Objective:
For vulnerable households it may be a good idea to start a group enterprise. The word enterprise implies an income-generating activity - one that will generate profit. The aim is for each group member to increase their individual income by taking a share of the group enterprise profit. It is important to introduce people both to the potential and the problems of starting a group enterprise.
Method:
Discuss the following points with the group and help them make a business plan. If possible, get hold of a copy of The group enterprise resource book published by FAO and read it.
A lot of enthusiasm is needed to make a small business enterprise successful. A group will need to be very sure that this is what they want to do before they start.
Advantages of running an enterprise as a group:
Group members can share their skills, time and resources together to make it work.
Work can be divided amongst the group members, making the best of the time everybody has available.
It is easier for groups to get assistance from outside - training, grants, loans, advice from rural development agencies, etc.
Groups give members more self-confidence, especially women.
Decisions taken in a group are often better and more realistic than those made by individuals.
Problems that arise in group enterprises:
Deciding who will do what is not easy - it can cause arguments.
Decision-making in groups takes longer and people do not always agree.
One or more group members may contribute less than others in time or money but still want an equal share of profits.
Nobody likes sharing losses.
The group needs to agree on the reasons for starting the business and what expectations they have from it. Is the main aim to raise some extra cash, to fill in spare time or develop it into their major source of income?
All members must agree on how much time and other resources they will each put into the business and then honour the agreement. It is not advisable to have more than five or six people involved in the operation.
A group enterprise must be planned just like an individual business. It has to be profitable or it will fail. Market research must be carried out and costs and returns estimated to establish the feasibility of the enterprise.
It is so important to manage the enterprise in a business like manner that the following roles are better than the traditional chairman, secretary, etc.:
Supply co-ordinator - |
responsible for making sure inputs are available on time, arranging storage and stock control, negotiating prices and credit facilities. |
Production co-ordinator - |
responsible for making sure the right number of people are working when needed, for training and ensuring that the product is produced in the right quantities, at the right time, at the right quality and at the lowest cost. |
Accountant - |
responsible for recording members contributions, what money has been spent on what and what money is received from sales, for producing simple accounts, for monitoring cash flow and giving regular reports to members. |
Marketing co-ordinator - |
responsible for finding out what customers want, checking that all necessary arrangements for selling are in place (e.g., stall, permits, transport), co-ordinating the members who will be doing the selling, arranging advertising and promotion. |
General manager - |
responsible for making sure the different parts of the business are working together properly, for co-ordinating decision-making and keeping the group motivated and together. |
A cash flow budget and business plan should be prepared in a similar way to an individual planning a new enterprise. Some of the forms have been modified for use by groups planning an income-generating project and are shown on the following pages. The time plans remain the same.
The principles for completing these are the same as described in the earlier sections on business plans and cash flow budgets. There are just some minor differences. Normally a group will only have one income-generating activity. One of the sources of cash inflow will be members contributions and instead of household expenses, there is space for planning cash withdrawals by members if required.
The cash flow budget from start-up to established operation indicates how much money members will need to find to make the enterprise work. As with an individuals cash flow, the closing balance must be positive. If there is a negative figure this must be overcome by increasing contributions or seeking a grant or loan.
It is very unwise for members to take cash out of the business until they have completed a production period and know how much profit they have made. If there is no profit there is no income for members - nobody is paying them a salary. They must make a profit to ensure they get some benefit from participating in a group enterprise.
BUSINESS PLAN FOR INCOME-GENERATING PROJECTS: GROUP
Group Name: _________________________ Kushet/Gott: _______________________
Project description:
________________________________________________________________________________________
Period of plan: from |
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to |
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_______ |
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(month) |
(year) |
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(month) |
(year) |
Names of group members and their designated role in the management of this group enterprise, e.g., supply co-ordinator, production co-ordinator, marketing co-ordinator, accountant, business manager.
Name |
Role |
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Date of legal registration if applicable __________________
Previous experience as a group, if any
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What capital equipment do you need to buy for the new project?
Item |
Cost including transport (K) |
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Which suppliers have in stock the inputs you need to buy for the new project?
____________________________________________________________________________________________
Estimate the profitability of the new enterprise:
INCOME
Product or service |
Quantity |
Price per unit |
Total value (Birr) |
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TOTAL |
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COSTS (Only include a share of the full cost of buildings, machines, tools, oxen)
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Quantity needed |
Price per unit |
Total cost (Birr) |
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TOTAL |
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EXPECTED PROFIT |
Birr |
Has the group established rules for sharing profit and covering losses? Give brief details.
____________________________________________________________________________________________
Has the group opened a bank / MFI account? The account details must be supplied if applying for a grant or loan.
____________________________________________________________________________________________
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?
____________________________________________________________________________________________
Group: __________________________ |
CASH FLOW BUDGET |
Year: _______________ |
MONEY COMING IN |
Month 1 |
Month 2 |
Month 3 |
Month 4 |
Month 5 |
Month 6 |
Month 7 |
Month 8 |
Month 9 |
Month 10 |
Month 11 |
Month 12 |
Total |
Sales of: |
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Other sources: |
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Members' contributions |
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TOTAL |
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MONEY GOING OUT |
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Business inputs: |
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Capital items: |
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Withdrawals by group members |
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TOTAL |
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NET CASH FLOW |
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Opening balance |
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Closing balance |
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+ Loan |
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- Loan deposit / fees |
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- Loan repayment |
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New Closing Balance |
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