2,000 x 100%
5,000 = 13.33% (360 degrees) = 48 degrees

PIE CHART SHOWING DISTRIBUTION OF THE CUSTOMER SHARE IN THE

MARKET

Blue- Najmald agrovet

Maroon-Mashambani agrovet
Green- Mkulima agrovet
19 | P a g e
3.3 COMPETITION
The agro vet is based in agricultural industry whose growth is incentive. Therefore many
agrovets are emerging on daily basis due to demand of the farm products.

POTENTIAL COMPETITORS
The business has the following competitors
Mashambani agrovet stores
Wakulima animal feeds and poultry layers B
Size of the competitors
They are in small size expect
They lack customer satisfaction..
3.3.1 EFFECTS OF THE COMPETITORS ON THE BUSINESS
All are located within the town centre.
Changes in price of product as per the business.

3.3.2 GEOGRAPHICAL LOCATION OF COMPETITORS

MASHAMBANI AGROVET STORES is located not far from the business premises and has
good return of customers but poor equipment.
HOW TO OVERCOME THE COMPETITORS
Use of modern technology such as refrigerators for storage of vaccines.
Ensure effective products advertisement and fair pricing with quality products and services.

3.4 METHODS OF PROMOTION AND ADVERTISING

3.4.1 PROMOTION
Used to encourage sales of commodity in a targeted marketed mix.

20 | P a g e
Commonly used during introduction of a new product in the market. It includes the following
elements, public relation, publicity and personal selling sales promotion.
The business shall use the following promotion method.
Good public image
The business will relate well with its customers and competition through use of communication
skills this improves image of the business.
Calendar and other publications such as free booklets and note book with the business products
services on the margin. Use of T-shirts which bears the business name and logo.
Operation hours
It will operate on long hours from 6.00am to 8.00pm.

3.4.2 ADVERTISEMENT
The aim of advertising is to attract more customers and orientation of the business to the world at
large. The business will put in use the following forms of advertisement.
The media
The business will advertise its product through television and radio programmes.
Billboards and posters
Will be put in different places roadside, round about and junctions.
Building of interpersonal relationship with neigbouring school, factories, and general public for
example issue time table free after sale or inquiry of the farm products and services.
Cost
The business will try its best to minimize the cost of advertisement to reduce the expenses; the
business therefore will advertise some of its products through the use of employees.
Frequency of advertisement
The business will do advertisement once a day through radio jambo and chamgee fm.

3.5 PRICING STRATEGY

The business will have fluctuating characteristics due to the following factors.
 Economic Nature
 Current planting, weeding harvesting seasons
 Quality of the products
21 | P a g e
  Increase decrease on the market demand.
The business has opted the use of the following pricing methods.
Psychological pricing
Is a method of charging price of goods and services rendered depending on the profits loss
realized by the business. Pricing is based on psychological significance of customers.
PRICES OF SOME OF ITS PROUCTS AND SERVICES
PRICE LIST
PRODUCT/SERVICES QUANTITY PRICE (SHS)
Maize seed 1kg 400
Fungicide 5 tables 100
Herbicide 5 tablet 50
Dairy meal 500g 250
Maize germ 1kg 550
Mineral salt 1 pkt 100
Deworming 50 kg 80
Vaccination Ml 100

Discounting prices
Mainly to potential customers who buy in bulk
Prestige pricing
Will be administered to farmers who prefer high based breed seeds and vetenary pricing of
hybrid cows.
Market pricing
Pricing according to prevailing in the market .
Cost –plus pricing
Is pricing according to production cost incurred.

FACTORS TO CONSIDER DURING PRICING

Objective of the pricing
Price set will cover the cost of production, therefore the price must yield return.
22 | P a g e
The market structure
The business will be simply a rice taker because of high competitive market structure
Government policy regarding monopoly pricing
Degree of physical differences such as product texture and packaging.

3.6 SALES TACTICS.

The business will use the following selling tactics
 Direct selling to both potential and regular customers
 Discounting of products
 Credit services especially to potential customers
 Impromptu services during low sales and reduce overstocking
 Use of agents and promoters by staff quarters

The business will utilize distributors and agents.

3.7 DISTRIBUTION STRATEGIES

The business will major in zero –level channel of distribution (producer-consumer selling). This
method involves direct selling which is less expensive and simple to operate.
Over-counter purchasing, where customers buy over the counter bargain and pay for the products
and services offered at the cashier desk.

23 | P a g e
 CHAPTER FOUR

4.0 ORGANIZATION/ MANAGEMENT PLAN

The proposed business will be managed by the owner who is also responsible of formulating
rules and regulations governing the firm. The management team includes the manager who is
also a purchasing manager, accounts supervisor, inventory and sales supervisor. The non-
management team will include general workers, security personnel and the drivers.

4.1 NAJMALD ORGANIZATION STRUCTURE

MANAGER

ACCOUNTS SUPERVISOR SALES

SUPERVISOR SUPERVISOR

SECURITY DRIVER GENERAL

PERSONNEL WORKER

24 | P a g e
4.2 KEY MANAGEMENT PERSONNEL /BUSINESS MANAGERS

NAME POSITION QUALIFICATION DUTIES AND RESPONSIBILITIES

Manager Must have diploma in BA or He/she will be creating policies to the
human resource management
management. He/she will carry out firm purchases
Must have knowledge and Organize the annual general meeting
skills from the study of Carry out research towards business
entrepreneurship and human improvement
resource managment. Responsible for allocating activities to
Must have experience from the staff
any institution where she
was on industrial attachment

Accountant KATC final certificate or Keep books of accounts

must have a diploma in Prepare annual reports
Business Administration Writing receipts and filling copies of it
Must be computer literate for reference
Must be honest , trustworthy Deposit and withdraw money on
and should be a person of behalf of the manager
integrity Should work under minimal
supervision
Salesman Should have a certificate in Keep inventory records
sales and marketing. Check delivery and stock available
Should have been in a Receiving goods from the suppliers
working field for years and issues them to customers
Must be honest and
trustworthy
Should have good public
relations

25 | P a g e
 Should be of age 20-45
years

4.3 OTHER PERSONNEL DUTIES AND RESPONSIBILITIES

NUMBER OF EMPLOYE QUALIFICATION DUTIES AND RESPONSIBILITIES

EMPLOYEES E
2 Security Must have certificate To direct customers
Personnel for National Youth To maintain law and order around the business premises
Service (N.Y.S) on To provide 24 hours security around the business premises
defense
Must have an age of
between 20-45 years
Must have general
knowledge of
education
1 Driver Should have ABC To liaise with both purchasing and marketing on goods to
class driving licence transport either to the form or to customers.
Must have 5 years Be in charge of the transport facilities and inform
working experience management on necessary repairs and maintenance
Must be a form four
leaver with a
minimum grade
mean grade of D+
3 CARRIERS Any person To help in moving of goods
Must be over
18years old

26 | P a g e
4.4 RECRUITMENT, TRAINING AND PROMOTION
4.4.1 RECRUITMENT
NAJMALD AGRO VET intends to recruit employees basing on their educational levels and
experiences, recruitment will be done advertisement through posters and employees educational
institute and through chief Barazas. The business intends to liaise with many training institutions
purposely for graduates who are above average performance.
This will really enable the business enterprise to improve its handling of differed tasks for
effectively. Nevertheless any recruitment exercise that will require advertisement will be done
through appropriate advertisement media.

4.4.2TRAINING
The business intends to train employees in future on necessary skills required in business. This
will also be done when the business had grown and had generated more profits. Employees will
be taken for workshops and seminars, exchange programmes and inviting experts to advise
installation of computer in the business to cope with changing technology and to increase the
competitiveness of the business.
4.4.3PROMOTIION METHOD
This is an act of promotional employees as matter of motivating than in their various field of
operations. Employees promotion will be based on.
Their efficiency
The proprietor intends to promote hardworking workers who work efficiently with the aim of
increasing productivity to the firm.
Academic qualifications
Employees who possess high education level will be promoted accordingly. This is due to the
experience and skills they possess.
Hardworking and honest
The proprietor intends to promote hardworking and honest employees. This is done through their
measurable performance.
Incase of high future returns
The business intends to promote their employees in future when the have experienced high profit
margin.
27 | P a g e
4.5 RENUMERATION AND INCENTIVES
4.5.1 RENUMERATION GUIDELINES
The business intends to pay employees wages and salaries under the regulations and wages terms
of employment. This will assist the business to meet with the legal requirement and those factors
will be considered when paying employees wages and salaries.
Nature of the job
Employees will be paid according to the type of the job in the business.
Number of days worked
Employees salaries will be paid basing on the number of days worked in a month.
Job groups
The proposed business plan to employ casual workers in future, terms of payment will depend on
whether an individual is casual worker or permanent employee.

4.5.2 INCENTIVES
These are reward offered to the employees. They are meant to motivate them in undertaking the
activities effectively.
Presents and rewards
Efficient and effective employees will be rewarded with presents in order to motivate them.
Organizations trips
The business after a reasonable time will arrange to take their employees for a trip. This act will
motivate them.
Writing letters and materials
Management will ensure that whenever an employee does well in certain areas in the business
they are given a recommendation letter of appreciation with relevant signature and business logo.
This will help them during employees promotions.

Also the business will offer the following;

Free lunch and tea
The business will ensure its employees are given tea and allowances.
28 | P a g e
Transport allowance
Transport allowances will be granted to employees to enable them to come to work on time and
break for their home at the evening without much inconveniences.
Overtimes
The business will come up with a package of rewarding overtime to every extra one hour to
encourage the workers to work selflessly to attain the business objectives.
Medical allowances
Medical allowances will be grated to employees of the proposed business incase of illness.
Pension
The business plans to register all employees with the national Social Security und (NSSF) so as
to secure monetary for retirement age.

4.6 LICENCE AND PERMITS AND BYLAWS

It regard to the terms of business operations in the country, enterprise has to acquire some
monetary documents to legalize its operation. The documents to be acquired are:-
 Trade license from the Kericho town council
 Transport license from transport license board
 Medical certificate from kericho district hospital
Licenses
The business will obtain permission for the activities by obtaining a license from the central
government under the ministry of trade and industry licensing law of Kenya.
Permit
The business will obtain a permit from (legal government) law of Kenya. The business will be
given an authority to operate in the site after filling a form showing name, location and the nature
of business. The proposed business will therefore be registered under its official name to
commence its operation.
By- laws (legal requirement)
Part II taxation power and revenue sharing section 220
Taxation power
The law states that taxations and other revenue government and district government shall set out
the schedule thus the location authority taxes are collected from all business operating within
29 | P a g e
KERICHO town to raise revenue which is used for improving trading within the town such as
water projects, repairs of sewages, repair of roads and other sanitations premises.
Environmental and Natural Resources Act 8 section 89.
Discourage waste and encourage recycling
The law discourages waste and encourages recycling thus council requires each business
operation in town to ensure proper collection of waste and disposal in the specific areas.
This by-law will be of great importance to Najmald agro vet i.e. will enable the business operate
effectively and efficiently within any legal problems with the government of Kenya or the county
council authority.

4.7 OTHER SUPPORT SERVICES

These are services offered by other business entities to the proposed business to ensure that
processes and operation unfold smoothly. They include:
Banking Services
KENYA COMMERCIAL BANK
[Link] 4321
KERICHO
TEL: 022-11806040411

Medical Services
KERICHO DISTRICT HOSPITAL
[Link] 11
KERICHO

Postal Services
KERICHO POST OFFICE
[Link] 0400
KERICHO
TEL: 050-0126175

30 | P a g e
 CHAPTER FIVE
5.0 OPERATIONAL / PRODUCTION PLAN
Production and operational plan deals with how the business will provide its product and the
facilities that will be used in production

5.1 PRODUCTION FACILITIES AND CAPACITY

Najmald Agro farm is expected to produce offer and sell high quality products and services that
will be in high demand thus the enterprise is aspiring to have opened its business from 7.00am to
allow its customers to buy products for their day to day activities as early as possible.

5.1.2 FACILITIES AND CAPACITIES

The business will require production facilities of right capacity in production of chemicals local
animal feeds and vaccine neutralization in sufficient quantities.

Machine Capacity Leased/ Quantity Date Total cost Suppliers

/Equipment purchased supplied (shs)
Fridge master Large purchased 1 3/2/2015 45,000 Kericho
electronics
Weighing scale Medium purchased 2 3/2/2015 30,000 Kalya weighing
machinery
Accounting Medium purchased 1 3/2/2015 3,500 Westside
machine stationeries
Furniture & fitting purchased 3/2/2015 2,000 Westside
furniture’s
Computer Purchased 3 5/2/2015 60,000 Laptek
electronics
Telephone purchased 5 4/2/2015 15,000 wisecost
electronics
Electrical socket Purchased 5 3/2/2015 1,000 laptek
electronics

31 | P a g e
Cello tape purchased 12 3/2/2015 120 Ianoz stationery
Vaccinator purchased 12 3/2/2015 1,200 Paksons
syringe vetenary shop
Drenching guns purchased 10 6/2/2015 5,000 Pakson
vetenary shop
Drum pumps purchased 3 4/2/2015 4,500 All Farmers
vetenary
TOTAL 167320

Machines and equipment will be locally obtained with agreement for transfer to the owners
premises.

5.1.3 FEATURES OF WORKSHOP LAYOUT –GROUND PLAN

GENERAL PERSONNEL
MANAGER MANAGER

ENTRANCE
CCCU
PRODUCTION
ASSISTANCE
SALES CLERK
MANAGER

ACCOUNTANT TRANSPORTATION
OFFICE

EXIT DOOR

4.3 PRODUCTION STRATEGY SECURITY

The business will incur monthly expenses for the production on GUARD
the following.
32 | P a g e
5.2 PRODUCTION STRATEGY
Labor cost
Raw material cost
Production overhead cost
5.2.1THE COST OF LABOUR
It involves employees’ salary and allowances
TITLE NO. OF WORKERS AMOUNT (SHS)
Manager 1 20,000
Personnel manager 1 15,750
Accountant 1 14,450
Sales clerk 2 7,250
Production assistant manager 3 10,150
Veterinary doctor 4 2,100
Driver 2 7,250
5 2,175
Total 19 79,175

MONTHLY LABOUR REQUIREMENT

No of Workers Cost/Hr No. of Hours/Month

Manager cost/hr = cost per day

24 hrs (a day)
= 20,000 = shs. 27.77hr
30
1.27.77(24x30) = shs.20,000
Personnel manager 15,750 (24x30) =shs.15,750
30
Accountant 14,500(24x30)
30 = sh 14,500

33 | P a g e
Sales clerk 7,250 (24x30)
30 = sh 7,250
Production Assistant manager 10,150 (24x30)
30 = sh10,150
Security guard 2,100 (24x30)
30 = sh 2,100
Driver 2,175(24x30)
30 = sh2,175

5.2.2RAW MATERIAL COST

Product/service Quality Price per item 9shs) Total cost (shs)
Animal feeds 20,000kgs 30 60,000
Herbicide 40 tablets 10 400
Fungicide 40 tablets 10 400
Insecticide 40 tablets 10 400
Nematicide 40 tablets 10 400
Wormicide 40 tablets 10 400
Dairy feed 200packets 50 1000
Layers mash 100 packets 50 500
Onion mash 100 packets 50 500
Deworming 120 120
Vaccination 20 20
Stock spraying 100 100
Crops spraying 3,500 3,500
Disinfection 500 500
Washing
Totals 68,240

34 | P a g e
5.2.3 PRODUCTION OVERHEAD COST PER MONTH
ITEM AMOUNT (SHS)
Electricity 1,200
Water bill 25,000
Insurance 200
Provision for advertisement 1500
Telephone 700
Postage 500
Stationery 2000
Provision for depreciation 1500
Provision for debts 800
Provision for maintenance repair 3500
Transport cost 1000
Committee meeting 1000
Municipal charges 600
Total 39500

5.2.4 SUMMARY OF TOTAL MONTHLY PRODUCTION COST

ITEM AMOUNT
Labour cost 79,175
Raw material cost 68, 240
Production overhead cost 39,500
Grand totals 186, 915

35 | P a g e
5.3 PRODUCTION PROCESS
The processed business will be involved in production of finished goods and distribution.

Steps involved
Customers orders of goods from stock and payments on cash or credit.
Customers who buy in large quantity such as factory, discount will be offered to encourage
buying.
The business will source the information concerning the suppliers through quotation.
Ordering
The materials required in the business will be ordered through purchase order. This will state the
right specifications of materials required.
Transportation
The suppliers will liase with the supervisor about the impending order to be delivered this will
help the inventory supervisor to schedule the transport ** well.
Unloading of goods
Good received will be unloaded from the firm is ** and inspected. This is done comparing the
specification of materials in the purchase order against the physical measurement o the materials.
Price determination
The selling price of animal feeds will be based on buying price plus the transportation cost plus
the government tax also the required profits.
Selling of goods
Goods will be readily available for sale at he selling counter or customers disposal.

5.4 REGULATION AFFECTING OPERATION

Agro chemical farm will have rules and regulations governing its staff. Therefore it will be the
duty of every employee to observe these rules and regulations.
Health regulations

36 | P a g e
The proposed business will strive to abide by public health Act (cap 226) therefore the firm will
strive to maintain high standards of hygiene by keeping the environment and litters will be
dumped in a recommended place.

Labour laws
The firm will ensure that all employees are treated fairly, this is done by observing
environmental Act.

The law states rules and conditions at recruiting staff

Wages and conditions of employment. The employees wages and salaries will be governed by
this Act, also term of working conditions will be governed by the Act.
Environment regulations
The firm will ensure its environment is well cleared. This will be done by ensuring that bins are
placed every place needed. Also the firm will recycle water product like firm chemicals used for
making fertilizers etc.
Safety regulations
All employees in the firm are expected to observe safety rules and regulations in their disposal.
Also the firm will establish a weekly safety talk where workers will spend 30 minutes every
Friday morning before work. These talk will help employees pin point possible accidents and the
immediate first aid boxes full with the required items for first exercise all over the business
premises.

37 | P a g e
 CHAPTER SIX
6.0 FINANCIAL PLAN
This chapter deals with financial analysis of the business. It shows what should be invested
financial operation on what is expected from the business.

6.1 PRE-OPERATIONAL COSTS

ITEM AMOUNT (KSH.)
Trading license and legal fees 1,800
Advertisement cost 5,000
Electricity cost 5,000
Water installation 5,000
Insurance 500
Bank account opening fee 500
Loan processing fee 2,000
Telephone and Addresses 5,000
TOTAL 33,800

6.2 NAJMALD AGROVET WORKING CAPITAL

Working capital= current assets –current liabilities
ITEM 2015
SHS
Stock of raw material 29,500
Debtors 100,000
Cash in hand 860,850
Cash at bank 505,330
Working capital 1,495,680

38 | P a g e
NAJMALD AGROVET
6.2.1 PROJECTED CASH FLOW STATEMENT FOR YEAR ENDING 2015
MONTH JAN FEB MARCH APR MAY JUNE JULY AUG SEP OCT NOV DEC
Amount (shs)
CASH IN FLOW
A
Opening bal b/f - 260800 302350 340700 404000 496200 638200 730300 822550 845850 868150 865350
Cash sales 200000 150000 100000 100000 150000 200000 150000 200000 100000 80000 50000 20000
Debtors 5000 5000 5000 5000 5000 5000 50000 5000 5000 5000 5000 5000
Loan 120000 - - - - - - - - - - -
Owners equity 100000 - - - - - - - - - - -
Total ash inflow 425000 415800 402850 445700 559000 701200 793200 935300 927550 930850 923150 890350
CASH
OUTFLOW B
Cash purchases 150000 100000 50000 30000 50000 50000 50000 100000 7000 50000 45000 15000
Creditors 500 500 500 500 500 500 500 500 500 500 500 500
Advertisement 1000 500 500 - 1000 1200 1200 1000 - 1000 500 1000
Trading license 500 - - - - - - - - - - -
Miscellaneous 500 400 200 200 250 200 100 150 100 100 200 200
Drawings 1000 1500 500 500 500 500 500 500 500 500 1000 1000
Interest on loan 200 200 200 200 200 200 200 200 200 200 200 200

39 | P a g e
Transport 500 500 500 500 500 500 550 550 550 600 600 600
Salaries & wages 7500 7500 7500 7500 7500 7500 7500 7500 7500 7500 7500 7500
Electricity bill 1000 800 700 700 750 750 750 700 750 750 800 1500
Water bill 1500 1550 1550 1600 1600 1650 1650 1650 1600 1550 1500 2000
Total cash flow 164200 113450 62150 41700 62800 63000 62900 112750 81700 62700 57800 29500
Net cash c/d 260800 302350 346700 404000 496200 63820 730300 8225550 845850 868150 865350 719300
Accumulative 260800 563150 909850 1313850 1810050 2448250 3178550 4001100 4846950 5715100 6580450 7299750
cash

40 | P a g e
6.2.2NAJMALD AGROVET
INCOME STATEMENT FOR THE YEAR ENDED 31ST DECEMBER 2015
SHS. SHS.
PARTICULARS
Sales 1,500,000
Less : Cost of sales
Purchases 900,000
Less: Closing stock 860,850 39,150
Gross profit 1,460,850
Less: Operational expenses
Salaries and wages 90,000
Water bills 19,400
Electricity bills 9,950
Transport 6,450
Transport 2,400
Miscellaneous 2,600
Advertisement 8,900 139,700
Net profit before tax 1,321,150
Less: Provision for tax 10%
10% 1,321,150 (132,115)
Net profit after tax 1,189,035

41 | P a g e
6.5 PRO –FORMA BALANCE SHEET
NAJMALD AGROVET
Pro-forma opening balance sheet as at 31st December 2015
SHS SHS
FIXED ASSETS Capital 500,000
Computer 200,000 Owners equity 100,000
Furniture 200,000 600,000
Equipment 104,320 Add: Net profit 1,189,035
Total fixed assets 504,320 1,789,535
CURRENT ASSETS Less: Drawings 8,500
Stock 29,500 1,780,535
Debtors 100,000 LONG TERM LIABILITY
Cash at hand 860,850 Bank loan 120,000
Cash at bank 505,330 SHORT TERM LIABILITY
Creditors 99,465
2,000,000 2,000,000

42 | P a g e
6.6 BREAK EVEN LEVEL
NAJMALD AGROVET FOR THE YEAR ENDING 31ST DECEMBER 2016
FIXED COST EXPENSES SHS.
Trading license 500
Interest on loan 2,400
Salaries & wages 90,000
Total fixed assets 92,900
VARIABLE COST
Advertisement 8,900
Miscellaneous 2,600
Transport 6,450
Electricity bill 9,950
Water bill 19,400
47,300

Break Even Point = Fixed x 100% profit margin = Gross profit

Contribution sales ration sales

Contribution = Sales – variable cost (shs.1,460,850/sh.

Shs. 1,500,000-sh47,300 = sh.1,452,700 = 97.39%
= 1,452,700 x 100%
1,500,000
= 96.85%
BEP = 95,921.53 UNITS
6.7 PROFITABILITY RATIOS
NAJMALD AGROVET FOR THE YEAR ENDING 2016
Return on sales = Gross profit x 100
Sales
= 1,460,850 x 100%
1,500,000
= 97.39
43 | P a g e
Return on equity = Net profit after tax x 100%
Owners equity
Owner equity = (Net profit + opening capital ) – Drawing
= (1,189,035+500,000) – 85000
= 1,680,535 units
ROE = 1,189,035 x 100%
1,680,535
= 70.75
Return on investment = Net profit after tax x 100%
Total investment
Total investment = current assets + fixed assets
= 504,320 + 505,330
= 200,000
ROI = 1,189,035 x 100% = 59.45
200,000
6.8 DESIRED FINANCING
NAJMALD AGROVET
ITEM SH.
Pre-operational cost 33,800
Working capital 1,495,680
Fixed assets 504,320

Total 2,033,800

6.9 PROPOSED CAPITALIZATION

ITEM AMOUNT
Owners contribution 200000
Total borrowed( friend+ relative) 200,000
Loans from bank(s) 500000
Group 200000
TOTAL INVESTMENT 1100,000

44 | P a g e
APPENDICES

45 | P a g e