CAP Tool 22. Business Plans

Objective: To show people what is needed in a business plan.

Method:

Use the business plan format on the following page and discuss the information that is required with interest groups. The form has been kept as simple as possible. It should be accompanied by time plans and a cash flow budget which are explained in the next tool. The following notes will help you to explain some of the questions:

Project: e.g., sheep fattening or vegetable production or operating a grinding mill.

Period of plan: e.g., June 2003 to May 2004. It is important that this is a realistic time period covering a normal production cycle.

What are your current income-generating activities? This information is important because everybody is doing something to support themselves and the new “project” will be in addition to these other activities. It has been a big mistake when giving loans in the past to ignore the rest of someone’s life. How hard someone works on a new project will depend on whether that seems more worthwhile than working on their existing enterprises.

The questions about losing income if a new activity is introduced are important for the person to consider. Maybe growing groundnut seed will mean growing less barley. Will this mean less profit or more profit in the end?

Capital equipment means tools or any item that will last more than one production cycle. It might include a building or oxen or a sprayer.

It is important for people to know where they can buy their inputs. How often have you heard someone say that they could not get the inputs they needed when they wanted them? Nobody should start a production idea without knowing where to get inputs and they must not rely on other people or the government.

The budget involves working out what you are going to sell during the plan period and comparing it to the costs of producing it. Some examples were given in the sections on calculating and increasing profit.

If to do this activity someone had to stop doing something else, then they must check to see if the new profit gained is greater than the profit lost.

Finally the plan asks people to check that they know where and how they will sell their new product and whether they are aware of the risks involved in the new enterprise and how to counteract them.

BUSINESS PLAN FOR INCOME-GENERATING PROJECTS: INDIVIDUAL

Name: _________________________________ Kushet/Gott: __________________________

Project description:

____________________________________________________________________________

What are your current income-generating activities?

Will you have to reduce any of these activities to start the new project enterprise? ____________

If yes, estimate how much less you will spend on inputs and how much income you will lose:

Costs saved ______________ - Income lost _____________ = Net loss of ______________

What capital equipment do you need to buy for the new project?

Which suppliers have in stock the inputs you need to buy for the new project?

________________________________________________________________

Estimate the profitability of the new enterprise for the period of the plan:

INCOME

COSTS (Only include a share of the full cost of buildings, machines, tools, oxen)

Does this offset any reduction in income from reducing another activity? _______________

How will you sell your new products or services?

______________________________________________________________________________

What are the main risks to the success of this new enterprise and how will you counteract these?

______________________________________________________________________________