Safe Care Daycare Business In Kisumu, Kenya – Childcare Services

Mission and Vision

Safe care Daycare business will be a start-up child care facility establishment that will be situated in Kisumu, Kenya. The new business of child care facility is focused to attain great interest of regular consumer base with its wide base of consumers with its wide range of safe and secure child care services. The new bakery shop is intended to build a strong market position within the town because of its industry knowledge and low competitive surrounding in the business location. Safe care Daycare business has focuses on offering its products at a highly competitive price in order to address the demand of middle to higher income level consumers in the market. This Safe care Daycare business will be managed by two partners those will represent the management and administration areas. In establishing Safe care Daycare business the partners will offer funding from their savings that will address start-up expenses along with offering financial stability in the first year of business. Community center of Kisumu, Kenya is selected as the most suitable location for setting up this business. This is for the reason that the locality has a huge population base with very less competitors in the area. To attract a huge consumer base Safe care Daycare business will offer most exceptional childcare services to the infants through providing better games, toys and books for entertainment in the locality.

Mission set by Safe care Daycare business is to offer traditional and childcare services to the infants through providing better games, toys and books for entertainment at a competitive price that can address the demand of middle to higher income local market area visitors. The vision of Safe care Daycare business is to position itself as a daycare business that offers superior quality product with personalized consumer service. The vision of this new business will focus on offering safe and secured childcare at all times. Close personal attention will be given to every child that is deemed vital to provide a quality experience to every child. This is the reason for which suitable personnel will be appointed for making sure that every child attains superior supervision will be in care of this new day care business.

Product and Services

Safe care Daycare business will offer a wide range of childcare services at all the times of its business operations.

Certain daycare services that will be offered by this new business will include introducing rainy day activities along with serving and preparation of meals. Safe care Daycare business will also include toys, games and books for entertainment of children.

Safe care child care services will be offered to the infants of the age group of 3 months to 6 years old. Hours of operation of this new daycare business will be from 6:30 m to 7:30 pm from Monday to Saturday.

This new daycare business will also offer infants with several entertaining toys along with sandbox that are generally preferred by most children.

Five Product Levels

For this new daycare business it is identified that there are five product levels those can be identified and developed and these product levels signify the value that consumers associate with the company’s products. These five product levels for Safe care Daycare business are explained under:

• Core Benefit: This will include the basic product that will be offered by Safe care daycare business. For instance, childcare services during the daytime will be the major service that will be offered by this new business. Through observing such core services it can be stated that it is the uniqueness of this core service that will facilitate in better product positioning and decrease effects of fierce competition.
• Generic Product: This aspect indicates the quality of the services offered by Safe care Daycare business. For instance, rainy day activities along with serving and preparation of meals. Safe care Daycare business will also include toys, games and books for entertainment of children.
• Expected Product: This aspect includes services offered by the Safe care Daycare business that is expected by the consumers. For  instance, this new daycare business will also offer infants with several entertaining toys along with sandbox that are generally preferred by most children
• Augmented Product: This includes all the additional aspects that involve enhancing brand identity and image of the Safe care Daycare business. The objective of this new business is to offer qualities that are beyond an expected product along with offering exceptional learning programs and games for children.
• Potential Product: These aspects will consider the transformations as well as argumentations that will be undergone by the services of Safe care Daycare business in the upcoming years. For instance, new and innovative learning and play activities will be introduced for engaging children. In addition, few new toys games and toys will also be added for their entertainment.

Product and Services

Porter’s Generic Strategies

Porter’s generic competitive strategies are developed for Safe care Daycare business that can facilitate the company in attaining average performance in the industry. Differentiation strategy of Safe care Daycare business will make sure that the company sustains competitive advantage by means of specialty products as well as childcare services. The generic differentiation strategy will follow several policies and programs that can maintain the company differentiated.

Strategies those are relied on differentiation are developed to appeal consumers with special sensitivity for specific product aspect. In order to differentiate its business within the daycare industry the following strategies will be implemented by Safe care Daycare business:

• Market Penetration: Major intensive differentiation strategy of Safe care Daycare business will be attaining growth through market penetration. Such intensive strategy will support the company’s growth though increasing revenues from its existing markets. It will increase its presence in other parts of the nation. In order to increase its revenues along with attaining growth in the Kenyan markets because of which Safe care Daycare businesses intensive strategy of opening more daycare centers in the locality.
• Service Development: Safe care Daycare business will employ service development strategy that can also facilitate intensive company growth. In order to attain increased revenues, services offered by the company will include including more interactive learning and playing activities for children. Constant innovation of product mix will also be considered through offering new range of toys and children daycare services.

Product Selection

The products and the services those are intended to be offered by this new business of Safe care Daycare are explained under:

• Certain daycare services that will be offered by this new business will include introducing rainy day activities along with serving and preparation of meals. Safe care Daycare business will also include toys, games and books for entertainment of children.
• Safe care child care services will be offered to the infants of the age group of 3 months to 6 years old. Hours of operation of this new daycare business will be from 6:30 m to 7:30 pm from Monday to Saturday.
• This new daycare business will also offer infants with several entertaining toys along with sandbox that are generally preferred by most children.

Porters Five Forces

Porters Five Forces analysis is carried out for the Safe care daycare business as this can facilitate analyzing the suitability of the business environment of Kenya for this new business.

• Competitive Rivalry: This force is high for Safe care in Kenya because of existence of numerous competitors. Larger business within Kenyan child care industry is observed to operate on a higher level than the local companies. The different competitors of the business are day cares like Mother Goose baby care, Haven Daycare, Kids Playhouse day care, Victoria Kids Care, Green lane kindergarten day care among others. Small and new daycare businesses will have to select convenient and local locations to attain exceptional advantage to attain larger market share of local communities business. Converting customers those use substitute products is another aspect of competition existing within the daycare industry.
• Threat of Substitutes: Substitute products encompass the non-profit companies in Kenya that offers daycare services, churches that offers daycare along with certain employer-sponsored daycare facilities. Moreover, many influential people can even employ help at home in order to take care of their children and provide them with a better lifestyle.  Existence of such types of daycare facilities is observed to be present in offer companies or highly industrialized areas. Other direct competition is deemed to come from certain established child care facilities, personnel babysitters along with stay at home parents in Kenya.
• Threat of New Entrants: The chance of new entrants in the sector is high because of the ease of obtaining essential licenses. In addition, the numbers of pre-kindergarten programs supported by the state, which are housed in public schools, have grown over the years. This might affect the enrollment at private facilities and thus, difficulties could be encountered to maintain sound financial position. Moreover, the various growth opportunities in the given sector tend to attract different organizations.
• Bargaining Power of Consumers: The bargaining power of the consumers is medium, as many alternatives are inherent in the child care sector; however, they search for greater quality care having reliability, affordability and accessibility, which make it difficult for the working parents. Although there are a wide number of opportunities as available for the organization, for various age groups, the services provided by each of the companies is quite varied in nature which then tends to have a negative impact on client section and preference. Thus, they are in search of a business offering services to fulfill their needs at a lower price.
• Bargaining Power of Suppliers: The suppliers have high bargaining power, as they could provide greater value without minimizing price. Despite the availability of substitutes, a price could not be placed to value. This is because specialized services will be required to be given to the different consumers which would then lead to a higher demand. The higher the perceived value of child care services, the less likely the customers are about to haggle on the price and the customers of the competitors would register their children as well.

PESTEL Analysis

The Pestle analysis of Safe care Daycare in the Kenyan market is demonstrated briefly as follows:

• Political factors: Safe care Daycare will operate in consumer services in Kenya and thus, it will be exposed to various types of political environment and political system risks. Certain political factors need to be considered before the organization starts to operate in Kenya. These factors include corruption level, legal framework related to contract enforcement, favored trading partners, wage legislation and pricing regulations. In addition, the other benefits are compulsory employee benefits, industrial safety regulations along with product labeling and other requirements.
• Economic factors: The macro-environmental factors like the rate of inflation, rate of interest, savings rate and economic cycle ascertain aggregate demand and aggregate investment in a nation. On the other hand, the micro-environment factors like competition norms affect the competitive supremacy of Safe care Daycare. In addition, the organization could use the economic indicator of the nation like inflation, growth rate and spending of the consumers to estimate growth trajectory. Furthermore, the other economic factors that need to be taken into consideration are the type of economic system inherent in the Kenyan market and its stability. Thus, it could be stated that the intervention of the government in the free market and associated consumer services are the key economic factors for the business.
• Social factors: The shared attitudes and beliefs of the population play a crucial role in how the marketers at Safe care Daycare would understand the customers of Kenya and the way the marketing message is designed for the consumers of the consumer services industry. Hence, Safe Care needs to take into consideration the demographics, class structure, education level and culture of its target population before designing its marketing strategies.
• Technological factors: In terms of technological factors, Safe Care has to verse with the recent technological advancements made by its competitors and their impact on service offerings and cost structure along with the rate of technological diffusion. There has been rapid transformation of the industry in the past five years by providing opportunities to the established players in coping up with the change.
• Environmental factors: In Kenya, there are different liability clauses, if mishaps or environmental disasters take place. In addition, the government of Kenya often provides tax breaks to the organizations working in the consumer services sector. Hence, Safe Care needs to consider certain environmental factors, which include climate change, weather, environmental pollution laws, waste management along with attitude towards and support for renewable energy.
• Legal factors: There are certain legal factors in Kenya that Safe Care has to take into account before initiating its business and they are discrimination law, health and safety law, data protection along with consumer and e-commerce.

STP Analysis

New business of Safe care Daycare business will target a particular consumer segment that belongs to upper and middle class segment, two income professional families. This consumer group segment will be selected as the target market these are group of families having parents working that does not allow them time to raise their children. This group of families include working parents those have time for attaining more sophisticated child care ad are quite ambitious in terms of learning and development of their children. This target consumer segment has also considered offering proper teaching to their children regarding advanced concepts such as singing, reading as well as socialization. Consumer needs of this target consumer group, Safe care Daycare business will focus on developing skills of children. As there is growing number of working professionals in Kenyan families with people having long working hours there will be an increased need of child care.

This new daycare business will decide to position its business as “An Advanced Daycare Service” which will provide exceptional development and learning programs for children. Such positioning might be attained through introducing innovative learning programs for children that can support the toddlers coming to daycare center in appreciating the interrelationships of different skills.

Marketing Mix

Marketing mix for this new business will be developed along with evaluating their current effectiveness for the operation of this business. This will further benefit the new business to select to venture into child care business or if the new business will work within a business associated with marketing child care services as well as consumer demand. Marketing mix strategies have been developed for Safe care Daycare business that can facilitate this new business to attain competitive advantages:

• Product: Daycare service that will be offered by Safe care Daycare is a tangible or intangible service which is mass produced or manufactured on a huge scale with having specific unit volume. Intangible learning and daycare services that will be offered by this new business will include ubiquitous mass produced services. Teaching and games related services will be taken into consideration by this day school. All the services such as self-learning through games, teaching interpersonal skills and offering day meal services will be subject to life cycle. This will also encompass a growth phase followed by certain eventual decline period as services are subject to market saturation. For attaining competitiveness in the Kenyan market, product of service differentiation is necessary so that they are different from its competitors.  As stated earlier, various packages will be offered to the different customers who can then make use of their needs and choose the suitable one. Full time care, specialized program care, day care and other offerings are made to the clients.
• Price: The price that will be set by this new day care business for all its services will be as per the estimated amount that will be agreed upon by its target consumers for its services. The business might decrease or increase the price for its services in case other daycare business in the locality offers same services in competitive prices. Moreover, it is also ensured that the pricing for the services are set in accordance with the services that are available in the day care business. The business will set lower or competitive process for all its offered services so that it facilitates in attracting a huge consumer base within a year. In case the new business attains such objective, the consumers will derive improved satisfaction when they bring their children in the daycare center. The different packages being offered will comprise of different pricing ranges. The full time package will be more expensive than the day care packaging ones.
• Place: Place is the distribution channels those are selected by Safe care Daycare business in offering products to all its target consumers and the ways in which they are easily assessable by them. Distribution of all its services will be through offering unique selling point from its center. Such distribution strategy will be unique when compared with its competitors.  The school will have a location in a prime location at the city. At first just a single branch will be present which will then be followed by other branches. The distribution of its services will be such that all the children are treated and related to on an individual basis. There will also be two to three nannies attached to particular children at a time along with offering extracurricular activities for every child.
• Promotion: This aspect of the marketing mix strategy for Safe care Daycare business indicates all the communication channels that will be used by the marketers of this new business. The promotional elements that will be used by this new day care business will include public relations, advertising, sales promotion or personal selling. A particular amount of crossover takes place at the time these four major advertising aspects are taken together. Advertising channels that will be employed by this new daycare business will include television commercials, radio as well as internet adverts, billboard as well as print media. Public relations based advertising strategy will also be used in marketing this business that will be done through press releases, exhibitions, sponsorship deals, seminars, conferences, trade fairs and promotional events.

Goal and Timeframe

Task	Week 1	Week 2	Week 3	Week 4	Week 5	Week 6	Week 7	Week 8	Week 9
Selection of business idea and search for justification
Developing mission statement along with services to be offered
Carrying out generic strategy analysis for services to be offered
Internal and external business environment analysis
Target market and marketing mix strategy analysis
Developing SMART objectives in attaining competitive edge
Developing personnel plan for the business
Developing financial plan for analyzing success and profits of new business
Final business plan submission

The given time frame analysis has been presented in order to lay out the time frame of the entire procedure of setting up of the business organization. The time frame has been given of 9 weeks throughout which all the research and analysis has to be done in order to understand whether the business is viable in the long run or not. The business will start with selection of the business idea followed by determining the generic strategies of the organization, after that the internal as well as the external business environmental analysis will take place which will then be followed by the Target market and marketing mix analysis of the firm. Lastly, the SMART objectives of the organization will be set out which will then be followed by the personnel plan of the organization. The last part of the timeframe concentrates on the financial plan of the organization which will be followed by the submission of the business plan.

Five Product Levels

SMART

SMART objectives those are set for the new business of Safe care Daycare business are explained under:

• Specific- Safe care Daycare business will increase its revenue through tapping into high-level daycare market along with attaining market share of 10% by 2019. This is a specific objective as it elaborates a new market where the daycare business will take time to innovate in a specific manner. The daycare business is intended to set a standard in offering successful childcare services to the target market. Moreover, this objective is specific as the business will launch innovative services as per changing needs in the daycare sector.
• Measurable- This objective is deemed to be measurable as sales figures are to be reported by all the Kenyan companies. The daycare business will have innovative sales analytics system in accordance for reporting to all its stakeholders. Moreover, such business objective is also deemed to be measurable as the business will keep track of its yearly sales reports.
• Attainable- The objective set by Safe care Daycare business is deemed to be attainable for the reason that it will have highly interactive childcare service system. This new business will be popular as it will define its trends in offering exceptional daycare services that will offer best experience to all its target consumers. This new business will also make attempts in evaluating the daycare service interests of the target consumers. Based on such fact Safe care Daycare business can expanding its daycare product or service line that will focus on making daycare more enjoyable and learning for the children.
• Relevant- This objective set by Safe care Daycare business is deemed to be relevant for the reason that it can facilitate in maintaining a high standard for growth for an area in which the business has invested huge amount of resources. In addition, relevance of this objective set by new business is ensured as it might face fierce competition other daycare service providers in the Kenyan market.
• Timely- The business objective that is set by this new business is time bound for the reason that Safe care Daycare business has a limited date to attain the predetermined market share at the end of 2018. Not attaining the same will indicate lack of their new business success. In addition, the implementation of new business strategies effectiveness can only be attained if Safe care Daycare Service Company attains this business objective at the determined time.

Personnel Plan

Safe care Daycare is focused on offering safe and secure daycare all through the year. For this reason, close personal attention to every children are vital in offering a quality experience for every child. Considering the same, adequate personnel will be hired in making sure that every child has adequate supervision in this daycare business. The personnel pan for the new business of Safe care Daycare business will include a staff that will include 2 teachers, a cook, and a cleaning staff manager and in 2020 and 2021 an increase of 1 teacher will be considered for this business. Both the teachers will have marketing, sales as well as management background within the sector. The teachers will be selected from a specified background with proper training in managing students and small children. An HR agency will be employed, which will assist the firm in employing the given teachers. Moreover, one of the teachers named Andrea has experience of more than seven years at the Toddler warehouse and has the ability to increase revenue over years. The cook will be responsible for preparing two-time meals such as breakfast and lunch for the children those will attain the daycare services. The meal that will be offered to them will have nutritional benefits along with being tempting for the children.

The cleaning staff will be responsible for taking care of the hygiene of the children. It will be made sure that cleanliness of the daycare center is maintained for ensuring health of the children. The owners of the company will be responsible for having the training and leadership function within the company. The daycare center will consider increase in number of staff in the upcoming years of its business and will make an addition of two assistants and a general help person. The help person will be responsible for helping with the cooking, custodial as well as laundry tasks.

Ownership Details

The ownership of the business will be managed by me. As I am undergoing education right now, I will be easily able to understand the different aspects of managing the business and looking after the management of the day care. My strengths include strengths like communication, managing and delegating among others. Moreover, I will be looking after my weaknesses and try to cover them as well. I am not very adequate in teaching and thus, will be employing them. The business will be formulated based on a sole proprietorship basis.

Competitive Advantages

Safe care Daycare business is deemed to attain effective competitive advantages over its business rivals as will offer opportunity to offer safe as well as secure childcare to the children of the target consumers in Kenya. Through offering exceptional daycare services, this new business is anticipated to attain sustainable profitability over the future years. Moreover, Safe care Daycare will attain competitive advantages in the Kenyan market through providing well priced services, exceptional consumer service as well as highly experienced management team. Through such high-end services this new daycare business will attain an increasing market share along with popularity as premier daycare provider to children. The business will set lower or competitive process for all its offered services so that it facilitates in attracting a huge consumer base within a year.

Porter’s Generic Strategies

Another competitive advantage that the daycare business has is that it has made all its efforts and has attained all the suitable certificates and licensing. Moreover, through pre-hire background screenings will be carried out on the people before they are selected for employment. This will make sure that quality services are offered by this daycare center. The goals set by Safe care Daycare will offer them exceptional competitive advantages. Such goals are focused on making target consumers of parents feel that their children are taken care of at the daycare center and to make it safe, educational as well as fun experience for the children.

Legal considerations

Once all the plans about the business have been made, considerations need to be made about getting license and registering for insurance. The two main licenses which will be required are the Single Business Permit and the Fire Safety license which the county government will be providing. These licenses will cost about Ksh15000 and KSH 3000 respectively. Moreover, Liability Insurance cover also has to be taken care of for the facilities, staff and children.

Initial Investment

Particulars	Amount	Sub Totals
Registration Cost:-
Business Registration Charges	$800
Domain Name & Logo Registration Charges	$600
License for Operation	$2,100
Solicitor’s Fees	$5,000	$7,240
Set-Up Cost:-
Security Deposit for Rented Premises	$27,000
Interior Cost	$50,000
Equipment	$35,000
Furniture & Fixtures	$60,000
Office Equipment	$35,000	$2,07,000
Operational Expenses:
Purchase of Supplies	$8,000
Security Deposit for Electricity	$2,000
Telecommunication	$900
Software Installation	$250
Advertisement & Promotion	$6,000
Stationery Items	$1,000
Other Misc. Expenses	$300	$18,450
TOTAL INITIAL INVESTMENT		$232,690
Capital Contribution by Partners:
Owner’s contribution		$50,000
Loan from Bank @2.47% Interest p.a.		$2,30,000
TOTAL CAPITAL		$2,80,000
Balance Fund in Hand		$47,310

The given costs of the initial investment have been arrived at by examining the examples of the different schools which have undertaken a similar business model. The registration costs and other costs have been analyzed from the official websites of the schools registration. Certain assumptions have also been made with respect to the owner`s contribution and the loan which will be taken from the bank.

Profit and Loss

Calculation of gross profit:-
Particulars	Year 1 (in KSH)	Year 2 (in KSH)	Year 3 (in KSH)
Projected sales	10,240,000	13,071,875	15,291,938
Direct cost:
Materials and labor	1,361,046	1,481,046	1,481,046
Gross profit	8,878,954	11,590,829	13,810,892
Calculation of gross profit margin:-
Particulars	Year 1 (in KSH)	Year 2 (in KSH)	Year 3 (in KSH)
Projected sales	10,240,000	13,071,875	15,291,938
Gross profit	8,878,954	11,590,829	13,810,892
Gross profit margin	86.71%	88.67%	90.31%
Calculation of overheads:-
Particulars	Year 1 (in KSH)	Year 2 (in KSH)	Year 3 (in KSH)
Variable costs:
Direct materials and labor	1,361,046	1,481,046	1,481,046
Commissions	15,000	17,000	17,500
Freight outwards	1,200	1,500	1,800
Total variable costs	1,377,246	1,499,546	1,500,346
Annual production	800	890	955
Variable cost per unit	1,722	1,685	1,571
Fixed costs:	–	–	–
Rent	130,000	130,000	130,000
Depreciation	218,000	165,307	250,000
Lease	70,000	75,000	75,000
Utilities	500,000	500,000	500,000
Vehicle expense	23,000	23,000	23,000
Insurance	19,000	19,000	19,000
Advertising and marketing	30,000	30,000	30,000
Total fixed costs	990,000	942,307	1,027,000

Calculation of estimated profit:-
Particulars	Year 1	Year 2	Year 3
Projected sales	10,240,000	13,071,875	15,291,938
Less: Variable cost	1,377,246	1,499,546	1,500,346
Contribution margin	8,862,754	11,572,329	13,791,592
Less: Fixed cost	990,000	942,307	1,027,000
Estimated profit	7,872,754	10,630,022	12,764,592

Particulars	Year 1	Year 2	Year 3
Sales revenue:
Annual units expected to be sold:
Full daycare	250	250	255
Part time care	200	220	230
Sessional service	190	220	220
Pre-school services	160	200	250
Total annual units to be sold	800	890	955
Cost of sales per unit (in KSH):
Sales revenue:	12,000	13,000	13,000
Annual units expected to be sold:	12,200	15,000	17,000
Full daycare	13,000	15,100	17,250
Part time care	14,000	15,650	16,800
Total average selling price per unit	12,800	14,688	16,013
Total sales revenue	10,240,000	13,071,875	15,291,938

The given profit and loss account has been formed in order to understand the profitability of the business organization in the future. All aspects of the business have been considered in the profit and loss account. The sales price has been arrived at after analyzing the number of student admissions of each earlier and multiplied them by identifying the fees they will be charged. All other labor and material expenses have also been taken into consideration. The cost structure has been divided into fixed as well as variable costs which make the calculations of the profits more accurate in nature.

Cash Flow Statement

Particulars	Year 1 (in KSH)	Year 2 (in KSH)	Year 3 (in KSH)
Cash flows from operations:
Cash receipts from customers	9,216,000	11,764,688	13,762,744
Cash paid for:
Inventory purchase	408,314	444,314	444,314
Income tax	2,292,826	3,120,007	3,760,377
Net cash flows from operations	6,514,860	8,200,367	9,558,053
Cash flows from investing activities:
Sale of property, plant and equipment	–	–	–
Purchase of property, plant and equipment	170,000	120,000	160,000
Net cash flows from investing activities	170,000	120,000	160,000
Cash flows from financing activities:
Loan repayment	525,000	575,000	587,500
Stock repurchase	–	–	–
Net cash flows from financing activities	525,000	575,000	587,500
Net increase in cash	5,819,860	7,505,367	8,810,553
Cash at the beginning of the year	–	5,819,860	13,325,227
Cash at the end of the year	5,819,860	13,325,227	22,135,780

Particulars	Year 1	Year 2	Year 3
Sales revenue:
Annual units expected to be sold:
Full daycare	250	250	255
Part time care	200	220	230
Sessional service	190	220	220
Pre-school services	160	200	250
Total annual units to be sold	800	890	955
Cost of sales per unit (in KSH):
Sales revenue:	12,000	13,000	13,000
Annual units expected to be sold:	12,200	15,000	17,000
Full daycare	13,000	15,100	17,250
Part time care	14,000	15,650	16,800
Total average selling price per unit	12,800	14,688	16,013
Total sales revenue	10,240,000	13,071,875	15,291,938

The cash flow statement takes into consideration the different sources of cash into the organization. The highest source of income for the organization is the operations activities. Through the operating activities, the organization is being successfully able to attain a larger success rate.

9.4. Balance Sheet

Particulars	Year 1 (in KSH)	Year 2 (in KSH)	Year 3 (in KSH)
Assets:
Current assets:
Cash	5,819,860	13,325,227	22,135,780
Inventory	1,361,046	1,481,046	1,481,046
Accounts receivable	1,024,000	1,307,188	1,529,194
Total current assets	8,204,906	16,113,461	25,146,019
Non-current assets:
Buildings	1,700,000	1,200,000	1,600,000
Less: Accumulated depreciation	170,000	120,000	160,000
Net buildings	1,530,000	1,080,000	1,440,000
Land	1,798,968	957,576	1,662,098
Leasehold improvements	210,000	110,000	210,000
Less: Accumulated depreciation	10,500	5,500	10,500
Net leasehold improvements	199,500	1,735,000	199,500
Machinery and equipment	250,000	265,379	530,000
Less: Accumulated depreciation	37,500	39,807	79,500
Net machinery and equipment	212,500	225,572	450,500
Total non-current assets	3,740,968	3,998,148	3,752,098
Total assets	11,945,874	20,111,609	28,898,117
Liabilities and owners’ equity:
Liabilities:
Current liabilities:
Accounts payable	952,732	1,036,732	1,036,732
Current borrowing	–	150,000	230,000
Other current liabilities	–	–	–
Total current liabilities	952,732	1,186,732	1,266,732
Non-current liabilities:
Long-term liabilities	2,100,000	2,300,000	2,350,000
Total non-current liabilities	2,100,000	2,300,000	2,350,000
Total liabilities	3,052,732	3,486,732	3,616,732
Owners’ equity:
Share capital	2,100,000	2,100,000	2,100,000
Retained earnings	–	7,280,016	8,774,214
Total owners’ equity	2,100,000	9,380,016	10,874,214
Total liabilities and owners’ equity	5,152,732	12,866,748	14,490,946

The balance sheet of the organization is providing information about the standing of the business at a particular time frame. The analysis of the balance sheet reflects the fact that the organization is in a favorable position which can be taken to be a positive sign in future.

Break Even Analysis

Particulars	Year 1 (in KSH)	Year 2 (in KSH)	Year 3 (in KSH)
Variable costs:
Direct materials and labor	1,361,046	1,481,046	1,481,046
Commissions	15,000	17,000	17,500
Freight outwards	1,200	1,500	1,800
Total variable costs	1,377,246	1,499,546	1,500,346
Annual production	800	890	955
Variable cost per unit	1,722	1,685	1,571
Fixed costs:	–	–	–
Rent	130,000	130,000	130,000
Depreciation	218,000	165,307	250,000
Lease	70,000	75,000	75,000
Utilities	500,000	500,000	500,000
Vehicle expense	23,000	23,000	23,000
Insurance	19,000	19,000	19,000
Advertising and marketing	30,000	30,000	30,000
Total fixed costs	990,000	942,307	1,027,000

Calculation of actual turnover needed to break-even:-
Particulars	Year 1	Year 2	Year 3
Selling price per unit	12,800	14,688	16,013
Less: Variable cost per unit	1,722	1,685	1,571
Contribution margin per unit	11,078	13,003	14,441
Fixed cost	990,000	942,307	1,027,000
Break-even point (in units)	89	72	71
Break-even sales (in KSH)	1,143,843	1,064,411	1,138,724
Calculation of monthly target to break-even:-
Particulars	Year 1	Year 2	Year 3
Break-even sales (in KSH)	1,143,843	1,064,411	1,138,724
Monthly break-even sales	95,320.26	88,700.94	94,893.69

Calculation of estimated profit:-
Particulars	Year 1	Year 2	Year 3
Projected sales	10,240,000	13,071,875	15,291,938
Less: Variable cost	1,377,246	1,499,546	1,500,346
Contribution margin	8,862,754	11,572,329	13,791,592
Less: Fixed cost	990,000	942,307	1,027,000
Estimated profit	7,872,754	10,630,022	12,764,592

From the given analysis, it can be stated that the business would be required to make a monthly sales of 95320.26 in the first year to break even, 88700.94 in the second year and 94,893.69 in the third year

Pay slip

STAFF	YEAR1(KSH)	YEAR2(KSH)	YEAR3(KSH)
MANAGER	328200	328200	328200
TEACHER	287544	120000	120000
290376	287544	287544
	290376	290376
COOK	246300	246300	246300
CLEANING	208626	208626	208626
TOTAL	1361046	1481046	1481046

The pay slip of the organization is given in the given table. During the first year, only two teachers will be employed for the company and as the business begins to flourish, an additional teacher shall be employed in the third year. Moreover, cleaning staff, cook and a manager shall also be employed to overlook the operations of the organization and ensure the long term success of the organization.

Product Selection

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