Business Plan and Start-up Capital
What is a business plan?
A business plan is a written document describing a business idea, how it will operate, who will buy and how money will be made. In the Kenyan CBC Business Studies pathway, learners prepare one for a small school or community enterprise. It guides the owner and convinces lenders such as banks and SACCOs.
Components of a business plan
- Executive summary: short overview written last but placed first.
- Business description: name, location, legal form (sole proprietorship, partnership, company), mission.
- Marketing plan: target customers, competitors, the 4 Ps (product, price, place, promotion).
- Operations plan: premises, equipment, suppliers, workers, daily routine.
- Management plan: who does what, skills of the owner.
- Financial plan: start-up costs, projected income, cash flow, break-even.
- Risks and mitigation: theft, competition, changes in prices.
Sources of start-up capital
| Source | Notes |
|---|---|
| Personal savings | No interest, no repayment |
| Family and friends | Flexible, may strain relationships |
| Chama / table banking | Group savings and loans |
| SACCO or bank loan | Needs security and a plan |
| Government funds | Uwezo Fund, Youth Enterprise funds |
| Mobile loans | Quick but high interest |
| Grants and donations | Not repaid |
Start-up costs
Include licence (county single business permit), rent deposit, equipment, first stock and working capital for the first months.
Break-even analysis
Contribution per unit = selling price - variable cost per unit.
Break-even units = fixed costs / contribution per unit.
Worked example 1: A mandazi seller has fixed costs of KES 6,000 per month. Each packet sells at KES 30 and costs KES 18 to make.
- Contribution = 30 - 18 = KES 12
- Break-even = 6,000 / 12 = 500 packets
Worked example 2: If she sells 800 packets, profit = (800 x 12) - 6,000 = 9,600 - 6,000 = KES 3,600.
Simple profit projection
| Item | KES |
|---|---|
| Sales (800 x 30) | 24,000 |
| Less cost of goods (800 x 18) | 14,400 |
| Gross profit | 9,600 |
| Less fixed costs | 6,000 |
| Net profit | 3,600 |
Qualities of a good plan
- Realistic, clear and based on market research.
- Shows how loans will be repaid.
- Updated regularly.
Try it
- Choose a business near your school and list its five main start-up costs.
- A barber has fixed costs of KES 15,000, charges KES 150 and variable cost is KES 30 per cut. Find the break-even number of cuts.
- Write a three-sentence executive summary for a tuck-shop plan.
- State two risks of borrowing through mobile loans.
Quick Quiz
- Marketing plan
- Executive summary
- Financial plan
- Appendix
Answer: Option 2- Trade credit
- Bank overdraft
- Bank loan repayable in 5 years
- Accrued wages
Answer: Option 3- 300
- 500
- 750
- 1,000
Answer: Option 2- Uwezo Fund
- Hospital Fund
- National Highway Fund
- Tourism Fund
Answer: Option 1