IV. How to obtain the maximum income from an activity?
Aim of the question: The question is intended to encourage the participants to identify the factors contributing to the success of income-generating activities. At the same time they should ask themselves whether these conditions are present in their own activities (if they are already involved in one). They need to be aware of these factors and to gauge their own skills when they consider embarking on an activity.
Trainers should allow participants to express themselves freely, pell-mell, and jot all the suggestions down on the blackboard. They may complete the list if necessary, arrange them in order and present them as suggested below.
This involves finding out whether the man or woman suggesting the activity has the required technical skills and, if not, whether they can acquire them rapidly. Is this activity their usual occupation, or does one (some) of them (in the case of a group) have the necessary qualifications to undertake the activity with at least a minimum of professionalism?
As mentioned, modern economies are based on a division of labour, with each individual doing what he/she knows best. We would be heading for disaster if we undertook weaving or shoemaking, mechanics or masonry, dyeing or rice trading without prior preparation. The saying "The best blacksmith is the one with the most experience" is very true, for experience is what it really boils down to.
Once the skill of each individual or group has been identified, we then have to establish the other prerequisites for a technically feasible operation: water for market gardening, raw materials for craftsmen, feed for farm fattening and roads for marketing.
We should not forget management skills, but we shall deal with this in the chapter on economic activity management.
In addition to being technically feasible, the income-generating activities should be profitable, that is to say they should produce income or a surplus (one could also use the term profit). An activity that does not produce a profit runs at a loss.
Gross profit is the positive difference between costs and returns (see Chapter 6.2.3 on the operating account). Net profit is obtained by deducting overheads and depreciations from gross profit.
A carefully prepared estimated operating account enables us to determine whether an operation will be profitable before it is launched. The actual operating account (established at the end of the financial year) and the balance sheet give us the actual performance, loss or profit, of an operation.
Economic and financial profitability should not be confused with social benefits: a well that is to provide drinking water to a village must be socially beneficial; it is not intended to make a profit or to bring in any money. This type of undertaking is often subsidized. A profit-making activity, on the other hand (cabbage marketing, for instance), should be financially profitable, in other words, returns should be higher than costs so as to produce a profit.