Business Plan 3Gtech Final

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CHAPTER ONE

1.0 EXECUTIVE SUMMARY

1.1 Business Description

The business shall be a sole proprietorship oriented and the business shall be called 3GTECHCYBER CAF. The business shall be located at Nyeri town and the proprietor intends to deal

with computer services and products. The main services include offering internet services,

typesetting, printing, photocopying, and lamination, binding and also training on computer

packages.

The justification of the business is the growth in this sector and also the weaknesses of the

existing competitors.

1.2 Marketing Plan

The business will have individuals and institutions as its customers. The identified competitors

are One Stop, Digits, Hedge Hog and Morphil cyber cafe. To achieve competitive advantage the

proprietor will consider the operating costs, the prevailing market prices and the profit margin.

For promotion, the proprietor will use posters, flyers and banners, personal selling tactics and

some sales promotions will be carried out from time to time to keep the clients satisfied. Due to

the nature of products/service the distribution will mainly be catered for by the clients and

customers coming to the business premises.

1.3 Management and Organizational Plan

To run the business the proprietor will adopt a simple organizational structure, with the

proprietor at the top who will act as the business manager and will be assisted by an operations

coordinator and a support staff. The proprietor intends to increase the number of employees as

the business grows.

All recruitment will be on merit basis and the remuneration will be according to ones skills and

competence. All employees will be taken through an organizational induction and performance

will be evaluated on the basis of achieving the set individual goals and targets.

All the other services like banking services, insurance services, and security services shall be

outsourced from various service providers in order to ensure quality, efficiency and reduce costs.

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The licenses, permits and By laws regulating the operations of the business like business

registration, operating licenses and working environment regulations will be acquired before the

business commence operations.

1.4 Operational Plan

The various tools and equipments required for effective operations will be acquired at an

established cost of Kshs. 300,000. The proprietor will also have to cater for the renovations,

redesigning and partitioning of the premises and all this will cost a total of Kshs. 100,000.

The materials requirements have also been computed and all the materials will cost a total of

Kshs. 300,000. The monthly labor cost will be Kshs. 60,000 and the overheads will cost a total of

Kshs. 80,000.

1.5 Financial Plan

The pre operational cost will amount to Kshs. 600,000. The proprietor projects that the

business will grow with 4%, 8% and 10% for the initial three years of operations. The business

will require Kshs: 60,000 and 75,000 as working capital for the two years. The net cash inflow

has also been calculated and it amounts to Kshs: 680,000, 815,000, and 1,071,700 for the threeyears respectively.

The proprietor has projected a profit of Kshs: 72,000, 100,000, and 203,000 for the three years

respectively. To break even, the business must have sales revenue worth Kshs 521,111 in a year.

The current ratio of the business in 2011 is 1.88; stock turnover of the business is on average

57.7% while as the profit margin is an average of 14.73%.

The desired financing amounts to Kshs. 680,000 and this will be catered for from personal

savings of Kshs. 200,000, from family and friends Kshs. 250,000 and a Loan from the bank of

Kshs. 230,000.

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CHAPTER TWO

2.0 BUSINESS DESCRIPTION

2.1 Sponsor

Name : Frolence Thegetha

Age : 30 Years

Marital Status : Married

Residence : Kenyan

Education : Diploma in Information Technology

Experience : Employed as a cyber caf assistant.

Acquiring the

Necessary experience : From current employment as a cyber caf assistant.

Attend workshops mostly organized by

Kenya Small Business Association.

Attending training seminars for Small Business Entrepreneurs

Amount to be invested: Kshs. 680,000

Amount to be borrowed: Kshs. 480,000

Specific sources of fund: From Equity Bank and from family and friends.

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2.2 Name of the Business

The name of the business will be 3GTECH CYBER CAF. The word 3GTECH was

adopted because of its simplicity that makes it unique to customers and conveys a state of art

modern technology cyber that our customers needs would be fully satisfied

The proposed business would be a start up and the entrepreneur expects to open up the business

after completing his studies so as to capitalize on the free time that he will have and also on the

skills acquired during his course.

2.3 Location of the Business

The business will be located at Nyeri. The postal address of the business is P. o. Box 3589 200,

Nyeri. The business phone number will be 0724564468. The email contact of the business willbe [email protected]. The location is favorable because of the availability of

institutions and Hostels, level of rent and rates which are considerably affordable compared to

other areas in Nyeri, There are also a number of institutions around that can be considered to be a

rich market for the businesses services.

2.4 Form of Ownership

The business shall adopt a sole proprietorship structure and management. I will be the sole owner

of the business and this is mainly because I have the relevant and appropriate skills to manage

the business and also am able to secure the necessary resources for the business.

Suitability of the form of ownership chosen

i. I will have direct contact with my clients and therefore be able to serve them

better.

ii. There are fewer legal formalities that are required to start the business.

iii. To coordinate and supervise this kind of business is easier.

iv. The aspect of personal appraisal evaluation of a person and for the business is

enhanced by the virtue of its creation and management style.

v. The ability to network with different prospects that will assist in the consultancy

and financing of the business.

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mailto:[email protected]:[email protected]:[email protected]


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2.5 Products and Services

The Products and Services

The main services includes: offering computer services where people can access the internet. The

business will also offer printing, scanning, photocopying, lamination, typesetting, stationeries,

binding and offer training on computer packages and accounting packages

2.6 Industry

The business is categorized under the information and communications technology industry.

Within this area, this industry is characterized by small businesses offering very limited or no

variety at all in terms of only focusing on one area alone such as cyber caf and at the same time

mostly specializing in the provision of internet services. Most of the businesses in these industryare sole proprietorships and due to the nature of services/products that they offer and the

accompanying high costs, most of the clients prefer to go to get these kind of services from

businesses that offer them at lower prices and therefore most of the businesses have only a

handful of customers while others have specialized in one area of service such as bulk printers

who target corporate organizations.

2.7 Justification

Customers will always want to be associated with a business that conforms to customer

requirements and which values the customer as the king. Most entrepreneurs in this sector

particularly in Ngara are not aware of what the customer wants most of their business premises

provide low quality products and services for instance low speed in internet access, low quality

printing services. Etc 3GTECH CYBER CAF comes handy with the efficient and effective

products and services that for Ngara customers; this is due to a simple market research which I

carried out to determine what customers expect from cyber cafes.

The business has good chances of success due to the following factors:

Trends and growth potential of the market Off late, there has been an increase in the

number of students in learning institutions therefore a strain on the resources of the institution.

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Weaknesses of the existing competitors through a market survey, I was able to identify

specific weaknesses of the competitors some of which include; limited variety, high costs, lack

of reliability i.e. most of the business had inadequate equipment that were too old while others

had slow working computers and also most of the businesses operate from 8 to 5 and therefore

they are not able to cater for early morning, late evening and weekend clients.

3GTECH CYBER CAF will be a success since the business owner will combine the principles

of variety, quality products and services, reliable computer equipments and also offer products

and services that customers are able to afford while satisfying their needs

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CHAPTER THREE

MARKETING PLAN

3.1 Customers:

The major customers are as summarized below:

Individuals these are persons who purchase for their own consumption. These are the

customer who spread the good word of the business to others about our products and services.

Hence the business seeks to maintain standard quality on its products and services so as to attract

more loyal customers.

Institutions these includes: secondary schools, training colleges and universities. These

institutions mostly carry out their day to day activities using most of the products which the

business will be selling. 3GTECH seeks to apply for tenders from these institutions to supply

them with stationeries and services such a bulk printing and photocopying.

Government agencies - Due to high profile and expectations once the business expands to

diversify into others related services the others class of customers to target are government

agencies. Government agencies will be targeted when it comes to tendering for supply of the

stationery like photocopies paper, writing material etc.

Understanding of the prime customers:

This is analysis under different categories

What they buy: They mostly purchase stationeries and computer services such as printing,

photocopy.etc

For secondary school their purchases mostly consist of exercise books, photocopying papers for

examination printing, pens, pencils, paper clips, browse the internet.

For colleges and universities they mostly purchase photocopying papers, they also demand

services of printing, photocopy, lamination, typesetting, binding, printing, scanning, and

browsing

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Why do they buy - The major reason why they buy what they buy is to fulfill certain needs for

life existence. Like institutions cannot do without stationeries. Hence they satisfy these needs

when they make a purchase. Therefore, the customer needs to be treated well by the business by

fulfilling his or her needs with quality products and services.

Their preferred mode of buying There are different modes which customers use when making

a purchase. These are cash or on credit basis. For most learning institutions, they usually buy on

credit while as for individual customers the most common mode of buying is cash. Availability

of cash enables customers to buy on cash while others request for credit facilities. Already

measures are in place to facilitate these two modes of purchase.

When they buy In this business there are fluctuations in terms of demand. I.e. there are times

when demand is high or low. During the month of January, May and September, these are theperiod when most individual and learning institutions demand more of the stationeries from the

shops for a new terms, it requires high stock levels to prevent any discouragement due to stock

outs.

3.2 Competition.

There are various competitors existing currently within the chosen location of the business. The

major competitors are:

One Stop cyber cafe: They operate within the same locality and the business started operating 4

years ago. It is a family business and though they are located near a road network but they have

been unable to capitalize on their location since their opening has been very inconsistent and

mostly their services are slow.

On the other hand 3GTECH CYBER CAF will open Mon to Saturday 7pm to 8pm and on

Sundays from 2pm to 6:30 pm. Also one of the distinguishing features of 3G TECH CYBER

CAF will be variety and quality and this will automatically draw clients to the business.

Digits cyber cafe - has been in operation for the last 3 years. This business is located in an

isolated locality. Their prices are also a bit high compared to all the other existing businesses.

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To neutralize this advantages, 3G TECH services will have a credit facility in place especially

for those who will be taking the training of computer packages, the prices will be lower since I

believe in accessible products and services and finally the business will have a modern outlook

so as to attract moon light clientele and then offer them much more at a lower cost.

Hedge Hog Cyber caf a small cyber cafe shop located within Ruringu. The proprietor

usually concentrates on offering only computer services where customers are only offered

internet services.

To counter these, KENTECH CYBER CAF will offer competitive prices, offer a variety of

services and at the same time clients will have an opportunity of accessing the internet faster.

And therefore since most of Hedge Hog clientele are students from the Vision Institute of

Professionals our business will be able to capture these customers.

3.2.1 SWOT Analysis

The SWOT analysis seeks to examine the strengths, weaknesses, opportunities and threats of the

proposed business. The analysis will enable 3G TECH CYBER CAF to build its customer base

and acquire a certain percentage of market share.

3.2.2 Strengths

Strength is an area in which a company is better off than its competitors. The identified strengths

of this business include the following:

i. Variety; Provide a range of different products lines. Most of the business existing

within the same environment doesnt have a wide range of variety in terms of the

services that we shall be offering.

ii. Quality service to target customers.

iii. Skilled strategic planners in all areas of management.

iv. Visionary and good leadership style.

v. Pricing; the intention is to have a competitive price that would allow us to

dominate a larger market share and therefore be able to capitalize on the sales

turnover.

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vi. Quality of products and services Quality is core for this business and therefore

by offering high quality services clients will keep on coming.

3.2.3 Weaknesses

Possible weaknesses of this business will include:

i. The high start up cost of implementation.

ii. Coping with competition from well established competitors.

iii. Cost of maintenance of the equipments.

3.2.4 Opportunities

A business unit has to monitor key macro environment forces (demographic, economic,

technological, political-legal and social cultural) and significant micro environment factors

(customers, competitors and suppliers) that affect the ability of the business to earn profits. Some

of the envisaged opportunities include:-

i. Availability of a favorable business environment that is flexible to the business.

ii. Employing new technological developments that are more cost effective.

iii. Offer promotional prices due to high demand.

3.2.5 Threats

An environmental threat is any unfavorable trend or development that can lead to the absence of

defensive marketing action, to deterioration in sales or profits. The business shall classify threats

according to seriousness and probability of occurrence. The threats that the business shall be

faced with are:-

i. Rapid changes in technology may warrant the company to keep on changing its

equipments to keep up with the pace.

ii. Downward pressure from competitors on pricing.

iii. Market share strategies are pushing credit prices down.

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3.3 Pricing Strategy

The business shall base its pricing strategy on cost benefit analysis which will enable the

business to generate prices that will be equal to or less than those of the competitors while

generating a profit at the same time.

The pricing strategy will be based on:-

i. Cost of inventory part

ii. Cost of overheads

iii. Prevailing market prices

iv. Profit margin

The prices will be two fold i.e. promotion prices that would attract an 8% discount every time

there is a promotion and during the initial 4 months of operation when the business will have a

penetrating price.

3G TECH will stabilize its prices after 8 months of operation in which during the same period

the organization will still be offering discounts and offers to bulk purchases.

3.4 Sales Tactics

Direct selling 3G TECH CYBER CAF will engage the services of individual sales people

who will be making direct contact with customers of our products and services close up on any

sales opportunity and distribute brochures to potential clients. Inform customers on the changing

features of our products, offers and discounts on our products and services. These sales people

will be paid on commission basis.

Quality of sales staff and their number the business will endeavor to engage professional sales

people and since their payment will be based solely on commissions the business will engage

with two salesmen. The sales representatives will be engaged in a sales program by which the

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sole proprietor together with the sales representatives will put in place the strategies to market

the products and services to reach the intended customers

3.5 Advertising and Promotion strategy

To reach out on the targeted customers the following promotion strategies will be adopted by

3GTECH CYBER CAF.

Advertising by means of:

i. Flyers and Banners; The banners and flyers will come in handy during sales

promotions. The banner will cost Kshs. 10,000 and the flyers will be at Kshs. 10 each and

to start with we have ordered for 2500 copies.

The banner will be creatively designed in order to entice customers from a distance and

for the flyers they are very efficient since all potential clients who interact with the sales

team will have something to go with which they can use to recommend the products and

services to other people and for any other kind of references.

ii. Personal Selling

3GTECH Services will engage the services of individual sales representatives, who will

be making direct contact with customers through door to door selling activities to marketthe products and services, close up on any sales opportunity and distribute brochures to

potential clients. These sales people will be paid on commission basis.

iii. Sales promotion

The business will have an initial opening sale which will run for eight months and then

from there onwards we will be having seasonal sale promotions whereby for each season

one fast moving item will be on sale in order to ensure that as the clients come for this

services they also get to see and buy our other products and services.

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CHAPTER FOUR

ORGANIZATIONAL PLAN

4.1 The Organization Structure

The business will adopt a simple structure, with the business manager being at the very top

position and then have one person as his assistants occupying the position of an operations

coordinator and marketing. The business will be hiring sales representatives during promotion

campaigns who shall report to the manager and operations coordinator.

Fig 1.0 Business Structure

4.2 Key Management Personnel

The business will have only one proprietor who will also act as the Business Manager and he

will be expected to undertake the following responsibilities:

i. The business manager shall coordinate all the aspects of the business in

collaboration with the operations coordinator.

ii. The business manager shall also be responsible for the performance of the

coordinator

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Business Manager

Operations

coordinator

Coordinator

Support StaffSales

Representatives


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iii. The business manager will be expected to be the one responsible for making key

business decisions.

iv. The business manager shall also coordinate the marketing and operations of the

business.

v. Sourcing out business opportunities for the business through hired sales men and

also will be expected to organize and coordinate all sales and marketing activities

that the business will be undertaking

The business manager will be paid a salary of Kshs. 25,000 per month

Other than the business manager, there shall be only one personal assistant who will be the

operations coordinator in the management team.

Operations Coordinator This will be one position and to be considered for the position a

candidate will have to prove that he/she has prior experience in business management, must have

at least CPA part 1, must be computer literate.

The operations coordinator will be responsible for sourcing of the various items and equipments

that the business will require, will coordinate all service activities, will maintain the businesses

books of accounts, will coordinate the general operations of the business which includes amongst

others cleaning, security and banking of all cash collections.

The incumbent will be given a basic salary of Kshs. 20,000,

4.3 Other personnel

Sales men

The business shall hiring sales men on contract basis who will be expected to source out business

and close deals where applicable. They will also be expected to dedicate some of their time in

marketing the business and the products. To start with, the business will engage 2 sales men and

then review the number to 5 after the initial one year of operating.

The incumbents must have at least a Diploma in sales and marketing with at least 1 year of

experience as a sales person dealing with the first moving goods or services.

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The incumbents will get a salary based on a commission at the rate of 8% of their gross sales.

Support Staff

This position shall only be one in the business. The incumbents will be expected to assist with

the cleaning, arranging of the outlet, and guiding clients within the business. Also when there is a

major marketing campaign they will be expected to be part of the campaign.

The incumbents will be paid a salary of Kshs. 7,000.

4.4 Recruitment training and promotions

All recruitments shall be on merit basis whereby the proprietor will head hunted both the

operations and Sales and marketing coordinators. After recruitment, it will now be the

coordinators responsibility to organize on how the incumbents for those people reporting to

them will be sourced. The proprietor will have to meet all candidates and approve before they are

engaged as employees. All employees will have to undergo an initial induction training where

they shall be taken through the vision, mission and values of the business.

All people under sales will be evaluated on the basis of achieving the set target of Kshs. 50,000

gross sales per month and client feedback. For those under operations, it shall be based on their

performance and carrying out the tasks assigned to them

4.5 Remuneration and incentives

Table 4.1 Remuneration and Incentives

Position Positions Salary Total Pay

Manager 1 25,000 25,000

Operations

Coordinator

1 20,000 20,000

Sales Men 2 Each @

7,000

14,000

Support staff 1 7,000 7,000

Total 5 66,000 66,000

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4.6 Support services

i. Banking Services

The business will open an account with Equity Bank Ngara Branch. This is mainly because its

easy to get a business loan with this bank once you have an active account with them for some

time.

ii. Insurance Services

The business will get a cover with CFC insurance company who has agreed to give a cover at a

cost of 10% of the total value of the business per month.

iii. Security Services

G4S will be contacted to offer security services at a cost of Kshs. 500 per month for one guard.

4.7 Licenses, Permits and By - Laws

3GTECH CYBER CAF will abide by all trading regulations and rules of the local county

councils and the country as a whole. 3GTECH CYBER CAF will set out contracts of service

and provisions on such matters as summary dismissal, notice on terminating of services of an

employee, and the keeping of records of the employees to be hired as per the regulations set out

in the Employment Act of 2007.

CHAPTER FIVE

OPERATIONAL PLAN

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5.1 Operational Facilities

The business will be operations oriented and therefore the proprietor has picked on a building

that will support the operations of the business. The building that will house the business will be

rented at a cost of Kshs. 15,000 per month and a deposit of kshs 10,000.

The building has an ample parking space that is around the Dubai House. The building is easy to

locate and due to its strategic position.

To be operational, the proprietor plans to cater for the redesign and restocking of the main

operating room so that it can be fitted with shelves, a cashier stand and also increase the

ventilation in order to ensure that there is enough air circulation due to the high number of

customers that are expected. All these renovations and partitioning will cost a total of Kshs. 100,

000.

The owner of the premises has agreed to be taking care of the annual maintenance fee of the

premises after the business proprietor gives it the initial face lift.

The following information relates to the equipments and tools that the business will need to be

able to start off with the operations.

Table 5.1 Equipments and Tools for Start up.

Item No. Capacity Unit Cost T.T Cost Manufacturer Supplier

Computer 10 40 GB,

512MB

memory

20,000 300,000 DELL Blue Merg

Printer/Photocop

ier/Scanner

1 30 sheets

per Min

150,000 75,000 HP Copy Cat

Laminator 1 10,000 10,000 Casio Blue Merg

ETR Machine 1 27,000 27,000 Casio Blue Merg

Shelves 6 50 items 3000 18,000 Artech Artech

Stapler 2 24/6 & 200 500 Office Point Tuskys

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Paper Punch 2 18 sheets 300 600 Office Point Tuskys

5.2 Operational Strategy

Table 5.2 Material Requirements

Monthly Materials Requirements

Item units Total cost Manufacturer Supplier

Biros 20 400 Haco Industry Haco Industry

Printing Papers 250 rims 62,500 Kasuku & Kartasi Kasuku and KartasiStaples 2 400 Office Point Office Point

Paper punches 2 600 Office Point Office Point

Ring Binders 1600 40,000 Haco Industry Haco Industry

Empty CDs 300 3,000 Imation Blue Merge

For all these monthly materials, the suppliers will be delivering the supplies at the business

premises at no extra cost to the business. In situations where there will be shortages either due to

high demands or delayed deliveries the proprietor will organize to have the materials collected

from the suppliers and such costs shall be charged as inventory costs in that particular month. To

try and mitigate against shortages the proprietor will ensure that the business adopts an inventory

policy and mechanisms that would ensure the business has enough stock of the required

materials at all times.

Overheads

Table 5.3 Overheads

Item Cost

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Rent 15,000

Electricity 2500

Water 400

Advertising 30,000

Office Stationary 4500

Insurance 3000

Security 500

License 1250

Total 51650

5.3 Operational process

All the services that shall be provided will be ready to be offered to the customer or clients.

Other than a few services like binding, laminating and typing and printing of which the acquired

products will have to be taken through a final processing by the proprietor to be useful to the

client.

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Fig 2.0 Layout of the 3Gtech Cyber Caf

5.4 The Regulations governing Operations

These regulations range from government regulations to the local government regulations.

The registration of business with the register of businesses must be obtained before any other

activity is carried out this will cost the proprietor Kshs. 20,000

The license from the local government also must be obtained before opening the business to

ensure conducive environment for the business, this will cost Kshs. 1250 per month

Requirements such as value added tax registration and personal identification number (pin) shall

be obtained from Kenya Revenue Authority.

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Table 5.4 Government Permits.

Trading license Nyeri County Council 1250 per month

V.A.T Certificate Kenya Revenue Authority -

PIN NO Kenya Revenue Authority -

Registration certificate Nyeri County council 20,000

5.5 Technology to be used

So as to avoid inconsistencies in our provision of services especially the internet services, the

business will subscribe a 10GB (gigabyte) internet bundle from KDN Limited (Kenya Data

Networks) which is reliable at a cost of KSH 10,000. This is because unlike other internet

providers, the internet bundle is efficient and reliable, fast in term of speed.

CHAPTER SIX

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FINANCIAL PLAN

6.1 Pre Operation Costs

Table 5.5 Pre-Operation Costs

3GTECH CYBER CAF

PRE OPERATIONAL COSTS

ITEM COST

Rent Kshs 15,000

Renovations Kshs 100,000

Electricity Kshs 2500

Water Kshs 2000

Registration and legal Fees Kshs 20000

Licenses and Permits Kshs 15000

Furniture, fixtures and Fittings Kshs 50000

Tools and equipments Kshs 400,000

Stationery Kshs 2000

Bank Charges Kshs 8,000

Insurance Kshs 3000

Advertising Kshs 30,000

Total Kshs 647,500

i. The rent will be at the rate of 15,000 per month.

ii. The repainting of the room and the customization is will also form part of the preoperational costs under renovations.

iii. Electricity, water, telephone and postage include money that will be deposited

with the service providers plus the initial cost of customizing these services.

iv. The license will cost Kshs 1250 per month,

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v. Tools and equipments are as reflected under operational tools and equipments

6.2. Working Capital Requirements

Table 5.6 Working Capital Requirements

3GTECH CYBER CAF

WORKING CAPITAL ITEMS YEAR 1 YEAR 2

A. Current Assets

Inventory 150,000 180,000

Debtors 50,000 45,000

Cash at Bank 20,000 27,000

Cash in hand 5,000 8,000

TOTAL 225,000 260,000

B. Current Liabilities

Short term loan 60,000 80000

Bills payable 55,000 60,000Creditors 50,000 45,000

TOTAL 165,000 185,000

NOTES

It is projected that the business will experience a growth of 4%, 8% for the initial two

years and this explains the variance of the figures in the two years.

6.3. Projected Cash Flows

Table 5.7 Projected Cash Flows

ITEM 2011 2012

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A cash inflows

Beginning cash 650,000 750,000

Cash sales 250,000 350,000

Collections from debtors 50,000 25,000

Total inflows 950,000 1,125,000

B Cash outflows

Cash purchases 80,000 95,000

Creditors payment 30,000 20,000

Rent 15,000 15,000

Wages & salaries 66,000 66,000

Electricity 2500 3500

Water 5,000 5,000

Telephone 5,000 5,000

Transport 6,500 6,500

Stationery 2,000 2,000

Advertising 30,000 40,000

Repairs & maintenance 15,000 15,000

Tax 5,000 5,000

Insurance 3,000 3,000

Bank charges 8,000 6,500

Total outflows 273,000 287,500

Net Cash Inflow 677,000 837,500

6.4. Pro - Forma Income Statement

Table 5.8 Pro-Forma Income Statement

3GTECH CYBER CAFE

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PRO FORMA INCOME STATEMENT

FOR THE YEAR ENDED 31ST DECEMBER

ITEM 2011 2012 2013Sales 700,000 800,000 950,000

Less sales returns 50,000 45,000 55,000

Net sales 650,000 755,000 895,000

2. cost of goods sold

Opening stock 200,000 230,000

Add purchases 400,000 250,000 300,000

Less purchases returns 40,000 60,000 50,000

Cost of goods available for sale 360,000 390,000 480,000

Less closing stock 200,000 160,000 210,000

Cost of goods sold 160,000 230,000 270,000

3. Gross profit 490,000 525,000 625,000

4. operating expenses

Rent 15,000 15,000 15,000

Wages & salaries 66,000 70,000 70,000

Electricity 60,000 60,000 60,000

Water 60,000 60,000 60,000

Telephone 30,000 33,000 27,000

Stationery 13,000 15,000 18,000

Advertising 30,000 40,000 50,000

Repairs & maintenance 60,000 63,000 66,000

Insurance 36,000 36,000 36,000

Total Expenses 370,000 392,000 402,000

5. NET PROFIT 120,000 133,000 223,000

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i. It is projected that the business will experience a growth of 4%, 8% & 10% for

the initial three years and this explains the variance of the figures in the threeyears.

ii. Insurance will be charged at a cost of 10% on the value of the business for every

month

iii. Advertising 30,000 comprises of the cost of buying a banner, printing out 5,000

flyers.

6.5. Pro Forma Balance Sheet

Table 5.9 Pro-Forma Balance Sheet

3GTECH CYBER CAF

PRO FORMA BALANCE SHEET

AS AT 31ST DECEMBER

ITEM 2011 2012 2013

Assets

Current assets

Cash in hand 30,000 40,000 50,000

Cash at bank 60,000 90,000 100,000

Debtors 50,000 45,000 55,000

prepayments 30,000 25,000 34,000

Total current assets 170,000 200,000 239,000Fixed assets

Tools and equipments 400,000 470,000 550,000

Furniture & fittings 100,000 110,000 130,000

Total fixed assets 500,000 580,000 680,000

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Total assets 670,000 780,000 919,000

Liabilities

Current liabilities

creditors 50,000 60,000 70,000

Bills payable 20,000 25,000 35,000

Short term loan 30,000 25,000 35,000

Total current liabilities 90,000 110,000 140,000

Long term liabilities

Bank loan 400,000 250,000 200,000

Total long term liability 400,000 250,000 200,000

Total liabilities 490,000 360,000 340,000

Capital ( equity) 180,000 230,000 250,000

Add retained profits 190,000 329,000

Total liabilities and capital 670,000 780,000 919,000

The bank loan will have been used in to cater for some of the pre - operational costs

Stock will form part of the cash at hand.

6.6 Break Even Point

Breakeven point = Operating Expenses

1 - Cost of sales/sales

Break Even point (2011) = 402,000 = 521,111.111

1-160,000/700,000

To be profitable, 3GTECH CYBER CAF will have to make sales worth at least 521,111

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CHAPTER SEVEN

7.1 RISK ANALYISIS

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As the business is in an industry that experience rapid technological advancements, then the

business is faced with a risk of having and operating equipments that may run out of date.

The business may also run the risk of incurring losses due to frequent power failure and outages.

The business may also be faced with the risk of computers crashing as a result of computer

viruses which would mean that the anti-virus has to be updated frequently.

The business may also be faced with the risk of vandalism especially from thugs,

The business may also be faced with the risk of competitors copying or duplicating what we are

doing and therefore change in market share.

The business may also be faced with the risk of not achieving the targets set which translates not

recouping the initial investments.

REFERENCES

1. Amstrong M. (2006), Human Resource Management Practice 10th Edition, Kogan

Page Limited, London

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2. Cole, A. (1959) Business Enterprise in its social setting, Harvard University Press,

Boston, 1959

3. Drucker, P. (1970) Entrepreneurship in Business Enterprise, Journal of Business

Policy, Vol 1, 1970.

4. Stathis, M. (2004) The startup Company Bible for Entrepreneurs Apex Venture

Advisors Publishing.

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