Module 3: Basic elements in the establishment and maintenance of micro-enterprises
Topic 1: Causes of success or failure of a business
Activity 1: My proposed business
Activity 3: My production plan
Activity 4: My management plan
MODULE 3: BASIC ELEMENTS IN THE ESTABLISHMENT AND MAINTENANCE OF MICRO-ENTERPRISES
MODULE 3: VISUAL AIDS, CASES, FORMS
VISUAL AIDS |
|
M3 - 1: |
Factors which led to Lin's Success In Her Business |
2: |
Factors which Led to the Failure of Chu's Business |
3: |
Important Considerations for A Successful Business |
4: |
List of Micro-Enterprises to be Undertaken by Individuals |
5: |
Ms. Zhang's Net Cash Income |
6: |
Ms. Wang's Cash Record |
7: |
Plastic Green House for Vegetables |
CASES |
|
M3 - 1: |
Lin's Cabbage Garden |
2: |
Chu's Cabbage Garden |
3: |
Zhang's Potato Starch Processing Business |
FORMS |
|
M3 - 1: |
Marketing Aspect of My Business Plan |
2: |
Production Plan for Year___ |
3: |
Organization and Management Plan |
4: |
Investment Plan |
5: |
Net Cash Income |
6: |
Cash Record |
MODULE 3: BASIC ELEMENTS IN THE ESTABLISHMENT AND MAINTENANCE OF MICRO-ENTERPRISES
INTRODUCTION
This Module is intended to equip participants with the knowledge, attitudes and skills in planning, implementing and evaluating their chosen micro-enterprise. It also helps them to go through the steps of making a simple feasibility study of their chosen micro-enterprise
OUTPUT OBJECTIVES
At the end of 15.5 hours, participants will have been able to:
1. Identify the causes of why business succeed or fail;
2. Internalize important principles in starting and running a business;
3. Prepared a simple Business Plan for their chosen micro-enterprise as the basis for their application for funding from their Group Capital Fund and Project Revolving Fund;
4. Internalized the need and applied the basic skills in keeping a cash record.
Background/Rationale
In general, the poor cannot take unnecessary risks. Their resources and condition are such that they do not have enough to be able to incur losses. If they experience failure, they lose more than their material resources. This erodes their own self-confidence. Furthermore, failure in a project which is associated with external assistance, reinforces their lack of confidence in external agents. It is important there for that rural women have safeguards when they engage in micro-enterprise development. That success and not failure results in their micro-enterprise undertaking since this involves their own money and other resources.
This topic therefore gives the participants an opportunity to examine the factors contributing to success or failure of a micro-enterprise.
Output Objectives
At the end of 2 hours, participants will have:
Identified factors which cause success or failure of a micro-enterprise or business.
Time |
1 hour |
Methodology: |
Case Study/Discussion/Lecture |
Step |
Preparations:
Case M 3 - 1: Lin's Cabbage Garden; Visual Aid M 3 -1.
Materials:
marker pens; newsprint
Instructions for Facilitator (1)
1. Facilitator introduces this Activity by saying that we are now ready to learn more about factors which contribute to the success or failure of a micro-enterprise. Capital fund to start a micro-enterprise, will be available through group savings and the project loan. Availability of funds alone is not sufficient preparations. We have to make sure that the micro-enterprise we choose to borrow money for should succeed. More than anyone else, we are sure that the rural women themselves would want their micro-enterprise to succeed.
Task Instructions
2. Facilitator forms sub-groups of 5 - 7 women and reads Case M 3 - 1: Lin's Cabbage Garden.
3. After reading the Case, Facilitator asks the group to discuss what they have learned from the Case.
Guide Questions
(On Newsprint)
(a) Is Lin's business successful?
(b) If so what are the factors which contributed to her success?
4. Sub-groups report results of their discussion.
5. Facilitator summarizes the results of their discussions under the following headings:
(a) Marketing
(b) Financing
(c) Production
(d) Management
(e) Self-reliance
6. Important Pointers for facilitator in synthesizing the results of this Activity is found in Visual Aid M 3 - 1.
Case M 3 -1: "Lin's Cabbage Garden".
Lin is a farmer in the Dazhai village in Inner Mongolia. She has 2 children. Her husband works as a factory worker.
Lin tills 5 mu of rice land. For many year she has been farming rice and has not made good profits.
Because of her very low profits from cultivating rice, she thought about planting vegetables. But before she made a decision, Lin made a careful survey in the market of which types of vegetables are in demand and commands higher price. She went to several market places and found out that cabbage sells at a very high price and were in high demand.
She went to an agricultural technician from the Ministry of Food and Agriculture and asked how cabbage is grown. Fortunately there was a workshop to be given on cabbage for 2 days. She attended the 2 day workshop and learned how to raise cabbage. Since the workshop was basically conducted through demonstration and field practicum, Lin learned how to plant, water, fertilize, weed and harvest cabbage. She also learned that on 5 mu of land, she will need 200 yuan for land preparation, fertilizers, chemicals, labor and other incidental expenses.
Lin has only 100 yuan. She went to her parents and requested for a loan of 100 yuan at 2% interest per month. Then she went to the market place and secured the commitments from buyers for her cabbage produce. With a ready market for her cabbage, she started to grow cabbage in her land. She religiously followed what she had learned from the workshop et the Ministry of Food and Agriculture. Lin recorded all her production expenses on cabbage production.
After 3 months, she started harvesting cabbage and selling them to her buyers. She also recorded all her sales. Her total sales amounted to 600 yuan. She made a profit of 400 yuan. Out of the profit, she paid her loan of 100 yuan to her parents including the interest. All the rest of the profit, she reinvested in cabbage production by renting an additional 5 mu of land.
Visual Aid M 3 - 1
Factors Which Led to Lin's Success in Her Business
(a) Marketing
· Lin conducted a market survey;
· She determined the demand and price of cabbage;
· She secured her sales through negotiations
(b) Production
· Lin attended workshop in production of cabbage;
· She knows the proper practices involved in cabbage production from land preparation to harvesting of produce;
(c) Financing
· Lin used her savings and secured a loan;
· Lin reinvested all her earnings in cabbage so she can expand her business;
(d) Management
· Lin took care of all stages of production according to what she learned from her workshop (land preparation to harvesting);
· She kept a record of her transactions.
(e) Self-reliance principle
· Lin has the principle of self-reliance, since she showed initiative or thinking about something new by herself;
· Lin was realistic in that the micro-enterprise she chose was small? relatively
· low risk and can be managed together with her other tasks;
· relatively simple technology and low investment;
· relatively short production-cycle (less than a year), so quick return of investment;
· contribute to cash income;
· Because Lin succeeded, her confidence and enthusiasm has increased;
· Lin's management skills have improved because now she has first hand experience;
· she has learned a new technological skill.
Time: |
1 hour |
Methodology: |
Case Study/Lecture/ Discussion |
Steps: |
Preparations:
Case M 3 - 2: Chu's Cabbage Garden; Visual Aid M 3 - 2.
Materials:
marker pens; newsprint
Instructions for Facilitator (1)
1. Facilitator introduces this Activity by saying that now that we have analyzed the factors which led to the success of Lin's business or micro-enterprise, let us examine another Chu's case, if she also has considered the factors which could lead to success in her business.
Task Instructions
2. Using the same sub-grouping as in Activity 1, Facilitator reads Case M 3 - 2: " Chu's Cabbage Garden".
3. Facilitator gives guide questions.
Guide Questions
(On Newsprint)
(a) Is Chu's business a success or failure ? Why ?
(b) What factors contributed to the failure of Chu's micro-enterprise ?
4. Ask the group to present their outputs.
Instructions for Facilitator (2)
5. Facilitator summarizes the results of their discussions according to the following headings:
(a) Marketing
(b) Financial
(c)Production
(d) Management
(e) Self-Reliance
6. For important Pointers see Visual Aid M 3 - 2.
Case M 3 - 2: Chu's Cabbage Garden
Chu is another farmer from the same Dazhai village in Inner Mongolia. Her husband is a drunkard. Chu has been tilling rice for the last 10 years. Just like the other farmers, her profits from rice production is low.
Chu heard the news that her friend Lin, realized good profit from planting cabbage. Because of this Chu decided to plant cabbage. She borrowed 140 yuan from her relatives to start a 3-mu cabbage plot.
Unlike Lin, Chu did not record her expenses. She even used 20 yuan from her loan to buy dresses. Due to this, her budget fell short and she was not able to buy all the fertilizer requirement for the cabbage. Moreover, because cabbage production is new to her, she simply thought that cabbage growing is the same with rice. She left the cabbage plantation to her husband to do who, thinking that this could be cared for like rice, irrigated the plants excessively and about 1/4 of her cabbage died.
After 3 months, she harvested her cabbage. Because they lack the proper care and management, her cabbage did not grow well. The worse part is that because the quality of her cabbage was low, buyers did not want to buy her product at a good price. Her total sales thus, amounted to only 100 yuan.
Visual aid M 3 - 2
Factors which Led to Chu's Failure in Her Business
Marketing
· She did not go to the market to check the demand for her cabbage;
· She had no contact for potential buyer of her product.
Production
· She had no knowledge or skill about cabbage - growing, that is why her yield was low and poor in quality.
Financing
· She spent the money intended for investment in her business for things which were not planned for and were not income - generating (dresses). This is why there was not enough money left to buy necessary things for production.
· She did not keep any records.
· She cannot repay her loan.
Management
· Because she did not have the proper knowledge, she did not understand the needs of the product;
· She showed little interest in her project, she even left her husband to do some tasks, who also did not know much about cabbage.
Self-Reliance related factors
· Because she failed, her confidence with herself now is even lower than before she engaged in the cabbage enterprise;
· She would tend to blame her husband and therefore she is beginning to acquire traits of not taking responsibility for her actions (dependency culture);
· She did not learn new skills in planting cabbage and managing her new business (her dependency reinforced).
Background/Rationale
At this stage of the workshop process, participants have some general and basic understanding of factors which influence success or failure of a micro-enterprise and the basic elements in engaging in business. Making a business plan is one of the basic elements for the success of the business. It is the basis for deciding whether the intended business is profitable or not.
In this topic, participants will learn to make a simple business plan for their own specific micro-enterprise. These are however very preliminary. It is important for the Facilitator to understand that this is a relatively new area of knowledge both for Facilitator as well as for participants. Even if the outputs are very rough, what is important is that the participants would have broken their own apprehensions.
At the end of this Topic, Facilitator tells participants that the WG Loans Committee with help from Field Workers will work with them on their Business Plan some time after the workshop. Their outputs therefore will be considered notes.
Participants will be reminded that at this stage they already know from Module 2 about the Group Capital Fund and the Project Revolving Fund as two possible sources for funding their Business proposal, besides their own resources.
At this stage, what is important is that each one should have a preliminary Business Plan.
Output Objectives
1. By the end of 5.5 hours participants will have initial skills to draft a Business Plan;
2. Each participant will have accomplished their preliminary Business Plan.
Time |
1.5 hour |
Methodology |
Group Task/ Individual Tasks/Discussion/Lecture |
Output |
Individual Notes for Business Plans |
Steps |
Preparations:
Visual Aid M 3 - 3; Visual Aid M 3 - 4.
Materials:
marker pens; newsprint
Instructions for Facilitator (1)
1. Facilitator asks participants whether they agree that a business can only be considered successful if it makes a profit. When participants agree, Facilitator then gives the definition of business.
A business is any undertaking which involves the production of goods and/or services to obtain a profit by selling these goods and/or services.
2. Facilitator asks participants to give examples of the kind of businesses they know Write the examples on the blackboard Then explain that the businesses can be divided in the following categories Write down the categories and ask participants for examples under each category.
a Production:
producing goods for selling, e.g. tobacco growing, sheep raising. The profit comes from selling the produce at a higher price than it costs to produce it.
b. Processing/manufacturing:
converting raw materials into finished product, e.g. processing wheat into flower. The profit comes from selling the produce at a higher price than it costs to produce it..
c. Trading:
buying and selling of the same product(s), e.g. grocery shop, market stall. The profit comes from selling the goods at a higher price than they were bought.
d. Services:
main line of business is providing a service e.g. barber shop, transportation. The profit comes from selling the service at a higher price than it costs to produce it.
Instructions for Facilitator (2)
3. Facilitator then continues saying that in the previous Topic we analyzed what factors makes a business succeed or fail. Lin's business is successful, because she studied and prepared well before she started her business and she managed it properly. That is why she was able to make a profit and Chu did not.
From this we learn that if we want to start a business, we first need to carefully consider what we want to do and how we will do it. We need to be reasonably sure that we can make a profit.
Task Instructions
4. We shall now start applying what we have learned to make our own individual Business Plan. Together, let us go over the steps in Business Planning. Let us compare this to planning for a meal. This Visual Aid will help us analyze the elements of business planning in a systematic way. I want you to come up with examples as we go along. I will write on the blackboard the answers you will give me as we go along. (Facilitator uses Visual Aid M 3-3)
5. Facilitator tells the participants to apply what we have learned from the Cases of Lin and Chu in the previous Activities in answering the questions.
6. We look into the production aspect (good cooking skills, materials needed), the marketing aspect (no food stall in the village, knowing the customer, good location, quality service), the financial aspect (investment needed, available capital), and the management aspect (husband and sister in law can help).
7. Facilitator continues and says that asking oneself these questions is also very helpful because we can find out what other information we need (in this case especially about the marketing aspect, number of customers and the pricing) before we can make a decision.
Task Instructions
Group Task Guide
(On newsprint)
(a) Consider these questions and apply them to the enterprise you are thinking of engaging in.
(b) Form into sub-groups of 5 - 7 women.
(c) You are given 30 minutes to share your ideas with each other.
(d) After sharing your ideas with each other, write down for yourself your own ideas about your own business.
(e) You have 15 minutes to write down your ideas.
(f) Use the headings in Visual Aid M 3 - 3 and write them on the blackboard.
Facilitator repeats the questions once more using Visual Aid M 3 - 3 after she gives the Group Task Guide.
Note that putting them in sub-groups helps in clarifying their own thoughts on the matter, before they develop their Business Plans in more detail.
Instructions for Facilitator (3)
8. During the sub-group discussions, Facilitator and Monitors go around and assist individuals in the above Activity. This task is very important. Help the illiterates, who may be clear of what they want to do, but are not able to write it down. If they are having a difficult time, Facilitator and Monitors should "tutor", meaning take one person at a time and help them articulate what they want to do and how they want to do it.
9. Facilitator should realize that at this stage, individuals are not yet very clear with their own Business Plans. This Activity "softens" them so to speak for the next Activity, in which the critical aspects in business planning are thought through in more detail.
What we want out of this activity therefore is not necessarily a complete and good plan.
Task Instructions
10. After 45 minutes, the Staff consolidate the participants' outputs, using Visual Aid M 3 4.
11. This consolidated output is presented in newsprint to the participants. Facilitator should do this presentation by going over the headings of the Visual Aid and making highlights and from time to time asking for confirmation from the participants. Facilitator should be showing her appreciation for the outputs, since this has been very difficult for the participants.
12. Facilitator reminds participants to hold on to what they have written as their answers to the above questions, because they will need these in the next Activity.
Note: It is very important that they have the outputs written.
Instructions for Facilitator (4)
13. Facilitator ends the session by saying that here now is a list of projects as a basis for a proposal for funding from our Group Capital Fund and the Project Revolving Fund. That we have taken time to preliminarily assess the various aspects of business in this activity, so that it would not be so difficult to actually accomplish the application for funding from the Group Capital Fund and the Project Revolving Fund in the next activity.
Visual Aid 3-3
Important Considerations in Planning
PLANNING FOR MEAL |
PLANNING FOR BUSINESS |
What Food do I want to make? e. g. special noodle soup |
What Business do I want to do? e.g. noodle stall |
Why do I think this is a good idea? |
Why do I think this is a good idea? |
I went to make something special for festival day end my family likes this dish very much |
I am a good cook and there is no food stall in the village. Also, my place is right at the main road, so I think many people will like to come, so that I can make a good profit. |
How much will I make? |
How much will I produce/sell? |
Except for my family members, I want to give some to my old neighbors, all together I will make for 15 bowls |
I will make two kinds o noodles. Each day, I expect about 15 customers for each kind. |
What do I need to make it? |
What do I need to operate the food stall? |
Materials: stove, fuel, pan, knife, ingredients, |
Materials: place, stove, fuel, pan, knives; bowl singredients, table, stools, bowls, glasses, chopsticks, etc. |
Skills: Know which ingredients, how many, |
Skills: cooking, cleanliness, friendly to how to mix, how long to cook, etc. customers, know what people like to eat, know where to get ingredients at reasonable price, etc. |
Labor: can do it myself, have time |
Labor: my daughter in law can help with serving and cleaning during busy hours |
How much money do I need? |
How much money do I need? |
I have most of the materials, |
I have a suitable building, stove and enough cooking utensils. I need 3 tables with stools, which my husband can make for 200 rmb, and I have to buy 10 bowls, 50 chopsticks, 10 glasses at a total of 50 rmb. For ingredients and fuel I need 200 rmb |
Do I have the money? |
Do I have the money? |
yes |
I have 250 rmb and need 450 rmb, so I will have to borrow 200 rmb |
Shall I do it? |
Shall I do it? |
I have the money, the materials, the skills and the time, and my family will appreciate it, so I will do it. |
I am confident that I can run a food stall. My daughter-in-law wants to support me, but I have to invest 450 rmb and I need to be sure that enough people come and are willing to pay my price before I can decide to do it. I first need to compute how much a meal will cost and then ask people whether they would become my customer. Only when I am sure of my profit will I borrow |
Visual Aid M 3 4
List of Micro-Enterprises to be undertaken by Individuals
(Consolidation Form)
Name |
Type of Business |
Financing |
Duration of Loan | |
Self |
Revolving Fund |
|||
(a) Production Projects |
||||
1 |
||||
2 |
||||
3 |
||||
4 |
||||
5 |
||||
6 |
||||
7 |
||||
etc. |
||||
Sub-total |
||||
(b) Processing/Manufacturing Projects |
||||
1 |
||||
2 |
||||
3 |
||||
etc. |
||||
Sub total |
||||
(c) Training/Mechanizing Projects |
||||
1 |
||||
2 |
||||
3 |
||||
etc. |
||||
Sub-total |
||||
(d) Service Projects |
||||
1 |
||||
2 |
||||
3 |
||||
etc. |
||||
Sub-total |
||||
Grand Total |
||||
Time |
1 hour |
Methodology |
Discussion |
Steps |
Preparations:
Form M 3 - 1: Each participant should have one copy
Guide Questions on newsprint
Materials:
marker pens; newsprint
Instructions for Facilitator (1)
1. Facilitator introduces the activity by saying that participants now have quite a clear idea about the business they want to undertake. Although there may be things we need to check further, we have a good basis to start preparing a loan application.
Task Instructions
2. Facilitator makes sub-groups of 5-7 women. These sub-groups should be as homogeneous as possible, i. e. women who want to plant vegetables are in one group Those who want to raise sheep in another. Etc The idea here is to give members a chance to consult with each other in detailing their business plan. Make sure there is a Monitor to help illiterates, or pair one illiterate with a literate person.
3. Facilitator explains that in this Activity participants will start refining the business plan proposal. First we will look at the marketing plan. No matter how good the product or service is, if we cannot sell it well, our business will fail.
4. Facilitator then asks the homogeneous sub-groups to compare their notes of the marketing aspects. Write the guide questions below on the blackboard or newsprint and explain. Ask participants to discuss the guide questions and ask each to write the conclusions for her own business.
5. Each participant fills in her own Form M 3 - 1. Guide Questions should help her in thinking through what she wants to write on this Form.
6. Give the groups 15 minutes for discussion. Go around to assist and make notes on issues youneed to clarify during the plenary discussion.
Guide Questions
(On newsprint)
(a) Customers
How sure are you about the potential buyer(s) of your product(s)?
Where and to whom will you sell?
Why would they buy from you?
What makes your product/service attractive?
How do you make your product known?
Is the buyer reliable, does he pay the agreed price?
Are there others who sell the same product/service? What is their price/quality?
(b) Price
What price can you charge? How sure are you that you can get this price?
Are there different prices for different quality?
(c) Volume
How much can you sell of each product/service you intend to sell?
How much of each quality do you intend to sell?
Instructions for Facilitator (2)
7. In this Activity Facilitator should realize that for most participants, this is the first time for them to think about these questions. The importance of the Activity is that participants make a start in thinking their business through. Exchanging ideas with others in the group could lessen their apprehensions. Facilitator plays a big part in building their confidence, if she is encouraging and helpful.
8. Assure them of future assistance in further preparation of their business plans and encourage more discussion in the group after this workshop.
Instructions for Facilitator (3)
9. Conclude this Activity by asking two to three persons (perhaps the shy ones) to share with the group their feelings and what changes they have experienced in the way they think about doing something new like this process of learning about their Marketing Plan.
10. Encourage them to talk with potential buyers after the workshop and check out some of what they have written into the business plans.
Form M 3 - 1: Marketing Aspects of My Business Plan
1. Where will you sell your produce (location)?___
2. To whom will you sell (specify name of company and address):___
Do you have a contract with the buyer ?___
3. What is/are their buying price(s) and your expected volume to be sold? (If buyer requires specific quality, state the pricing per quality specification and estimated volume per quality).
Quality Control |
Unit Price |
Expected Volume to be sold |
1. |
||
2. |
||
3. |
||
TOTAL |
4. Have you sold to this buyer before?___ If yes, what was the previous pricing and volume sold?___ Since when?___ . Do you know of persons in the village who have sold to this buyer before (Please name them):
5. Do you expect changes in the pricing you stated in #3 within the year?___ If yes, what price changes do you expect?___
6. What additional costs will you incur in selling and delivering your produce to your buyer? (e.g. sacks, transport, etc.)
Item |
Amount |
7. Do you know of alternative buyers? If yes, please list them, their location and buying paces.
Buyer |
Location/Address |
Unit Price |
Time |
1.5 hour |
Methodology |
Group Task/ Individual Tasks/Discussion/Lecture |
Steps |
Preparations:
Form M 3 - 2: Each participant should have one copy of this Form
Guide Questions on newsprint or blackboard
Materials:
marker pens; newsprint
Instructions for Facilitator (I)
1. Facilitator introduces the Activity by saying that we will now go into the next part of our business plan. We will plan the production and management of our business in more detail.
2. Facilitator explains that we will first plan the materials that are needed to produce our product or service. There are two kinds of materials. Those that are used up every time the output volume is produced and those that can be used for more than one production cycle. For example, every time a crop is produced, we need new fertilizer, seeds, etc., but materials such as machines, buildings, etc. can be used over a longer period of time. The first type of materials is called non-durable materials, the second type are called fixed assets.
3. Facilitator asks participants to give more examples of the two categories for their own type of business and writes these on the blackboard, until the difference is clear.
Task Instructions (1)
4. Facilitator then asks sub-groups to discuss what kind of materials are needed to operate the business they have in mind, not only those they need to buy, but also those they already have. Tell participants that it is not necessary at this stage to quantify the volume and price. That can be done later.
5. Give the sub-groups of 5 - 7 women 15 minutes to discuss and write down their outputs. Ask each sub-group to report on newsprint using the following format:
Output of Discussion Format
(On newsprint)
1. Name of Business:___
2. Materials needed for my Business:___ (type of business)
2.1. Fixed Assets |
2.2. Non-durable Materials |
3. Ask each sub-group to report and ask other participants to comment. First ask to comment whether the materials are listed in the right category. When that is clear, ask to comment whether the list is complete.
4. Facilitator then asks sub-groups to discuss how much of each of the materials they need to produce the projected output volume. For example: if it takes 60 jin of pig feed to raise a pig and the entrepreneur wants to raise 4 pigs, she will need 240 jin. Ask participants to also discuss the price per unit of the material and from whom they will buy. Participants should list the fixed assets and non-durable materials separately.
Task Instructions (2 ]
5. Ask each participant to write her own list. Make sure the weaker and illiterate participants get help. Give then 30 minutes to do this.
Task Instructions (3)
6. Facilitator then explains the other aspects in planning of production. Participants age given a copy of Form M 3 - 2: Production Plan for Year___ . They are told that they can use this for the Production Aspect of their Business Plan. They will be given a set of Guide Questions to help them think these items through.
7. Write the Guide Questions the blackboard or newsprint and ask sub-groups to discuss and write down the conclusions for their own individual enterprise.
Guide Questions
(On newsprint)
(1) Labor
Which time of the year is most busy? Can family members help or do you need to hire labor? If you need to pay for labor, how many days at what rate? For what tasks do you need help from others? Do they have the skills?
(2) Use of facilities
Do you need to rent land or other facilities e. g. market stall, storage? If yes, what is the rent or fee? Will you have costs such as electricity, water? How much?
(3) Other expenses
Will you have expenses in selling and delivering your product, meaning transportation costs, packing materials? How much? Do you have any other expenses, such as tax, administration costs, etc.? How much?
Instructions for Facilitator (2)
8. Facilitator concludes this Activity by reflecting back to the group what they have accomplished. This is very important as a means to build up their sense of confidence in what they are doing. This can motivate them further to continue with the detailed work entailed in the rest of the Activities under this Topic.
Form M 3-2
Borrower |
Production Plan for Year___ |
Location:___ |
Land Size/No of Heads:___ |
||
Crop/Livestock: |
Land Description 4/___ |
Production Inputs 2/ |
Labor Requirement |
Schedule/Months | ||||||||||||||||||||
Activities 1/ |
Item |
Quantity |
Unit Price |
Total Cost |
Acquisition 3/ |
# of Workers |
Wage Rate |
# of Days |
Total Cost |
1 |
2 |
3 |
4 |
5 |
6 |
7 |
8 |
9 |
10 |
11 |
12 | |
Cash |
Credit |
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Notes:
1/ List all activities chronologically from production up to harvesting/post-harvest.
2/ List all inputs required such as seedings fertilizers, pesticides or stocks/chicks, feed and chemicals.
3/ Check if such will be obtained on credit (to be deducted from sales) or to be bought in cash.
4/ For land description, please state whether low-land irrigated, non-irrigated/rainfed or upland.
Time: |
30 Minutes |
Methodology: |
Group Task/ Individual Task/Discussion/Lecture |
Steps: |
Preparations:
Form Aid M 3 - 3: Each participant should have on copy of this Form Guide Questions on newsprint
Materials:
marker pens; newsprint
Instructions for Facilitator (1)
1. Facilitator recaps from Activities on (a) Marketing Aspects; (b) production aspects of the business or enterprise which each one has chosen. She relates this to the fact that the participants have already accomplished some significant steps in planning their business. She encourages them by saying that in the beginning, the participants did not think that they could do this, but that they have proven to themselves that they can do so. This is what we mean by take small steps to attain self-reliance.
2. Facilitator then continues and says that we still have some more steps to complete our individual business plans. She explains further that in this Activity we will deal with the management plan of the business we have chosen.
3. Facilitator reminds the participants that in Lin's Case our conclusion was that she was successful because she not only had planned her business well, she also managed it very well. She did the buying and selling herself, kept her business finances separate from the household, was skillful in growing cabbage, etc. In short, she was fully in control of her business and thus self-reliant.
Task Instructions
4. Facilitator tells the participants that now we will think through the organization and management requirements of the business we have chosen.
5. Facilitator distributes Form M - 3 - 3 to each participant and tells them that with the help of Guide Questions they can fill in the information about their business in this Form. They are encouraged to consult with their friends and group members. They have 15 minutes to do this. After 15 minutes, participants can compare their notes with each other and help one another with constructive comments. Facilitator and Monitor will be available to help them with comments and suggestions.
6. Facilitator posts the Guide Questions or writes on the blackboard.
Guide Questions
(On newsprint)
(1) Skills
Did you do this kind of business before, do you have the skills?
If not, how will you acquire the skills? Will you keep records of your business? do you know how to keep a cashbook, how To prepare an income statement? if not, do you want to learn? how?
(2) Management
Do you have enough time to manage the business?
Who will do the buying and selling?
Who will keep the cash?
Who will keep the records?
Who will make the product?
Instructions for Facilitator (2)
7. Facilitator ends this session by further encouraging the group. She could single out one or two persons who at the early stages felt they could not do these exercises but are now doing well.
Form M 3 - 3: Organization and Management Plan
1. If household-managed
a. From your family, including yourself, who will be involved and what will be their role(s)/tasks?
Family Member |
Task/Responsibilities |
b. Do you intend to keep financial records for the project?___ Do you know how to prepare cash book?___ . If no, when do you wish to be trained?___
2. If group managed
a. Who are group members involved in the project and what are their tasks and responsibilities?
Name of Member |
Task/Responsibilities |
_ |
b. Do you intend to keep financial records?___ Does your assigned accountant/bookkeeper know how to prepare cash book?___ If no, when does your group wish to be trained?___
c. How often do you plan to meet as a group to monitor/evaluate the project?___
d. Do you intend to deposit cash balances in the bank?___ If yes, who are the signatories?___ If no, who will keep the cash?___
Time: |
1 hour |
Methodology: |
Group Task/ Individual Tasks/Illustrations/Discussion/Lecture |
Steps: |
Preparations:
Form M 3 - 4: Each participant should have a copy
Guide Questions on newsprint
Materials:
marker pens; news print
Instructions for Facilitator (1)
1. Facilitator explains that in the previous Activities, participants already have thought through and listed what they need to produce the intended product or services in terms of materials, labor and other expenses. In this Activity, we will learn how to write this down systematically in what is called an Investment Plan.
Task Instructions
2. Facilitator posts a newsprint with information as in Form M 3-4. She explains this Form using important points listed below.
Important Points
· The Investment Plan details exactly how much capital is needed to be able to start the business. It details information as to what purpose and from what source it these funds are to come from.
· In the Investment Plan only the Fixed Assets that need to be bought are listed. E. g. in the case of the food stall, the building is needed, but is already there. Only when costs will be made to improve/change the building, are these to be listed here.
· Working capital is the capital that is needed each time the intended output volume is produced. In Lin's case for instance, the costs of fertilizer, seeds, labor would be recorded here. In the Food Stall Case, the costs of fuel and ingredients are listed here, as well as the payment of the daughter in law. Costs of use of facilities, such as water, electricity, are also fisted here.
· Other expenses are expenses incurred in selling and delivery, transportation, tax, etc. In Lin's Case for instance she may have expenses in sending her produce to the market. In the Food Stall Case she may have expenses, such as bags for customers who want to take home leftovers.
3. Facilitator then asks each sub-group to choose one individual in their group whose investment plan they will discuss. Facilitator tells the group that in order to encourage the shy ones or the ones who say they have a difficult time should be chosen in each group.
4. Give the sub-groups 20 minutes to discuss and write the output on newsprint. During the discussion Facilitator/Monitors go around to assist. Make sure the chosen individual provides the information and understands/agrees to the output.
5. Ask the chosen individual from each group to present (if illiterate, read the output item by item and give her time to explain). Ask other participants to comment.
6. When participants are clear on how to fill in the information on the Investment Plan give another 20 minutes for each one to complete their individual Forms.
Instructions for Facilitator (2)
7. Facilitator ends this session by again giving the participants some encouragement and motivation to continue with the work. She reminds them once more to make sure that they keep their filled in Forms, since they need these for other Activities during the workshop and that they will need these when they actually apply for loans from the Revolving Fund.
Form M 3 - 4: Investment Plan
Cost Items |
Total Amount |
Own Savings |
Loan from Group |
Loan from Group |
A. Fixed Assets |
||||
(Equip., Facilities, Tools) |
||||
B. Production Costs |
||||
Inputs: |
||||
Hired Labor: |
||||
Use of facilities: |
||||
C. Other Expenses |
||||
TOTAL |
Equipment, facilities, tools which can be used for more than one production cycle.
Equipment/ Machine |
Total Amount |
Own Savings |
Loan from Group |
Loan from Group |
1. |
||||
2. |
||||
3. |
Time: |
2 hours |
Methodology: |
Case presentation/ Illustrations/Discussion |
Steps: |
Preparations:
Case M 3 - 3; Visual Aid M 3 - 5; Form M 3 - 5.
Materials:
maker pens; newsprint
Instructions for Facilitator (1)
1. Facilitator introduces this Activity by saying that at this stage we need to analyze what we have detailed in the various aspects of our business plans to see if we will really make a profit from our chose business. In this Activity we will learn how to compute whether we make a profit or whether we lose in this business. As we said earlier, we go into business to make a profit, not just so we have something to do.
2. All these steps we have taken to detail various aspects of our business plan is to help us minimize the risks we take in engaging in a business.
3. Facilitator explains that profit is income minus costs. For instance Lin sold the cabbage for 600 rmb (income) and she spent 200 rmb on fertilizer, seeds and labor (costs). Her profit therefore is 400 rmb. This amount was available for her buy new fertilizer, seeds, etc. and for repayment of her loan.
4. Facilitator then shows the computation using Form M 3 - 5: Net Cash Income
5. Facilitator continues to explain that the Net Cash Income is the cash that is available each time the projected output volume is produced and sold, e. g. in Lin's case for each time she tills the 5 mu with cabbage.
6. Facilitator then explains that the Costs of Goods Sold are only those costs that recur each time the output volume is produced. Costs of fixed assets are not included her, because fixed assets do not need to be bought each time the output volume is produced.
Instructions for Facilitator (2)
7. Facilitator posts Case M 3 - 3: Ms. Zhang's Starch Processing Business. She asks one participant to read this aloud.
8. Using Ms Zhang's Case, Facilitator then asks participants to supply the answers using Form M 3 - 5 format.
9. Facilitator then puts Visual Aid M 3- 5 on the wall and explains the correct answers on Ms Zhang's Net Cash Income projection. Facilitator does this very slowly and step by step so that the participants have enough time to absorb the ideas. 9. Facilitator further explains that Net Cash Income is the amount of cash that is earned each time the output volume is produced and sold.
10. Ms. Zhang's Net Cash Income is 315 rmb. She has recovered all the production costs and other expenses from the total income from the enterprise and has the Net Cash Income as reserve funds either for payment of loans and interest or for use as additional working capital in the next cycle.
Task Instructions
11. Facilitator then tells the participants that now we will do our own Net Cash Income Statement for the business we have chosen.
12. Facilitator explains that in making their marketing and production plan participants, they have already listed all the information that is needed to make the computation of Net Cash Income for their own business.
13. Facilitator asks sub-groups to help each other in writing the Net Cash Income Statement.
14. Give 20 minutes for each participant to complete Form M 3 - 5 for their individual business.
15. Ask some participants to present their computation. Invite others to ask questions and to make suggestions.
16. Give another 10 minutes for each one to make corrections.
Instructions for Facilitator (3)
17. Facilitator ends this session by telling participants that the Loans Committee, together with the WPD Field Workers will review these information on their business plans, some time after the workshop and come back to them individually for further consultations.
18. Participants have accomplished a lot by the end of this Activity and should be commended, considering that they are not used to this. But this is part of learning new skills and another big step towards achieving our goal of self-reliance.
Form M 3 - 5: Net Cash Income
Sales |
||
Other Income |
||
Total Income |
rmb | |
Less: Costs of Goods Sold |
||
Materials |
rmb |
|
Paid Labor |
rmb |
|
Use of Facilities |
rmb |
|
Total Costs of Goods Sold |
rmb | |
Gross Profit |
rmb | |
Less: other expenses |
rmb | |
Net Cash Income |
rmb |
Case M 3 - 3: Zhang's Potato Starch Processing Business
1. Ms. Zhang will buy potatoes and process this into starch.
Where should we list the costs of buying the potatoes? (cost of materials)
Where should we list the income from sales of the starch? (sales)
2. Ms. Zhang also needs water and electricity for the processing.
Where should we write the costs? (use of facilities)
3. Ms. Zhang will pay 20 rmb to her daughter who helps with cleaning the potatoes.
Where should we write the costs? (labor cost)
4. Ms. Zhang will sell the starch to the local vermicelli factory, but has to pay for the transportation costs.
Where should we write the costs? (other expenses)
5. Ms. Zhang will invest in a grinder that can be used for 10 years. Where should we write the costs? (the grinder is fixed asset, costs of which are not included in computation Net Cash Income)
6. Ms. Zhang needs to add a chemical for better quality of starch.
Where should we write the costs? (cost of materials)
Visual Aid M 3 - 5: Ms. Zhang's Net Cash Income
Sales: |
||
Quality A starch: 100 jin at 3 rmb/jin |
300 rmb |
|
Quality B starch: 80 jin at 2.5 rmb/jin |
200 rmb |
|
Other Income |
0 | |
Total Income |
500 rmb | |
Less: Costs of Goods Sold |
||
Materials |
||
400 jin potatoes at 0.3 rmb/jin |
120 rmb |
|
0.5 jin chemical at 30 rmb/jin |
15 rmb |
|
Paid Labor |
20 rmb |
|
Use of Facilities water and electricity |
10 rmb |
|
Total Costs of Goods Sold |
165 | |
rmb |
||
Gross Profit |
345 rmb | |
Less: other expenses |
||
Transportation |
. |
30 rmb |
Net Cash Income |
315 rmb |
Background/Rationale
Once individuals undertake their micro-enterprise, during their operation, there are basic business records which need to keep. In this Topic participants will be given an opportunity to learn basic skills in a basic record tool - the Cash Record.
Output Objectives
By the end of 2 hours participants would have:
Internalized basic skills in making Cash Records or how to keep a "cash book".
Time |
2 hours |
Methodology |
Illustration/discussion/lecture |
Steps |
Preparations:
Form M 3 - 6 Each Participant should have a copy
Visual Aid M 3 - 6; Visual Aid M 3 - 7; Illustrations; Practice Exercise
Materials:
marker pens; newsprint.
Facilitator Lectures (1)
1. Facilitator introduces this activity by saying that once we are engaged in our business, there are important recording requirements which could make us better business women. Facilitator refers to the Case: Lin's Cabbage Garden and says that the participants themselves mentioned that Lin's conscientious record keeping was one of the reasons for the success of her business. Facilitator asks some participants to tell why it is important to keep records.
Important Points
Only by keeping records, can we know how much we earn from our enterprise. Without records, we could be doing business without realizing that we have already incurred losses.
By keeping records we will notice changes in prices quickly. We can then take more immediate action. We can for example look for another supplier or buyer. If your engaged in trading, you could adjust the price quickly when there are changes in the market price. For a vegetable grower it may be beneficial to write down the market price of different vegetables every day, so that she is able to determine the best time of the year the demand for certain vegetables is highest.
By keeping records we can get to know how we are doing in production. e. g. is the quality of our product better than last time; have fewer animals died; did l sell more jin/mu, etc.?
Keeping records is also useful for planning e. g. what is the best time to market pigs or to buy fertilizer; when should be the best time to buy more fertilizer, etc.
When group members keep records, they can compare each other's business results and learn from each other. E. g. how to improve production or which buyers pay better.
2. Facilitator continues and emphasizes the fact that it is important to record every time money comes in or goes out of the business. For this we use the Cash Record.
3. Facilitator distributes Form M 3 - 6: Cash Record.
4. Facilitator illustrates the principle with Ms. Wang's Chicken Rasing Business.
Facilitator's Illustration
1. Facilitator starts:
Ms. Wang starts a chicken raising business. She has 120 rmb savings and receives a loan from the women's group of 80 rmb on the first of April.
Explain that her beginning balance is the amount of savings (120 rmb).
The loan is the first cash in of the business.
The remaining balance on April 1 is then 200 rmb.
Write these items and figures in the Cash Record on newsprint.
On April 2 Ms. Wang buys 120 chickens at 1 rmb each.
This is recorded as Cash Out. The remaining balance now is 200 minus 120 is 80 rmb.
2. Group members participate:
2.1. Ask a participant to record on the newsprint the purchase of feed in the total amount of 50 rmb on April 5.
2.2. Ask another participant to record the payment to her neighbor (a boy) who helped two days with the delivery of the chickens and with cleaning the shed after delivering. She pays him 10 rmb per day. She paid on June 10.
2.3. Ask another participant to record the sales of 110 chicken at 4 rmb. She received the payment on June 15.
Facilitator Lectures (2)
3. Ms. Wang's Record shows that she lost 20 chickens (She bought 120, sold 100). She can consider if that is too many and take measures to loose less chickens. Maybe they all died. If so, she may discuss with other group members or with the technician how to prevent next time.
Note that it would have been better if also for the feed it had been better if had known how many jin was bought and at what price.
4. Ms. Wang's Cash Record also shows that she can repay her loan of 80 rmb plus interest in June and still has more than 300 rmb for investment in new chickens.
5. Facilitator uses Visual Aid M 3 - 6 as a summary of Ms Wang's Cash Record.
Instructions for Facilitator (3)
6. Facilitator writes on newsprint and reads the following example for the group to practice recording:
Practice Exercise
My cash balance after the last harvest of vegetables is 450 rmb. I borrow 300 rmb at 2% interest per month for 3 months to enlarge the area of vegetables on March 1. On March 10,1995 I bought plastic and paid 300 rmb; bamboo for 100 rmb. On March 30 I bought seeds at 150 rmb and fertilizer at 200 rmb. On May 20 I sold most of my vegetables and received 1,200 rmb. On May 29 I paid back my loan with interest.
7. Facilitator forms sub-groups of 5 - 7 persons. She asks the sub-groups to record the transactions and make a Cash Record. Ask each sub-group to do this on newsprint. You are given only 15 minutes. This is a contest. Let us see who can finish first with the correct answers.
8. Compare the group outputs and in case of differences let participants discuss and explain to each other what the right answer is.
9. Facilitator uses Visual Aid M 3 - 7 as summary for the Practice Exercise.
Facilitator Synthesis
Synthesis: Important Points
In the Cash Record, all the money that comes in or goes out of the business is recorded. The beginning balance is the cash at hand, loans are recorded as cash in, loan repayment and interest is recorded as cash out.
In recording, we should be specific, e. g. how many jin bought at what unit price.
With this Cash Record, I can tell at all times my cash position in my business. Knowing this gives me a level of self confidence and order in the way I do my business. I am establishing a system in the way I work.
Form M 3 - 6: Cash Record
Name entrepreneur: |
Month: |
||||
Name enterprise: |
Year: |
||||
Beginning Balance (Cash Status) |
Amount: |
||||
Cash In |
Cash Out |
Remaining Balance |
|||
Item |
Amount |
Item |
Amount |
Amount |
Date |
Visual Aid M 3 - 6: Ms Wang's Cash Record
Beginning |
Balance |
120 rmb |
Savings | ||
Cash In |
Cash Out |
Remaining Balance | |||
Item |
Amount |
Item |
Amount |
Item |
Amount |
Loan Women's Group |
80 |
200 |
April 1 | ||
Bought 120 chicken each |
120 |
80 |
April 2 | ||
feed |
50 |
30 |
April 5 | ||
labor, 2 days, Y 10/ day |
20 |
June 10 |
|||
sold 100 chickens at Y 4 each |
400 |
410 |
June 15 | ||
Visual Aid M 3 - 7: Practice Exercise
Plastic Green House for Vegetable
Beginning |
Balance |
450 rmb |
Savings | ||
Cash In |
Cash Out |
Remaining Balance | |||
Item |
Amount |
Item |
Amount |
Item |
Amount |
Loan Women's Group |
300 |
750 |
March 1 | ||
plastic |
300 |
450 |
March 10 | ||
bamboo |
100 |
350 |
March 10 | ||
seeds |
150 |
200 |
March 30 | ||
fertilizers |
200 |
0 |
March 30 | ||
Sold Vegetables |
1200 |
1200 |
May 20 | ||
repaid |
300 |
900 |
May 29 | ||
interest |
18 |
882 |
May 29 | ||
Time: |
1 hour |
Methodology: |
Sharing of Insights and Lessons Learned |
Request Participants to Share Their Thoughts
1. Facilitator asks participants to share with the group their own thoughts as a result of the experience of learning in Module 3.
Guide questions:
(a) Please share with us the 3-4 important points which you learned from this Module;
(d) Which among the Activities you feel was or were most helpful to you?
(c) Which among the Activities was or were most difficult for you? Do you feel however, that these were important to you, even if they were difficult?
2. Facilitator ends by thanking the participants for their herd work and praises them for their outputs. She tells them what she herself has learned from all this.
