BUSINESS PLAN 1

BLANTYRE INTERNATIONAL UNIVERSITY, MALAWI

STUDENT: TEMWA MSISKA

ID: BIU2010/2/162

DISTANCE LEARNING

CONTACT: +265 884 139 749

COURSE: BACHELOR OF ACCOUNTING AND FINANCE

PROGRAMME CODE: ENTP411

E-mail: msiskatemwa@gmail.com

SUBMITTED TO

Professor Chishiri

Date: 27/04/2015
COMPUTERIZED FINANCE AND INVESTMENT

CONSULTANCY

BUSINESS PLAN

Prepared by: Temwa Msiska

01/02/2015
Table of contents Page

1. EXECUTIVE SUMMARY 1

2. BUSINESS DESCRIPTION 3
2.01 Name of business ..................................................................................................3
2.02 Ownership, Promoters and advisors .....................................................................3
2.03 Date and place of registration ...............................................................................4
2.04 Start of operations .................................................................................................5
2.05 Form of business operation ...................................................................................5
2.06 Brief history ..........................................................................................................6

3. BUSINESS GOALS 6
3.01 Vision statement....................................................................................................6
3.02 Mission statement .................................................................................................6
3.03 Goals .....................................................................................................................7
3.04 Objectives .............................................................................................................7
3.05 Financial agreement ..............................................................................................7

4. KEY PERSONNEL AND STAFFING 8

4.01 Organization chart .................................................................................................8
4.02 Position description and staffing ...........................................................................9
4.03 Skills, Qualification upgrade and Training ...........................................................9

5. PRODUCT / SERVICE DESCRIPTION 10

5.01 Description of service features............................................................................10
5.02 Specific advantages and challenges ....................................................................10
5.03 Service status ......................................................................................................11
5.04 Proprietary position of the service ......................................................................11

6. MARKET RESEARCH 12
6.01 Description of customers ....................................................................................12
6.02 Targeted customers .............................................................................................12
6.03 Service preferences .............................................................................................13
6.04 Potential market size and revenue.......................................................................13
6.05 Market trends ......................................................................................................14

7. DESCRIPTION OF COMPETITORS 15
7.01 Competitors name and market share ...................................................................15
7.02 Competitors profitability.....................................................................................15
7.03 Operating methods ..............................................................................................16
7.04 Level of Customer satisfaction ...........................................................................16
 7.05 S.W.O.T analysis ................................................................................................16

8. DESCRIPTION OF LOCATION 17
8.01 Importance of the location ..................................................................................17
8.02 Location criteria ..................................................................................................17

9. MARKETING METHODS 17
9.01 Marketing strategy ..............................................................................................17
9.02 Advertisement and promotion.............................................................................18
9.03 Sales strategy ......................................................................................................18
9.04 Communication methods ....................................................................................19
9.05 Highlighted features ............................................................................................19
9.06 Timing .................................................................................................................20
9.07 Product / Service Development ..........................................................................20
9.08 Research & development ....................................................................................20

10. PRICING 21
10.01 Pricing criteria .................................................................................................21
10.02 Methods of pricing ..........................................................................................22

11. FINANCIAL PROJECTIONS 22

11.01 Key assumptions .............................................................................................22
11.02 Description of startup costs .............................................................................24
11.03 Sales forecasts .................................................................................................26
(a) Monthly sales forecast for year 1 26
(b) Five years sales forecast 26
11.04 Income statement projection for the year ended 31 December .......................27
11.05 Break even analysis .........................................................................................27
11.06 Statement of financial position projection as at 31 December ........................28
11.07 Statement of cash flow projection for the year ended 31 December ..............29

12. FUNDING REQUIREMENTS 30

13. APPENDICES 31
1. EXECUTIVE SUMMARY
This business plan has been written to clarify an idea of a proposed accounting services

consultancy firm. The name of the consultancy firm will be called “CF& T Consultancy,

abbreviation for - Computerized Finance and Investment Consultancy”. The firm will be

located in Ares 51 Lilongwe, Malawi. The main mission of the firm is to help small and

medium scale investors to succeed in their investments, and the vision is to see the firm

accessible in all regions of Malawi in the next five years.

The main service that the firm will offer is investment trainings and guidance. This guidance

will be offered depending on the client’s needs, in terms of sub-services. The needs may be,

either a decision on which investment to undertake, or how to succeed in the present

investment. These sub-services to be offered will all have one benefit to the anticipated

clients, thus the success of their businesses by improving productivity through new skills

imparted to their staff.

The firm is expected to benefit from the huge market that is available. The targeted

prospective customers available are; small scale industries, and accounting students inclusive

of new graduates. The preliminary research shows that 80% of the total market is not

adequately covered. CF & I constancy is expected to acquire 1% of the 80% share which is

not adequately covered. This will translate to achievable demand of 6,160 customers. This

demand is expected to increase to 8,199 in the fifth year of the business.

The firm will be managed by a team of highly qualified staff, with a minimum of bachelor’s

degree in accounting/ business management plus three years’ experience, or a Diploma in

accounting/ business management plus five years’ experience. The competence of the new

staff will also be thorough scrutinized during the probation, and the non-performers will be

Page 1 of 33
relieved of their duties. This strict requirement is as specified because of the nature of the

business, as it will be based on Excellency and Integrity; for its continual success.

The expected revenue is assessed to be huge in the next five years; this is because of the huge

anticipated demand and the firm’s Excellency. The achievable demand of 6,160 is expected

to have a probability of 60%, and an annual growth rate of 10% from the second year. The

average revenue per customer is expected to be MwK10, 000.00. The direct expenses are

expected to be 30% of the gross revenue in the first year, and decrease by 10% compared to

the previous year’s expenses, each year due to economies of scale. Expected annual operating

profits for the next five years are summarized as below:

Ye a r 0 Ye a r 1 Ye a r 2 Ye a r 3 Ye a r 4
Se rvice
Gross
re ve nue s - MWK 36,960,000.00 MWK 40,656,000.00 MWK 44,721,600.00 MWK 49,193,760.00
O pe rating
cashflows MWK (10,000,000.00) MWK 25,872,000.00 MWK 30,676,800.00 MWK 35,740,320.00 MWK 41,110,608.00

The proposed firm is expected to utilize an average of MwK48,131,632.00 funds during its

operation in five years’ time, from the initial year. The funds will be used to buy initial

capital items like computers, printers, modems, furniture, and the construction of offices as

well as training lounges. The other money will be used to cover annual operating expenses in

the subsequent years as summarized in the table below:

YEAR FUNDS REQUIRED

year 0 MWK 10,000,000.00

year 1 MWK 11,088,000.00

year 2 MWK 9,979,200.00

year 3 MWK 8,981,280.00

year 4 MWK 8,083,152.00

Total MWK 48,131,632.00

Page 2 of 33
2. BUSINESS DESCRIPTION

2.01 Name of business

The new firm to be registered will be called Computerized Finance and Investment

Consultancy. Its trading name will be abbreviated as CF & I consultancy. The business will

utilize the current addresses and contacts available as below;

Address: The Managing Director

CF & I Consultancy
P.O. Box 376
Lilongwe, Malawi

Contacts: +265884139749
E-mail:msiskatemwa@gmail.com

2.02 Ownership, Promoters and advisors

CF and I consultancy firm was found by myself, also working as a Managing Director and an

active partner. The firm currently does not have any other promoter, except for the capital

contributions from the partners. The cash accumulated to date from the five partners is MwK

6,000,000.00. The capital structure contribution is summarized as below, amongst the five

partners:

NO PARTNER CONTRIBUTION SHARE %

1 Temwa Msiska Mwk1,800,000.00 30.0%

2 Wongani Chimphambano Mwk 1,050,000.00 17.5%

3 Purity Chitalo Mwk 1,050,000.00 17.5%

4 Lovemore Tinto Mwk 1,050,000.00 17.5%

5 Charles kamwendo Mwk1,050,000.00 17.5%

TOTAL Mwk 6,000,000.00 100%

There are six advisors for the firm in different relevant fields, as in the next table below:

Page 3 of 33
NO ADVISOR ADVISORY ROLE QUALIFICATION CONTACTS

1 Sobhuza Ngwenya Sales and marketing BBA, MBA,CIM +265 888 839 900

2 Veracious Mphuwa Insurance and risk management Advance Dip., CII UK +265 888 627 398

3 Alufeyo Mgungwe Computers and Information systems B.Sc in ICT +265888209265

4 Sebastian Nkosi Accounting, finance and Audit B.Acc, MBA, ACCA,CPA +265 888 661 022

5 Chisomo Msokera Legal and regulatory B.Sc in Law +265 999 616 983

6 Beatrice Nyirenda Human resources and administration Advanced Dip. HR Mgt +265 888 836 777

2.03 Date and place of registration

The business will be registered by 1 July 2015. Specifically, It is expected to be registered on

Friday, 1 may 2015. The business will be registered to be trading in Lilongwe, Area 51 as its

head office. CF & I consultancy will be established opposite Area 51 Calvary Family Church,

Lilongwe. The distance from the Road block stage (near Injena filling station-Area 49) is

about 3KM to the location.

The premises, according to the city plans, were designated for community infrastructures like

schools, colleges, Churches, hospitals and business offices. The premise is near

telecommunication transmitting sites, within 1KM recommended radius, which will make

network installation cheap and the signal quality good. The distance to electricity poles and

transformers is not more than 50Meters, which will as well make electricity installation

inexpensive. The area shall be guarded by outsourced G4S guards, who will be in charge of

all the security of the area being developed until its final stage. Thereafter an appointed

management team will have an option either to retain the present security provider or not.

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2.04 Start of operations

The partnership business is expected to start its operations on 1 January 2016. The ample

time has been given for its thorough preparation, so that all the legal, financial and other

considerations should be met. This proper preparation will prevents poor performance of the

partnership. CF & I Consultancy services are professional in natures, crucial and very

delicate; because of this, the firm will be operated in compliance with what the following

main legal provisions require:

a. Companies Act 1984 and 2006 (CA 1984 / 2006)

b. International Accounting standards (IAS)

c. International Standards on Audit (ISA)

d. Taxation Act (Chapter 41:01 of Malawi laws)

e. The constitution of Malawi

The fulfillment of the above legal requirements will be achieved with the assistance from the

firm’s approved advisors

2.05 Form of business operation

The business will be registered as a partnership. This form of because is easy to manage for a

new started business, like this. The partners will also benefit from the skills and qualifications

being possessed by the individual partner. Currently, the business has five partners as stated

and new partners may be allowed to join, to the maximum of ten. The new partners will be

admitted after an approval from at least three partners whose current capital contribution

totals to 65% of the total equity capital.

Page 5 of 33
2.06 Brief history

The suggested partnership business has informally been in operation for the last five years on

individual capacity, in terms of expert functions. Each partner to be has had a number of both

individual and corporate customers. The services that were being offered on individual

capacity were Sage Accounts lessons, Excel lessons, part-time teaching of PAEC Diploma

accounting lessons, and the preparation of corporate management accounts.

The partners got to know each other after several encounters at client’s premises while

offering one service and another. This made me to initiate the partnership business, after

contacting and convening a number of meetings with the other prospective partners. The

main aim was to make it easy for the customers to have all the required accounting and

professional services from one source, hence the formation of Computerized Finance and

Investment Consultancy services partnership.

3. BUSINESS GOALS

3.01 Vision statement

The vision is to see the firm accessible in all regions of Malawi in the next five years. This

will be achievable by re-investing some of the business profits in infrastructures development

in the other two regions of Malawi.

3.02 Mission statement

The mission of the firm is to help small and medium scale investors to succeed in their

investments. This will be achievable through the firm’s core values, which is Excellency and

Integrity in all its services rendered to customers

Page 6 of 33
3.03 Goals

 Achieve a Break even by the second year of CF & I Consultancy establishment.

 Achieve full customer service and satisfaction each year of the business operation.

 The business to be operated on a going concern and covert it to a limited liability

company in the next five to ten years.

3.04 Objectives

The firm has an objective of achieving 33% increase in its service demand and revenue over

the next five years. The achievement of this target will make the partnership firm to increase

its employment base by 50%, by recruiting more line staff. This will enable the partners leave

the management of the firm to the order staff, for the partners to concentrate on other

business opportunities.

3.05 Financial agreement

Each partner shall contribute al least 10% of the required capital. The partners’ profit sharing

ratios agreed so far are the proportion of each partner’ capital contrition’s to date. Partners

will be charged a 20% interest on all the drawings made, and no interest on capital will be

allowed in the first five years of its operation. Any new partner that may wish to join will

have to pay a calculated goodwill of the business, and shall contribute at least 10% of the

total capital (Both equity and debt capital), in cash.

Page 7 of 33
4. KEY PERSONNEL AND STAFFING

4.01 Organization chart

Mr. Temwa Msiska

(founder/chairman and Managing director)

Wongani Chimphambano
Purity Chitalo Lovemore Tinto Charles Kamwendo
(Chief Operations Officer)
(Chief Commercial Officer (Chief Tcehnical Officer) (Chief Finance Officer)

Vacant post
( Human Resources Vacant post Vacant post Vacant post
Manager) (Invetments Manager) (IT support Manager) (Financial Manager)

Vacant post Vacant post

Vacant post Vacant post
( Adminstration Specialist) (Accouting packages
(Accounting Consultant) (Audit Consultant)
Consultant)

The above chart shows the management and staff of CF & I Consultancy. The firm’s

Managing Director and the Chief Officers are all the partners to the business. The choice for

partners to be involved in the management of the business is because, it is at its infancy stage.

After five years, the top vacancies will be occupied by the current staff, so that the partners

will be concentrating on other business avenues. The promotion will also act as an incentive

to the current team. Members of staff will also be increased by 50% to cope with the growing

service demand. Support staff, like cleaners will be engaged on temporally basis, and G4s

Security Company will take the security role of the business.

Page 8 of 33
4.02 Position description and staffing

The firm will be managed by a team of highly qualified staff. The post for Managers and

consultants will be advertised in Malawi newspapers. The requirement for each post will be a

minimum of bachelor’s degree in accounting/ business management plus three years’

experience, or a Diploma in accounting/ business management plus five years’ experience.

All shortlisted candidates shall undergo both written and oral interviews. The successful

candidates shall receive a good remuneration package, for their motivation, but will undergo

six month probation to assess their proficiency. The staff who do not perform to he required

standard, will be sent for a refresher training and if the non-performance persist, He/ she will

be relived of duties and paid all the terminal benefits.

4.03 Skills, Qualification upgrade and Training

Refresher lessons and skills testing exams will be conducted every two months, because of

the nature of the firm. The trainings will include awareness of the latest service developed

and the recent accounting or technology changes. Other staff will in future be sent for higher

qualifications training, with a condition of 4 years bond after obtaining the qualification. The

payment term will be “half salary paid leave, and be back to work during academic holiday,

for a full salary”. CF & I Consultancy will bear all the cost for any type of training for its

staff. CF & I Consultancy will utilize most of its advisors during the staff refresher trainings.

Page 9 of 33
5. PRODUCT / SERVICE DESCRIPTION

5.01 Description of service features

The main service that CF & I Consultancy will offer is investment trainings and guidance.

Under this service, clients, who are investors, will be taught how best to select a viable

business and how to manage the business. Previously, investment consultancy services were

very expensive. The services were as well targeted for only big entities. The benefit of CF &

I Consultancy service will be its accessibility by all business levels, mostly small and

medium enterprises (SME’s). The important feature of this firm is its sub-sections or sub-

services. CF & I Consultancy will have sub-services as below:

 Accounting packages training

 Investments analysis and appraisal

 Internal audit services

 Accounting refresher lessons.

The above services will be offered at the firm’s main training station in Lilongwe, Area51.

This service point is at the center of Malawi, hence closer to both the northern and southern

regions of the country. Boarding facility will be available for customers from afar.

Arrangements to train the clients at their business place will also be acceptable.

5.02 Specific advantages and challenges

The investment trainings and guidance service will be advantageous to our customers in two

main ways. The first way is that the investor will be able to select the best and profitable

businesses. Secondly, the investors will be able to manage their business for its establishment

and going concern.

Page 10 of 33
The challenges that will be available are expounding ideas to entrepreneurs who completely

did not attend school, and also reaching of customers from very far away places. These

challenges will be solved in a number of ways. The first challenge will be solved by

expounding business concepts from an ordinary perspective, and giving out of audio discs or

cassettes as handouts for those who cannot read. There will also be developments in the

future, in terms of online mode of accessing professional trainings and guidance to cater for

remote customers, which will be implemented in a long run.

5.03 Service status

The CF & I Consultancy services that will be offered will not be luxurious in nature, but a

basic for any modern business. The services requested will be available in adequate way,

even with huge demand than that anticipated on the plan; because outsourcing option will be

considered, but only from a reputable business Consultants.

5.04 Proprietary position of the service

The main service of the firm will be branded as Investment Training and Guidance, (ITG).

This service brand will be copyrighted, so that no consultancy firm in Malawi will be allowed

to use the name, ITG as its service brand without paying for an agreed royalty. Under the ITG

service trade mark, the subservices will also have the service codes in our accounting system

as below:

o APT – short code for Accounting packages training

o IAA - short code for Investments Analysis and appraisal

o IAS - short code for Internal audit services

o ARL- short code for Accounting Refresher Lessons.

Page 11 of 33
6. MARKET RESEARCH

6.01 Description of customers

There are two main categories of customers that are being targeted. The first one is small and

medium enterprises (SMEs). This is composed of small scale businesses like family retail

shops and Medium enterprises like village corporative and so on. The second category is the

accounting/ finance student group. This is mainly composed of students at their final stage of

their academic or the recent graduated students.

6.02 Targeted customers

Preliminary research, according to World Bank’s statistics, shows that there are on average

760,000 SMEs in Malawi per year. (Source: http://www.worldbank.org/en/news/press-

release/2012/05/17/malawi-2012-micro-small-and-medium-business-survey-results-

financial-exclusion-big-problem). The second customer group, student category, according to

ICAM, ACCA,ABE,UNIMA and CIMA magazines reflects an average of 10,000

accounting/finance students in Malawi per year who are at their final levels or just graduated.

The sum of the two total market categories is 770,000 customers.(i.e. 760,000+10,000).

Further research shows that 80% of the targeted market is not adequately served in terms of

investment training and guidance; hence only 20% is adequately served. This concludes a
80
maximum potential market of 616,000 customers. (770,000 ×100). The total industry

analysis is shown in the table below:

Page 12 of 33
 TARGETED TOTAL ADEQUATELY POTENTIAL ADEQUATELY POTENTIAL
MARKET DEMAND COVERED % SHARE % COVERED SHARE
PER YEAR

Small scale 760,000 20% 80% 152,000 608,000

industries customers
Accounting 10,000 20% 80% 2,000 8,000
Students and new customers
graduates
TOTAL 770,000 20% 80% 154,000 616,000

6.03 Service preferences

The targeted customer groups are categorized with both low income and medium income

earning abilities. Hence, they prefer a service that will directly simplify business operations,

reduce costs and increase profits. Therefore, CF & I consultancy services will achieve these

customer preferences, as it is affordable, reliable and consistent result oriented.

6.04 Potential market size and revenue

CF & I consultancy is targeting 1% of the potential share of 616,000 customers during its first year of

1
operations, this translates to 6,160 customers. (616,000 × ). The firm is targeting this share
100

because of its little capacity both financial and material resource wise. The targeted market is

characterized as predictable and responsive, hence; it is expected to grow by 33% to 8,199 in the

fifth year of the business. The average revenue per customer is expected to be MwK10,

000.00. The revenue is expected to have a probability of 60%, Hence the first year’s revenue
60
will be MwK36, 960,000.00. (6,160 × 10,000.00 ×100). The income is expect to come from

the three regions of Malawi and in proportion as summarized in the table below:

Page 13 of 33
 SERVICES SUB-CATEGORY AND ITS PROPORTION SERVICE CATEGORY BY REGION

PROPORTION REGION
SERVICES CATEGORY OF TOTAL TOTAL
REVENUE Southern Central Northern

 Accounting packages training

30% 30% 50% 20% 100%

 Investments analysis and appraisal

30% 30% 50% 20% 100%

 Internal audit services

10% 30% 50% 20% 100%

 Accounting refresher lessons.

30% 30% 50% 20% 100%

100% 30% 50% 20% 100%

TOTAL

6.05 Market trends

Investments and financial consultancy services were primarily difficult to apply in Malawi

environment. This was partially because the affiliation of accountants and the way of

reporting were only monitored outside Malawi, i.e. with ACCA. However, there has been a

change in accounting professionalism in Malawi.

Previously, accountants were only obtaining affiliation from UK chartered institutes. Now,

chartered affiliation can be done locally though Institute of Chartered Accountants in Malawi

(ICAM) in conjunction with ICAEW. This legal and regulatory change is a business

opportunity for CF & I Consultancy, because students and SMEs will need to have trainings

and guidance services on the subject, in terms of its impact on their business and reporting

requirements.

Page 14 of 33
7. DESCRIPTION OF COMPETITORS

7.01 Competitors name and market share

The main competition for CF & I consultancy services will be on Accounting packages

training offered by IT centers, and audit and assurance services offered by other accounting

and auditing firms. My analysis shows that the firm’s potential rivals are competing towards

20% of the active Small and Medium Enterprises. The rest of their targets are bigger entities.

The summary below shows the profile of six main competitors contending on the firm’s main

target of SME market:

CF & I CONSULTANCY FIRM COMPETITORS PROFILE ANALYSIS

MARKET ANALYSIS MAIN COMPETITORS ANNUAL COVERAGE
METRO WALL ATC COLLEGE & TAXaVE GLOBAL KPMG AUDIT ALL
SERVICES CONSULTANTS CONSULTANTS SERVICES COMPUTER
BUSINESS
SOLUTIONS
CONSULTANCY
TARGETED TOTAL COMPETITORS SHARE % SHARE % SHARE % SHARE % SHARE % SHARE %
MARKET DEMAND TOTAL
PER COVERAGE
YEAR 20%
Small scale 760,000 152,000 45,600 30% 38,000 25% 30,400 20% 22,800 15% 12,160 8% 3,040 2%
industries customers
Accounting 10,000 2,000 400 20% 600 30% 300 15% 160 8% 40 2% 500 25%
Students and customers
new
graduates
TOTAL 770,000 154,000 46,000 29.87% 38,600 25.06% 30,700 19.94% 22,960 14.91% 12,200 7.92% 3,540 2.3%

7.02 Competitors profitability

The above competitors have average net revenue of MwK8, 000.00 per customer and an

expense base of 45% of gross revenue. The expense base of the competitors is so huge

because some of them are still in their infant stage, while the bigger firms are in their

diseconomies of scale. The competitor’s services are of high standard as well, because they

have adequate resources for their trainings. On the contrary, their customer after service

support is very poor because of their numerous customers.

Page 15 of 33
7.03 Operating methods

The current competitors adopted a red ocean strategy in their operations. This means that,

their competition is based on the existing market. Little efforts are being made by the existing

players to look for new market, as per blue ocean strategy. Their main fear is the risk to

loose existing customer, if they divert their effort in looking for a new market.

7.04 Level of Customer satisfaction

The customers for the competitors are currently expressing dissatisfaction because of level of

poor customer care and no after service support. This is because of the huge demands that the

competitors are having. The royal customers are also not getting royalty discounts; this is

making them to abandon the old firms.

7.05 S.W.O.T analysis

The table below summarizes the anticipated Strengths, Weaknesses, Opportunities and

Threats.

Strengths Weaknesses

 An excellent experienced accounting and  Little start-up capital contributed by

finance partners as well as advisors partners in form of cash
 All partners are currently employed in well-  No start up infrastructures are available
paying jobs
Opportunities Threats

 Vast and big unreached market is available  Risk of recruiting lazy staff who might
 The partners already have some more damage the firm’s first impression
customers who are being assisted on  Lack of tangible collateral to access higher
individual capacity basis bank loans

Page 16 of 33
8. DESCRIPTION OF LOCATION

8.01 Importance of the location

The location where CF & I Consultancy will be situated is very crucial because it is situated

at a place designated for community infrastructure by the ministry of lands through the city

council. The location is also a developing area, as many houses and other infrastructures are

being built nearby; hence customers will have a consultancy center, just close to them.

8.02 Location criteria

The criteria used to come up with the proposed place were as follows:

 The land is cheap, hence cost effective for the project

 The place is spacious for the customers to relax outside, during discussions

 The place is close to the main road, ESCOM power supply poles, Water board pipes and

Telecommunication sites.

 There are a lot of trees for fresh air.

9. MARKETING METHODS

9.01 Marketing strategy

CF & I consultancy will target small scale customer group using green field adventure. This

implies that the focus will be put much on the unreached small scale entrepreneurs. The

essence of the strategy is to reduce the impact of competition, as the firm is just a newly

started. This will be done by distributing introductory letters of our consultancy services to
Page 17 of 33
the investors. CF & I consultancy services will be unique in that they will be tailor made,

meaning; suitable to a specific investor and depending on the current economic conditions.

The key benefit to be highlighted is the payment mode and terms, thus installment payment

for our excellent services will be allowable, depending on customer’s financial capability.

Currently, each partner already has some customers that are being served in individual

capacity. Customer’s responses, upon hearing of the upcoming firm are so enormous

9.02 Advertisement and promotion

CF & I consultancy will have several exhibitions during its launch, on the importance of

guidance and trainings on investments. During these expositions two students will win free

scholarships to attend the first accounting packages training (APT sessions). One SME will

win free monthly subscription to be getting discs and monthly handouts/ magazines on

current investment techniques, and the general business environment. There will be three

promotions, each occurring once on every region of Malawi.

9.03 Sales strategy

The services will be delivered directly to clients, or at CF & I Consultancy head office in

Area 51, Lilongwe. Agents will only be used to source customers, as the business is

expatriate in nature, hence the need to be handled by the required staff. Most of the

accounting packages training and accounting refresher courses will be done at one central

place, whereas investment appraisal and audit services will either be done at client’s place,

the first two days, and the rest via internet or telephone. Relevant materials will be sent

monthly to customers at an agreed subscription fee. The subscribers, whenever relevant, they

will be visited to assess the physical business environment. Additional requested visits by a

Page 18 of 33
subscriber will attract a refund of the transport or fuel used, as our fees are already set at

minimal rates. All visits of more than 50 KM will require special fee arrangements with the

client, for either, fuel or accommodation refund.

9.04 Communication methods

Radio and Television adverts, brochures, posters as well as Facebook will be used as core

advertisement means. My research conducted show that the chosen advisement means are so

effective in the proportion as shown on the pies chart below:

EFFECTIVENESS OF ADVERTS
Facebook
TV adverts
Radio advers
Brochures and posters

Special agents will also be engaged for customer hunting; these will be earning a commission

of 12% of the service price/contract for every customer won. This big commission will

motivate the agents to seek more customers; hence firm’s revenue will grow as well.

9.05 Highlighted features

The adverts will press emphasis more on the reliability and efficiency of the CF & I

consultancy ITG services (Investment training and Consultancy servicers). Affordable

pricing and Mode of payment will also be emphasized, as the targeted customers are low and

medium income earners.

Page 19 of 33
9.06 Timing

All the adverts will scheduled for lunch and dinner time on both TV and radio stations. This

is the free time where customers are busy listening to the radio or watching TV. Facebook

posts will be updated after working hours, that’s the time where people are busy checking on

Facebook wall pages while going home in minibuses.

9.07 Product / Service Development

New services will be developed to cope with demands and the changing technological

developments. The future focus will be the development of an extensive and secured website

for the customers to be assisted online. The online contents will include brochures,

subscription expiry times, calendar of customer’s appointments and many more.

9.08 Research & development

Research will be made on an ongoing basis to deduce if the customers are still satisfied with

our service, or if there is a need to improve on the service and its delivery. International

market research will also be conducted, to see if the firm can target the global market with its

available resources. Currently, another research is already been conducted to find the

effective investment appraisal techniques. This will last a month from now, and it will be of

importance to the firm when analyzing customer’s proposed businesses.

Page 20 of 33
10.PRICING

10.01 Pricing criteria

The firm will be using pricing per batch as its strategy. This means that the firm will be

conducting its service in groups. This will enable the firm to reduce training cost per function

and per customer, hence the reduction in service fees. The customers will be getting the

highest quality of service at a little fee; hence big market share will be grasped, till all the

available resources have reached their limits. The table below summarizes the pricing

approach:

PRICING STRATEGY TABLE

STANDARD & SERVICE PRICING

REVENUE PER MONTHLY
AVERAGE
SERVICE CATEGORY
BATCH BATCH TOTALS PRICE /
PRICE PER UNIT CUSTOMER
DURATION
SIZE

 Accounting 38 MwK10,000.00 / MwK

I week MwK 380,000.00 /week MwK
packages training students student 1,520,000.00 10,000.00

 Investments
154 MwK10,000.00 / I month MwK
analysis and MwK1,540,000.00 MwK1,540,000.00
clients month / client subscription 10,000.00
appraisal

 Internal audit 55 MwK10,000.00 / I month MwK

MwK 550,000.00 MwK 550,000.00
services clients month/ client subscription 10,000.00

 Accounting 38 MwK10,000.00 / MwK

I week MwK 380,000.00/week MwK1,520,000.00
refresher lessons. students Student 10,000.00

MONTHLY ESTIMATED REVENUE FROM MwK 10,000.00 AVERAGE SERVICE FEE MwK5,130,000.00

Page 21 of 33
10.02 Methods of pricing

It is estimated that the average direct operating cost per unit will be 30% of the revenue.

Hence, the gross profit margin for CF & I consultancy will be 70%. The charges for any

service that may arise in future will be based on this profit margin pricing strategy.

11.FINANCIAL PROJECTIONS

11.01 Key assumptions

The following assumptions are made in the preparation of projected financial statements:

 Initial income for the project will come from the partners contributions. Any shortfall

will be funded by a bank loan. Sales from the first year will be based on 6,160

customers at a fee of MwK10,000.00 per customer. This revenue is expected to grow

at 10% per year from the first year. The revenue is expected to have a probability of

60%, thereby reducing the revenue per customer to MwK6,000.00. The sales and

costs are expected to be distributed evenly throughout the year.

 Direct expenses are expected to be 30% of the gross revenue in the first year, and

decrease by 10% compared to previous year’s expenses, each year due to economies

of scale. Direct expenses comprise of 12% commission given to agents after fetching

customers. It also covers transport for visiting clients in the first contract days within,

the recommended distance, as per our sales strategy .

 There will be a total of thirteen employees, inclusive of the five partners, who will

also be allocated salaries for the positions held in the firm. Each partner will receive

5% of the net profit before appropriation as his salary. 90% of the residual profits will

Page 22 of 33
 be shared, as per capital contribution ratios. Payment to partners’ current account will

be made in the next financial year, after management / board of directors’ approval.

 Managerial staff (4 posts), will each receive a gross salary of MwK200,000.00 per

month, and the specialist or consultants (4 posts), will as well receive a gross salary

MwK140,000.00 each, per month. The salary will be increased by 10% per annum

from the second year.

 10% of the residual profit will be transferred to general reserves

 Depreciation of assets will be 20% straight line per annum.

 Land and buildings are expected to appreciate by 5% of the NBV every year.

 Marketing and R & D cost are expected to be MwK 200,000 per annum

 City rates, water and electricity bills are expected to be MwK 250,000.00 per annum

 It is expected that 25% of the revenue will be on credit, payable one month after;

because the firm accepts installments terms.

 It is expected that MwK30,000.00 of rates, water and electricity will be accrued each

month

 Each partner is expected to pay PAYE tax in his own return (from the profits share),

but other employees’ PAYE tax will be withheld and expensed.

 The projected financial statements will be for three years, staring with initial year, i.e.

(Year 0), Hence the trend will be Year0, Year 1 and Year 2. This is because in the

initial year there will be big developments, in terms of capital expenditure.

 Insurance is expected to be MwK50,000.00 per annum

 Any other expense or loan that may be taken in the initial year will commence to be

repaid in year1, as there is no expected revenue in the initial year. The initial year’s

preparations are expected to end by 31st December of the year, after the start of the

business. The financial year of the firm will run from January - December.

Page 23 of 33
  Cleaning and security expenses are expected to be MwK750,000.00 per annum

 Bad debt provision are estimated to be 4% of the debtors

 MwK4,000,000.00 loan will be sourced from the bank to square-up the initial

construction and equipment purchase, on top of MwK 6,000,000.00 which is available

as partner’s capital.

 Loan interest will be deferred, meaning an approval will be requested for the interest

to be paid beginning the fourth year, where revenue will have grown and stable.

 An arrangement will be made to have an overdraft in year1, with deferred interest

payment, to year 4. The overdraft will not exceed the debtors figure.

 Both overdrafts and bank loan will attract 40% interest. The MwK4,000,000.00 loan

will be repaid for 10 years. Capital repayment of all loans will be made from year1,

only the interest payment will be deferred.

11.02 Description of startup costs

The firm will require an infrastructure and a number of equipment for its operations to begin.

The resources that are required are listed below:

 Land, and building construction

 Computer, networking and communication equipment

 Human resources

The table below summarizes the initial cost required to set up a structure for the firm

Page 24 of 33
 TOTAL COST -
1 PHYSICAL ITEM QUANTITY COST PER UNIT MwK
2 LAND ( 1 Hectares) 1.00 500,000.00 500,000.00
3 BRICKS 100,000.00 10.00 1,000,000.00
4 CEMENT 100.00 10,000.00 1,000,000.00
5 IRON SHEETS (IBR 28 guage) 50.00 9,380.00 469,000.00
FINISHING (DOORS, WINDOWS , PAINT
6 E.T.C) - 500,000.00 500,000.00
7 ELECTRICITY & WIRING - 200,000.00 200,000.00
8 LABOUR - 500,000.00 500,000.00
9 WATERBOARD & PLUMBING - 200,000.00 200,000.00
10 DESKTOP COMPUTERS & ACCESSORIES 40.00 80,000.00 3,200,000.00
11 WIRELESS ROUTERS 10.00 45,100.00 451,000.00
12 GROUND PHONES 15.00 12,000.00 180,000.00
13 ACCOUNTING AND FINANCE BOOKS 50.00 10,000.00 500,000.00
14 FURNITURE - 1,000,000.00 1,000,000.00
15 FROWERS & DECORATIVE ITEMS - 150,000.00 150,000.00
15 GO TV & SCREEN - 150,000.00 150,000.00
TOTAL 10,000,000.00

The supplier of the computers has offered to give three free multifunctional printers on the

condition that we buy all the computers from him. The Ministry of lands has offered the land

half the price, because this is the first consultancy structure being elected in the area. Hence,

they are motivating other investors to elect similar structures in the area.

Page 25 of 33
11.03 Sales forecasts

(a) Monthly sales forecast for year 1

J a n u a ry F e b ru a ry Ma rc h

Q u a rte r 1
Se rvice
Gross
re ve nue s MWK 3,080,000.00 MWK 3,080,000.00 MWK 3,080,000.00

Q u a rte r 2
A p ril Ma y June
Se rvice
Gross
re ve nue s MWK 3,080,000.00 MWK 3,080,000.00 MWK 3,080,000.00

Q u a rte r 3
J u ly Au g u s t S e p te m b e r
Se rvice
Gross
re ve nue s MWK 3,080,000.00 MWK 3,080,000.00 MWK 3,080,000.00

Q u a rte r 4
O c to b e r No ve m b e r De c e m b e r
Se rvice
Gross
re ve nue s MWK 3,080,000.00 MWK 3,080,000.00 MWK 3,080,000.00

Total MWK 36,960,000.00

(b) Five years sales forecast

Ye a r 0 Ye a r 1 Ye a r 2 Ye a r 3 Ye a r 4
Se rvice
Gross
re ve nue s - MWK 36,960,000.00 MWK 40,656,000.00 MWK 44,721,600.00 MWK 49,193,760.00
O pe rating
cashflows MWK (10,000,000.00) MWK 25,872,000.00 MWK 30,676,800.00 MWK 35,740,320.00 MWK 41,110,608.00

Page 26 of 33
11.04 Income statement projection for the year ended 31 December

Year 0 Year 1 Year 2

MwK MwK MwK
Revenue - 36,960,000.00 40,656,000.00
Cost ot revenue - - 11,088,000.00 - 9,979,200.00
Gross profit - 25,872,000.00 30,676,800.00
Expenses
Staff salaries 12,072,000.00 13,214,400.00
PAYE tax 4,248,000.00 4,737,600.00
Marketing and R&D 200,000.00 200,000.00
City rate, water and electricity
(250,000+30,000) 280,000.00 280,000.00
Insurance 50,000.00 50,000.00
Cleaning and security expenses 750,000.00 750,000.00
Depreciation 1,096,200.00 1,096,200.00
Bad debt provision 369,600.00 406,560.00
Total expenses - - 19,065,800.00 - 20,734,760.00
Net profit 6,806,200.00 9,942,040.00
Partners' salaries
(5% of net profit) - 340,310.00 - 497,102.00
Residual profit - 6,465,890.00 9,444,938.00
General reserve (10%) 646,589.00 944,493.80
Share of profits
Temwa (30%) 1,745,790.30 2,550,133.26
Wongani (17.5%) 1,018,377.68 1,487,577.74
Purity (17.5%) 1,018,377.68 1,487,577.74
Lovemore(17.5) 1,018,377.68 1,487,577.74
Charles(17.5) 1,018,377.68 1,487,577.74
6,465,890.00 9,444,938.00

11.05 Break even analysis

ESTIMATES BEP = Fixed costs / unit contribution

REVENUE PER UNIT 10,000.00 = 21,000,000.00 / 7,000.00
COST PER UNIT 3,000.00 = 3000
PROFIT PER UNIT 7,000.00
ANNUAL FIXED COSTS 21,000,000.00 : . BEP = 3,000 sustomer demand, by April Year 2

Page 27 of 33
11.06 Statement of financial position projection as at 31 December

FIXED ASSETS YEAR 0 - MwK YEAR 1 - MwK YEAR 2 - MwK

Land & Buildings 4,519,000.00 4,744,950.00 4,982,197.50
Equipment,Computers &
Accessories 3,981,000.00 3,184,800.00 2,388,600.00
Office furniture & Books 1,500,000.00 1,200,000.00 900,000.00
10,000,000.00 9,129,750.00 8,270,797.50
CURRENT ASSETS
Debtors - 8,870,400.00 9,757,440.00
Bank / (Bank OD) - - 1,678,310.00 -
Cash - - 1,756,487.00
- 7,192,090.00 11,513,927.00
TOTAL ASSETS 10,000,000.00 16,321,840.00 19,784,724.50

CAPITAL AND LIABILITIES

CURRENT LIABILITIES
Accruals - 30,000.00 30,000.00
LONG TERM LIABILITIES
Bank loan
(40% interest from 4th Yr) 4,000,000.00 3,600,000.00 3,200,000.00
PARTNER'S CAPITAL
Temwa 1,800,000.00 1,800,000.00 1,800,000.00
Wongani 1,050,000.00 1,050,000.00 1,050,000.00
Purity 1,050,000.00 1,050,000.00 1,050,000.00
Lovemore 1,050,000.00 1,050,000.00 1,050,000.00
Charles 1,050,000.00 1,050,000.00 1,050,000.00
6,000,000.00 6,000,000.00 6,000,000.00
Current account - 5,819,301.00 8,500,445.00
RESERVES -
General reserve - 646,589.00 1,591,082.00
Revaluation reserve - 225,950.00 463,197.50
- 872,539.00 2,054,279.50
TOTAL CAPITAL & LIABILITIES 10,000,000.00 16,321,840.00 19,784,724.50

Page 28 of 33
11.07 Statement of cash flow projection for the year ended 31 December

YEAR 0 YEAR 1 YEAR 2

MwK MwK MwK
Operating activities
Profit per account - 6,465,890.00 9,444,938.00
Add back:
- depreciation - 1,096,200.00 1,096,200.00
Increase or decrease in:
- Debtors - - 8,870,400.00 - 887,040.00
- Accruals - 30,000.00 -
Partners Dividends/ profit share paid - - - 5,819,301.00
Net cashflow from operations - - 1,278,310.00 3,834,797.00

Investing activities
Fixed assets acquistion - 10,000,000.00 - -
Loan receipt from bank 4,000,000.00
Net cashflow from investments - 6,000,000.00 - -

Financing activities
Loan repayment - - 400,000.00 - 400,000.00
Partners share capital contribution 6,000,000.00
Net cashflow from financing 6,000,000.00 - 400,000.00 - 400,000.00

Increase / (decrease in cash) - - 1,678,310.00 3,434,797.00

STATEMENT OF CASHFLOW SUMMARY

YEAR 0 YEAR 1 YEAR 2

Opening cash/cash equivalent 0 0 - 1,678,310.00
Closing cash/cash equivalent 0 - 1,678,310.00 1,756,487.00
Increase / (decrease) in cash 0 - 1,678,310.00 3,434,797.00

Page 29 of 33
12.FUNDING REQUIREMENTS

CF & I Consultancy is expected to utilize an average of MwK48,131,632.00 funds during its

operation in five years’ time, staring from the initial year (Year 0). The funds will be used to

buy initial capital items, and to cover annual operating expenses in the subsequent years.

The initial funding is expected to be 60% partners’ capital contributions, and 40% bank long

term loan. The total initial funds will be MwK10,000,000.00 which will be used on capital

expenditure items. The money for payment of annual operating expenses will come from the

firm’s projected revenues.

Currently, there are no promoters or any free grant available. The grant if available, will be

used for the firm’s promotions, activities. However, grants have not formed part of the initial

business plan, as no promising promoters have yet been found. The firm will still progress

even with few resources.

Below is the summary of funding requirements for direct costs / expenses to the business:

YEA R F U N D S R EQ U IR ED

ye a r 0 MW K 10,000,000.00

ye a r 1 MW K 11,088,000.00

ye a r 2 MW K 9,979,200.00

ye a r 3 MW K 8,981,280.00

ye a r 4 MW K 8,083,152.00

To ta l MW K 48,131,632.00

Page 30 of 33
13.APPENDICES

REVENUE AND DEBTORS CALCULATION FOR THREE YEARS

Year 0 Year 1 Year 2

Gross revenue - MWK 36,960,000.00 MWK 40,656,000.00
Debtors 9,240,000.00 10,164,000.00

DIRECT EXPENSES AND COSTS CALCULATION FOR THREE YEARS

YE AR C O S T S /E XP E N S E S

ye a r 0 MW K 1 0 ,0 0 0 ,0 0 0 .0 0

ye a r 1 MW K 1 1 ,0 8 8 ,0 0 0 .0 0

ye a r 2 MW K 9 ,9 7 9 ,2 0 0 .0 0

T o ta l M WK 3 1 ,0 6 7 ,2 0 0 .0 0

MONTHLY MALAWI PAYE AS YOU EARN TAX BOUNDARIES AND RATE

INCOME RANGE TAX RATE TAX LIABILITY

MWk0 – MwK 20,000.00 FREE -

Next MwK5,000.00 15% MwK750.00

Excess of MwK 25,000.00 30%

MANAGER’S & CONSULTANTS’ SALARIES & TAX FOR YEAR 1 AND 2

YEAR 1 YEAR 2
MANAGERS CONSULT ANT SANNUAL TO TALMANAGERS CONSULT ANTANNUAL
S TO TAL
Gross SALARY(MwK) 200,000.00 140,000.00 16,320,000.00 220,000.00 154,000.00 17,952,000.00
P.A.Y.E TAX (MwK) 53,250.00 35,250.00 4,248,000.00 59,250.00 39,450.00 4,737,600.00
Ne t salary 146,750.00 104,750.00 12,072,000.00 160,750.00 114,550.00 13,214,400.00

Page 31 of 33
ASSETS COST, DEPRECIATION AND REVALUATION CALCULATION

ASSETS BREAK DOWN SUMMARY AS AT 31.12.2015

ASSET VALUE(MwK)
1 LAND AND BUILDINGS 4,519,000.00
2 EQUIPMENT,COMPUTERS & ACCESSORIES 3,981,000.00
4 OFFICE FURNITURE AND BOOKS 1,500,000.00
TOTAL 10,000,000.00

FIXED ASSETS BREAKDOWN

15% LAND AND BUILDINGS

45% EQUIPMENT,COMPUTE
RS & ACCESSORIES
40% OFFICE FURNITURE
AND BOOKS

ASSETS DEPRECIATION /APPRECIATION FOR YEAR 1 & 2

EQUIPMENT,
COMPUTERS & OFFICE FURNITURE
ACCESSORIES AND BOOKS
LAND AND BUILDINGS DEPRECIATION DEPRECIATION TOTAL
APPRECIATION (MWK) (MWK) (MWK) (MWK)
YEAR0 - - - -
NBV 4,519,000.00 3,981,000.00 1,500,000.00

YEAR1 225,950.00 796,200.00 300,000.00 1,096,200.00

NBV 4,744,950.00 3,184,800.00 1,200,000.00

YEAR2 237,247.50 796,200.00 300,000.00 1,096,200.00

NBV 4,982,197.50 2,388,600.00 900,000.00

Page 32 of 33
ANALYSIS OF PROFITS, CAPITAL, ASSETS, LIABILITIES AND CASH FLOW FOR YEARS 0-2

ITEM YEAR 0 - MwK YEAR 1 - MwK YEAR 2 - MwK

RESIDUAL PROFIT - 6,465,890.00 9,444,938.00
CAPITAL 6,000,000.00 6,000,000.00 6,000,000.00
TOTAL ASSETS 10,000,000.00 16,321,840.00 19,784,724.50
TOTAL LIABILITIES 4,000,000.00 3,630,000.00 3,230,000.00
CASHFLOW INCREASE - - 1,678,310.00 3,434,797.00

25,000,000.00
20,000,000.00
15,000,000.00
10,000,000.00
YEAR 0 - MwK
5,000,000.00
YEAR 1 - MwK
-
-5,000,000.00 YEAR 2 - MwK

Page 33 of 33