Retail Hardware Store Business PLAN PDF

Preview

Summary

Business Research...

Description

MASINDE MULIRO UNIVERSITY OF SCIENCE AND TECHNOLOGY

NAME: NAMONDO

ODHIAMBO

JAVANS

REG NO: MIE/0007/12

COURSE CODE: ECC 418

COURSE TITLE: ENTREPRENEURSHIP FOR ENGINEERING

DEPARTMENT: MECHANICAL & INDUSTRIAL ENGINEERING

FACULTY: ENGINEERING

TASK: TAKE-AWAY CAT

DATE OF ISSUE: 10TH 2017

DATE OF SUBMISSION: 23RD JUNE 2017

i

Table of Contents Title Page..................................................................................................................................................i Table of Contents....................................................................................................................................ii RETAIL HARDWARE STORE BUSINESS PLAN.................................................................................................1 1.0 EXECUTIVE SUMMARY................................................................................................................1 Business Objectives.............................................................................................................................1 Mission Statement...............................................................................................................................1 Guiding Principles................................................................................................................................1 Key to Success......................................................................................................................................1 2.0 COMPANY DESCRIPTION........................................................................................................................2 2.1 OWNERSHIP....................................................................................................................................2 2.2 LEGAL FORM..................................................................................................................................2 2.3 START UP SUMMARY....................................................................................................................2 2.4 LOCATION AND FACILITIES........................................................................................................3 3.0 SERVICES................................................................................................................................................3 3.1 DAILY OPERATIONS AND PRODUCTION..................................................................................3 3.2 COMPETITIVE COMPARISON......................................................................................................3 3.3 SUPPLIERS......................................................................................................................................4 3.4 MANAGEMENT CONTROLS.........................................................................................................4 3.5 ADMINISTRATIVE SYSTEM.........................................................................................................4 4.0 MARKET ANALYSIS.................................................................................................................................5 4.1 Market Trend.....................................................................................................................................5 4.2 Market Size........................................................................................................................................5 4.3 Market Growth..................................................................................................................................5 4.4 Main Competitor................................................................................................................................5 4.5 Target Market Segment Strategy........................................................................................................6 5.0 MARKETING STRATEGY AND POSITIONING............................................................................................7 5.1 Strengths............................................................................................................................................7 5.2 Weakness...........................................................................................................................................7 5.3 Opportunities.....................................................................................................................................7 5.4 Threats...............................................................................................................................................7

ii

5.5 Positioning Statement........................................................................................................................7 5.6 Pricing Strategy.................................................................................................................................7 5.7 Market Program.................................................................................................................................7 6.0 ORGANIZATION AND MANAGEMENT....................................................................................................8 6.1 Organizational Structure....................................................................................................................8 6.2 Management Team.............................................................................................................................8 6.3 Managing Team Gaps........................................................................................................................8 6.4 Future Service....................................................................................................................................8 7.0 FINACIAL PLAN.......................................................................................................................................9 7.1 Source and Use of Funds...................................................................................................................9 7.2 Projections.......................................................................................................................................10

iii

RETAIL HARDWARE STORE BUSINESS PLAN 1.0 EXECUTIVE SUMMARY The Javah Hardware will be a moderately priced hardware located along the Kakamega-Mumias road, offering goods and services to its customers. Products such as cement, steel bars and rods, white cement, roofing sheets, door hinges, roofing nails, flooring tiles, welding rods among others will be available. The hardware will be family owned and operated by Samson and Samuel Namondo. Together they have 3 years of experience in sales and marketing. The site location was previously a bookshop, owned by Justus. The location will therefore require some additional renovation before fully acquiring it. Sales projection assume customers per week resulting in weekly sales of just over Ksh.20, 000 or Ksh.950, 000 annually. This will lead to much profit hence the idea is good to venture in. Total stand-up cost will Ksh.700, 000 of which Ksh.300, 000 will be contributed by the owners and the remainder will be secured by a proposed bank loan and grants. Business Objectives  To be the premier local hardware along Kakamega region  To promote quality hardware products at reasonable prices  To provide exemplary services to our customers  To achieve price cost ratio lower than 65% Mission Statement Our mission is to provide quality products and services to our customer’s satisfaction. This will be achieved by having enough stock of the products. Guiding Principles  Treating our customers with much respect that they deserve  Being mindful of our staff and respecting them  Providing quality service to our customers Key to Success -Hiring a salesman to be going around the region scouting for any new upcoming sites. -Locating the business where it is accessible to the main road to reduce the transport cost to our customers. -A variety of products at affordable prices -Employing qualified and highly skilled employees

1

2.0 COMPANY DESCRIPTION The Javah Hardware will be located along Kakamega-Mumias road, next to Jamal Filling Station, 7 kilometers from Kakamega Town. The hardware will be owned and operated by Samson and Samuel Namondo. It will provide products such as cement, steel bars, nails, door hinges, paints, glass panes, pipes, roofing sheets, etc. and offer services such as delivery services to customers. The hardware will operate for six days in a week as follows:

DAY OF THE WEEK Monday Tuesday Wednesday Thursday Friday Saturday Sunday

TIME OF THE DAY 07:30 AM- 5:00 PM 07:30 AM- 5:00 PM 07:30 AM- 5:00 PM 07:30 AM- 5:00 PM 07:30 AM- 5:00 PM 09:00 AM- 4:00 PM CLOSED

2.1 OWNERSHIP The hardware will be owned by Samson and Samuel Namondo. Both are sales and marketing graduates from Masinde Muliro University of Science And Technology and have three years of experience in storekeeping and marketing of products. They both worked for Bamburi Cement Company as sales persons for one and a half years and one year respectively. Due to demand for more labor in the hardware, we will require the family to fill in where possible until we are off the ground and making a profit.

2.2 LEGAL FORM Javah hardware will be organized as a single business wholly owned by Samson and Samuel Namondo. It will be registered as a property in Kakamega County.

2.3 START UP SUMMARY o Starting stock- Ksh. 500,000 (200 bags of cement, 100 pieces of steel bars; among others). o Rent and deposit- Ksh 50,000 (may vary). o Single business permit. o KRA ETR machine. o Other minor requirements e.g. renovations. o The minimum starting budget for this SME will be Ksh 700,000. o Ksh 300,000 of the startup budget will be funded by the owners. The owners’ source of funds is a combination of liquid assets and marketable securities. 2

2.4 LOCATION AND FACILITIES The 2,300 square foot hardware will be located in Kakamega County along KakamegaMumias road, 7 Km from Kakamega town. The hardware is located in the major traffic area at the intersection of Kotecha Road and Mumias Road. The region has a population of over 45,000 people according to the year 2,000 Census Report of Kenya. The residential population in the immediate area is comprised of a mixture of single families, students and multi-family housing.

3.0 SERVICES 3.1 DAILY OPERATIONS AND PRODUCTION Javah hardware will be operated six days a week. Lunch and dinner will be provided by the owners. Samson will write the schedules. Proper labelling and rotation techniques, accompanied by ample storage facilities will ensure that high quality prepared products will be sufficiently available to meet the demands during business hours. Samuel will be responsible for ordering, receiving and manufacturing sufficient inventory to meet the production demand. Stocktaking exercise will be done after every two weeks. This will help us understand which products are moving fast off the shelves as which ones need immediate restocking.

3.2 COMPETITIVE COMPARISON Kakamega region is made up of thirteen hardware stores. Major stores include: Nabongo, Pramukh, Walias and Mugo general stores. The nearest competitors are Nabongo hardware and Mugo general stores. Nabongo’s hardware is a sole proprietorship with six employees and generates 1.2 million shillings annually. Mugo general stores is located within the target market of Kakamega-Mumias road but deals with a wider variety of products apart from only those required in the hardware. Its profit ranges between 1.5 to 2.0 shillings annually.

3.3 SUPPLIERS Because of their years of experience and knowledge acquired in college, Samson and Samuel Namondo have established relationship with Bamburi Cement Company as their main

3

supplier of cement. They also have a relationship with Eston pipe manufacturers. These suppliers can provide reasonably priced products, delivered according to their schedule.

3.4 MANAGEMENT CONTROLS The Namondos will practice sound management procedures in order to control costs, ensure quality of products and provide friendly customer services. The following system will be used by management: 1) Order guide: the hardware will use an item specific order guide to track order history and maintain designated levels of products in inventory. 2) Weekly inventory: management will conduct a weekly inventory to determine the evaluation for use in the preparation of weekly projects and job reports. 3) Daily inventory tracking: daily inventory will be taken on specific items. Movement will be compared to sales data to ensure designated products have been properly accounted for.

3.5 ADMINISTRATIVE SYSTEM With a limited staff, it’s crucial that sums remain current with daily cash outlay. The purchase of Point Of Sale system (KRA ETR machine) will immensely help them with the use of daily administrative reports. 1) Daily cash control Sales and receipts recorded by the POS system will be compared to actual cash and credit card deposits on a daily basis. Acceptable over/short amounts will be limited to Ksh 500 per day. Discrepancies greater than 500 will prompt management to conduct an immediate audit to account for the difference. Monthly totals will be compared to actual profit and loss account, statement for accuracy. Cash, debit card and credit card receipts will be deposited in a deposit. 2) Purchasing records/payables A part time bookkeeper will process and record invoices and credit daily. Reports detailing cash expenditures, payments by cheques and amount payable transactions will be readily available. Cheques disbursements will be prepared by the bookkeeper. Cheques signing authority for the general operating will be given to the general manager. 3) Payroll processing Payments will be done according to the time and attendance system. Samson will make necessary adjustments and prepare the payroll

4

4.0 MARKET ANALYSIS The hardware business is a large and diverse business which contributes around Ksh. 200 million to the country’s economy in terms of taxation. On a typical day in Kenya over 800,000 people will need products that relate to hardware. Sales at fully equipped hardware reached up to 5 million in 2013. Sales at a limited serviced hardware reached Ksh. 230,000 a day in 2015. Kakamega County is made up of 11 hardware with combined annual revenue of about 3 million. The major hardware in the region are Pramukh Hardware, Nabongo Hardware and Walias Hardware.

4.1 Market Trend According to the National Hardware Stores Association, the top 10 rated products found in a hardware are; 1. Cement 2. Roofing Sheets 3. Roofing nails 4. Steel bar and rod 5. Door hinges 6. Flooring files 7. Welding rods 8. Plumbing materials 9. Window glasses 10. Barbed windows/ fencing wires

4.2 Market Size The Kenyan hardware industry includes about 280,000 hardware with combined annual revenue of 3 billion.

4.3 Market Growth By November 2015, the number of Kenyans in Kakamega who required hardware products rose by 1.8% as compared to the same month in 2010. This was due to increase in population in the region hence there was need for more houses.

4.4 Main Competitor The following hardwares are located within five kilometers radius of Javah Hardware: 



Pramukh Hardware- This is a full serviced family hardware established in the year 2003. It runs as a sole proprietorship and as 13 employees. Pramukh generates 1.9 million in revenue annually. Prices of most of their commodities are higher as compared to those at Javah Hardware. Nabongo Hardware- This is a sole proprietorship business with 6 employees and generates 1.2 million in revenue annually. 5



Mugo General Stores- It is located within the target market of Kakamega region but deals with a wider range of products. Its profits range between 1.5-2.0 million annually.

4.5 Target Market Segment Strategy Samson and Samuel Namondo selected the subject area for the hardware to be along the road primarily because the area was populated and is accessible to the main road. The hardware is at the region where much of construction works goes on. This will encourage our customers since it will help to reduce transport costs. The major employees in the region are Masinde Muliro University and the county government of Kakamega. The income rates of the residents of that region can be estimated as shown in the pie chart below;

Salaries ( monthly)

8.33% 11.11% 50.00% 30.56%

5.0 MARKETING STRATEGY AND POSITIONING 6

1st Qtr 2nd Qtr 3rd Qtr 4th Qtr

We realized that the hardware business will have to be achieved by doing more than just providing products at an affordable prices. We will utilize a marketing plan to build customer traffic. We will also strive to win more customers by being productive rather than reactive in our marketing efforts and stay current with popular industry trends.

5.1 Strengths   

Prime location with easy access Exceptional staff with the ‘can do’ attitude Affordable product prices

5.2 Weakness  

Recruiting and retaining quality employees Tight margins will allow little wiggle room for errors

5.3 Opportunities  

Little barriers to entry allow for immediate business opportunity Offering additional delivery service

5.4 Threats   

Government mandate (workers’ health, sanitation, fire extinguishers) Building and Maintaining sales volume Rising operating cost

5.5 Positioning Statement Javah Hardware will be the premier service and product provider in Kakamega region. We will offer reasonably priced products and services.

5.6 Pricing Strategy At Javah hardware, cost accounting is important, since the profitability of an individual product e.g. steel bars varies significantly with sizes hence determine the cost of each bar. We will take close look of the supplier’s quotation for easy determination of the selling price of our products.

5.7 Market Program Our initial marketing campaign will consist of contacting our customers by use of mobile phone.

6.0 ORGANIZATION AND MANAGEMENT

7

6.1 Organizational Structure Javah hardware expects to hire 6 employees in 2 year time. Samson and Samuel Namondo will personally select each candidates. They’ve adopted an effective interview process designed to staff the hardware with highly qualified people for each position. Each applicant will be rated and evaluated according to the pre-defined set of standards designs for each positions.

6.2 Management Team The hardware will be owned by Samson and Samuel Namondo. Both are graduates with degree in Sales and Marketing.

6.3 Managing Team Gaps Initially, Samson and Samuel will fill many of the management gaps. Over time, they have plans to hire a sales director, a general manager and a store keeper. To meet the gap associated in payroll, inventory management and cost accounting, the Namondo will purchase a Point of Sale System (POS) that simplifies most of the communication between the members of the staff. The POS will also acts as a clock and help in preparing payrolls.

6.4 Future Service Javah hardware has future plans to expand its branches to Mumias and Webuye towns. It will also provide a wider variety of products to increase the sales and profits. The Javah hardware is targeting that in 1.5 years, it will have a sales agent who can market the products and a truck driver to deliver products to our customers.

8

7.0 FINACIAL PLAN   

Required cost of start up Profit and loss Financial ratios

The ta...