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

1. Executive summary: short overview written last but placed first.
2. Business description: name, location, legal form (sole proprietorship, partnership, company), mission.
3. Marketing plan: target customers, competitors, the 4 Ps (product, price, place, promotion).
4. Operations plan: premises, equipment, suppliers, workers, daily routine.
5. Management plan: who does what, skills of the owner.
6. Financial plan: start-up costs, projected income, cash flow, break-even.
7. Risks and mitigation: theft, competition, changes in prices.

Sources of start-up capital

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

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.