Your

Business
Plan
Handbook








PREFACE

This handbook is prepared for both veterans and civilians who either want to start their
own businesses, or who want to expand and improve their businesses.

This is a very important aspect of business development and requires careful
undertaking by both the trainer and trainee.

This business plan handbook was developed in collaboration with a number of VOCA
volunteers, partners and organizations.

These include:

Organizations and Partners.
Soroti Catholic Diocese Integrated Development Organisation (SOCADIDO)
Soroti District Association of NGOs Network (SODANN)
Uganda Veterans Assistance Board
Vision Terudo (Teso Rural Development Organisation)
World Learning, Inc.
World Vision, Soroti Project office
US Peace Corps

Volunteers
Mr. Dave Hammond
Prof. Surrendra Singh
Mr. Clair Hein
Ms Donna Kerner
Mr. Bob Nottleman

Thanks go to Dave Hammond whose TOT in January and February of 1996, provided
the backbone to this handbook. His input during the workbook during the
September/October, 1996. Pilot TOT for "Your Business Plan Handbook" and "Your
Business Plan Workbook" were of valuable benefit in the development of the materials.
Donna Kerner's field-testing of these materials during veterans training and subsequent
feedback from the same, is also highly appreciated. Appreciation also goes to Bob
Nottleman for his contribution to the materials during the January/February Grand TOTs.

Our appreciation also goes to Mr. Clair Hein and Prof. Surrendra Singh who worked
hand in hand with VOCA staff, Mr. Martin Owiny to develop "Your Business Plan
Handbook" and "Your Business Plan Workbook" and the Trainers Guide to the two.
Special thanks also go to VOCA staff Ms Elsie Mukasa for the development of the
graphics, design and layout of these materials.



This handbook was funded by the United States Agency for International
Development (USAID).

HOW TO USE THIS HANDBOOK

This handbook is designed to be studied and filled out by a trainee in conjunction with a
trainer.

You are therefore advised to go step by step through it with the help of your trainer. Do
not rush through or try to understand it immediately, but allow your trainer to take you
chapter by chapter, step by step, exercise by exercise.

After completing this handbook, use your answers in the handbook to fill out your
workbook. If you do this you will then have a business plan that you understand and
which you can present to a lending institution.

What is a business plan?

In a business plan, you think about and work out what will happen in a business.
This will help you put your business in order, plan how your business will grow and see
the problems your business may face when it starts.

A business plan has a number of parts to it.


PARTS OF A BUSINESS PLAN
- Title page
- Summary
- Goals
- Management and organization
- Marketing plan
- Work plan
- Start-up capital
- Projected income statement
- Cash flow plan
- Break even analysis
- Balance sheet
- Profit and loss statement


A business plan will help you:
Understand your business better,
Expand and improve your business,
Decide whether to continue in business or not,
Obtain financial assistance,
Prepare for the future of your business.

*You should revise your business plan every year.
CONTENTS
1. ASSESS YOURSELF IN BUSINESS........................................... 6
The character of a successful entrepreneur ...................................
Strengths, weaknesses, opportunities and threats .........................
Look at your business in detail .......................................................

2. BY LAWS FOR YOUR GROUP................................................. 15
Purpose of the business group.......................................................
Members of the group.....................................................................
Leadership of the group..................................................................
The Executive Committee...............................................................
Meetings .........................................................................................
Finances .........................................................................................
Noting .............................................................................................


3. GOALS FOR YOUR BUSINESS................................................ 22
The reason for your business .........................................................
Explain your achievements as a business or..................................
business group ...............................................................................


4. MANAGEMENT AND ORGANIZATION.................................... 26
Identify the activities that need to be performed
in your business ........................................................................
Identify the number of employees you will
require in each activity ..............................................................
Explain how you will obtain the employees for
each task...................................................................................
Explain how you will pay your employees ......................................
Explain the roles and strengths of your employees........................
How to solve conflict .......................................................................


5. MARKETING PLAN................................................................... 33
What is a market?...........................................................................
What is marketing?.........................................................................
What is a marketing plan? ..............................................................
The four Ps and two Cs of marketing .............................................


6. YOUR WORK PLAN.................................................................. 45
State the production goals for your business..................................
List the activities to be performed in your business........................
Give the names or number of laborers who
will perform each activity...........................................................
Estimate the material resources you need
to perform each activity.............................................................
Estimate the cash required for each activity...................................
Fill out the work plan.......................................................................


7. START-UP CAPITAL................................................................. 50
Investments ....................................................................................
Working capital ...............................................................................
How to calculate working capital.....................................................
How to calculate start-up capital .....................................................
Sources of start-up capital ..............................................................


8. COSTING AND PRICING YOUR GOODS AND SERVICES..... 56
Costs...............................................................................................
Price................................................................................................
How to make a profit.......................................................................


9. PROJECTED INCOME STATEMENT ....................................... 61
The components of the projected income statement ......................
Projected income statement ...........................................................


10. CASH FLOW PLAN................................................................... 71
How to make a cash flow plan........................................................
Your cash flow plan ........................................................................
Exercise..........................................................................................
Exercise..........................................................................................


11. BREAK EVEN ANALYSIS......................................................... 83
Break even point sales level ...........................................................
Break even point price level............................................................


12. YOUR BALANCE SHEET.......................................................... 89
Components of a balance sheet .....................................................


13. PROFIT AND LOSS STATEMENT............................................ 95
Profit and loss statement for ...........................................................


14. EXECUTIVE BUSINESS PLAN SUMMARY............................ 100
Loan requests.................................................................................


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ASSESS YOURSELF
IN BUSINESS








CHAPTER ONE.

ASSESS YOURSELF IN BUSINESS.



Mr. Otim, was discharged from the Uganda army in 1991, on his return home he worked
for other people in his community on several jobs. However he was not happy with the
amount of money he was getting on those jobs, so he started his own business, which is
a retail shop in the market of his home town which is called "Mbili".

Mr. Otim wants his business to grow so he has decided to go for a business plan
development training by an NGO in Mbili so that he can learn how to write a business
plan. This will help him understand his business better, help his business to grow and
find out how much money he needs for all this to happen. Mr. Otim has also found that
he has the characteristics of a successful entrepreneur.


The character of a successful entrepreneur.
An entrepreneur refers to a business person who is running a business enterprise. This
business person needs to have certain abilities, skills, and attitudes if his business is to
succeed. These abilities, skills and attitudes are referred as the character of an
entrepreneur. A business group will also need to have within itself people who have the
character of a successful entrepreneur.

To be a successful entrepreneur or business group you usually should have the
following characteristics:

You should be hardworking:
This means that you should be ready to commit all the necessary energy, time,
skills, and responsibilities necessary for your business to succeed and
each task be well completed.

You should be determined:
Being determined involves being committed to ensure that every task in the
business once started is successfully completed.

You should be a risk taker:
A risk taker is some body who assumes responsibility and makes decisions after
careful consideration of what he is doing even if they are not absolutely sure that it will
work so long as it will be of benefit to the business.

You should be ready to work as a team:
Working as a team means that you are ready to listen from your workers and learn
from them even as they listen from you and learn from you. This will ensure
that every body in the business is respected and motivated. And be cause every
contributes to the decisions being made, it is likely that the best decisions will be
made.

You should be able creative
Being creative means that you are ready to come up with and carry out the many
ideas that you or your workers may have for the business.

If an entrepreneur or group has these characteristics then their likely to be able to
succeed in the business that they are running.

Given that you are running a business you need to look at the strengths, weaknesses,
opportunities and threats that you may be having in the business. These strengths,
weaknesses and opportunities are referred to as S.W.O.T.


Strengths, weaknesses, opportunities and threats (S.W.O.T.)
If a business is to survive, it needs to continually look at it self to see what its strengths,
weaknesses, opportunities are, and what threats it may be facing. strengths and
weaknesses are internal issues in the business which the business may have control
over while opportunities and threats are external factors to the business. Which the
business does not have control over like taxation, government policy, inflation, floods,
hailstones, etc.

You need to assess your strengths and weaknesses in relevant aspects of your
business. Your strengths indicate advantages you will have in business, which can be
used to improve your business, while weaknesses indicate problem areas which need to
be addressed so that your business can improve. You will also need to use the
opportunities your business has as best you can and minimize the effects of the threats
your business has as much as possible.

In summary a business will need to:

Build on its strengths
Improve on its opportunities
Select the best opportunities
Minimize its threats.

You will now do a SWOT analysis on the business you are running. To help you do this,
look at your strengths, weaknesses, opportunities and threats. In light of the product
your selling, who your customers are, where they live, when and how they buy from you,
what other things they buy, how much money they have to spend on products like yours,
and who your competitors are.

STRENGTHS WEAKNESSES













OPPORTUNITIES THREATS














LOOK AT YOUR BUSINESS IN DETAIL
You may decide to go into business as an individual or as a group. At the end of the day
whatever means you may choose, your success in business as a manager or as a group
depends largely on your strengths in personal characteristics, business management,
technical skills, knowledge of your line of business, and your financial position. When
you start a business it is important that you have the skills to ensure that your business
will survive and will be self sustaining once your business plan is complete.

You will now go through a number of steps to help you determine your strengths and
weaknesses in a number of areas relevant to your business.


STEP 1.

PERSONAL CHARACTERISTICS
Here you should be looking at your characteristics, skills, capabilities and attitudes as an
individual and as a group. You should be looking at you or your groups individual
commitment to business, self confidence, self motivation, decision making capabilities,
ability to handle problems and take risks, your adaptability and flexibility in the business
environment. You should ask yourself or your group whether you are opportunity takers
and are able to see these opportunities.

Having reviewed this, ask yourself the following questions:

A) What are the strong points in your personal characteristics as an
individual or as a group?




B) What are the weak points in your personal characteristics as an
individual or as a group?




C) The weaknesses will be overcome in the following ways;







STEP 2.

BUSINESS MANAGEMENT SKILLS
Business management refers to how you are able to handle money and the day to day
running of the business. The handling of money involves arranging of the finances,
keeping business records, the management of credit and the planning for financial
success. While the day to day running of the business refers to how you are able to
provide direction to workers and handle them.

Ask yourself these two questions:

A) What makes you or your group strong in business management?




B) What makes you or your group weak in business management?



C) The weaknesses will be overcome in the following ways;




STEP 3.

TECHNICAL SKILLS
Technical skills refers to the things you need to know and be able to do in the business
you are involved in. This knowledge and ability covers areas like purchase and use of
equipment and machinery, knowledge of the production process, buying and selling of
goods and services and provision of services.

When you look at your technical skills ask yourself these questions;

A) What are your or your groups strengths in technical skills?



B) What are your or your groups weak points in technical skills?



C) The weaknesses will be overcome in the following ways;




STEP 4.

EXPERIENCE IN THE LINE OF BUSINESS
This refers to how you understand the different things that happen in the business you
are involved in. This understanding may come from your involvement in the other
businesses of the same kind. This also covers how you are able to direct business
operations, and to effectively manage anything to do with the business, and set up rules
and regulations for the business to run. Your or any other member of your group's
experience in this kind of business will therefore be important.

Following the above explanation answer the following questions;

A) Have you or your group been involved in this line of business before?(Explain)




B) In what areas is you or your groups experience in this line of business
strong?



C) In what areas is you or your groups experience in this line of business weak?




D) The weaknesses will be overcome in the following ways:




STEP 5.

FINANCIAL POSITION.
In looking at your financial position, we are looking at your abilities to commit or access
financial and material resources for the business that you want to start. The finances or
resources obtained may be your own or could otherwise be sought from a relative, a
financing institution or from any other source. Taking this into consideration you need to
ask yourself:

A) What are your strengths as far as the financial position of this business is
concerned?



B) What are your weaknesses as far as the financial position of this business
is concerned?



C) I will compensate for my weaknesses in the following ways:









The strengths that you have indicated above indicate advantages to your business. You
should therefore use them as much as possible to improve the performance of your
business. The weaknesses indicate areas that you need to look into if you want your
business to improve. If you are not able to compensate for or overcome these
weaknesses you should look for external assistance to help you do this.


Mr. Otim assessed himself in business and found that he has a number of strengths
which he needs to build on, however because of the weakness he has in record keeping
and business management he decided to attend the business training by an NGO in
Mbili. This will help him to run his lock up shop in the market better than he has been
doing. He is also planning to take opportunity of the pick-up lorry transport to begin to
take some of his goods to the market in the neighboring town.


























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YOUR GROUP AND
YOUR
BUSINESS




CHAPTER TWO.

YOUR GROUP AND YOUR BUSINESS.

Three male veterans and three female veterans from Mbili village have come together
and formed a business group called "Pamoja". They have also got four civilians in the
group so that there are a total of ten people in the group.

As a group all members of "Pamoja" are growing groundnuts on four acres of land in
Mbili village. They have a chairman, vice-chairman and treasurer who run the group
according to the by-laws that they all wrote out. The reason for which they formed the
business group was to earn some money to support their families and send their children
to school, to improve their standard of living and to provide groundnuts for the
community and the produce buyers who come to Mbili.


You may be thinking of going into business as a group or as an individual. Should you
be thinking of operating your business as a group, it is important that the history of your
group and its future plans and prospects are well presented in your business plan.

This will enable the members of the group to better understand each other and
determine the direction of the group. Other people who may be interested in your
business plan will also better understand your business and therefore be in a better
position to consider assistance to your business.

In this chapter you will go through seven steps that will help you better explain your
business and your group.




STEP 1.

EXPLAIN THE BACKGROUND AND PURPOSE OF YOUR BUSINESS GROUP.
A description of the background and purpose will help each group member to
understand the purpose of the group and decide if they agree with it or not. Having a
common understanding will help reduce conflict as the group grows.

A) When was your group formed?

B) Why was your group formed?

C) Who was responsible for the formation of your group and how was the
group formed? (Please give a list of their names)

D) List the members of your group and indicate how many are veterans and
or veterans wives.


STEP 2.

DESCRIBE THE BY-LAWS OF YOUR BUSINESS GROUP
Your group will need to have by-laws which are rules and regulations by which the group
will be run. These rules and regulations cover things like:

The membership of your group.
The attendance of meetings. This covers who will attend meetings and when.
The duties of each person in the group.
The leadership of the group. This covers the roles and responsibilities of
leaders.
The records that the group will keep. This can cover the records of meetings, these
are called minutes. They also cover financial records which the group will keep.
The rules for handling money.
How decisions should be made in a group.
How conflicts should be handled in a group.
Any other areas deemed relevant to the group.
The by-laws should all be written out by all the members of the group so that every
body understands how the group should operate.


Does your group have by-laws? Yes No

Do you keep minutes of each meeting? Yes No


What other records does your group keep?


Do you have rules on handling money? Yes No

If Yes please explain the rules for
handling money in your group.

Do you have a bank account? Yes No

If Yes, with which bank?

E) How many signatories do you have to the bank account and who are they?

F) What actions will you take when members of your group?

Do not attend meetings?


Do not keep the by-laws?


Misuse money?


STEP 3.

DESCRIBE THE SET-UP OF YOUR BUSINESS GROUP
This step is designed to help you explain the organizational set-up of your group. This
refers to the leadership of the group, and the different roles and functions of the group. A
healthy group will meet with its leaders as often as is necessary. Only when the group
gets too big should the leaders meet on their own.

A) Who are the leaders of your group?




B) What positions do they hold?



C) What are their duties?



D) How often does your group meet?


E) When do the leaders of your group meet?



STEP 4.

EXPLAIN HOW YOUR GROUP WILL MAKE DECISIONS.
Inside business you will need to make decisions and sometimes take risks in order to
succeed. Some of the decisions will need to be taken quickly and decisively. While
some of the more urgent decisions will need to be left to the leaders. In this step you will
discuss how you will make decisions inside the group, in order to ensure business
success. This will help reduce conflict within the group and enhance efficiency.

A) How does your group make decisions?

B) Who is involved in this and how are they involved?




STEP 5

IDENTIFY THE BUSINESS SKILLS AVAILABLE IN YOUR GROUP.
It is further important to identify and use the skills, experience and training that is
available within your group. Members of your group may have certain skills, experience
and training that they acquired before or during the time that they were in your group.
Inside this step you will identify where these potentials exist and how they can be used
in business activity.

A) What experience do members of your group have in producing the
product or service in your business?



B) What training have members of your group received and at what level
was it?



C) What other business skills do members of your group possess?




D) How will these skills, experiences and training be used in the business?


STEP 6.

DESCRIBE THE WEAKNESSES OF YOUR GROUP.

In spite of the fact that you may be able to identify a number of strengths in your group, it
is important that you are as truthful as possible with yourself to also identify your groups
weaknesses. This will help you to ensure that they are appropriately addressed.

A) In what areas are the members of your group not doing well?



B) What problems have your group encountered?





STEP 7.

EXPLAIN THE EXTERNAL ASSISTANCE REQUIRED BY YOUR GROUP.
Having identified your strengths and your weaknesses it is important for you to identify
the areas in which you will require external assistance and where you will obtain this
assistance from. You may want to consider obtaining external assistance for the
problem areas indicated in STEP 6. This assistance could be obtained from other
businesses or groups like yours. Other sources of assistance can be obtained on Page
.

A) In which areas does your group require external assistance ?



B) Where will your group obtain this assistance?



C) What group do you know that you are helping and that is of help to you?



D) What group do you know that you can help and can be of help to you?
How will this happen?







The members of Pamoja decided that they will not mix personal problems with the
business and everybody who works in the business will be paid for the work that they do.
They do this so that their business will be able to grow without members causing loss by
taking out money. They therefore come out with rules for handling money in the
business and decided to open a bank account in the local commercial bank. The
chairman of the group and the vice chairman will be the two signatories to the account.

The members also decided that decisions for the group will be made at group meetings
and all members of the group should try to attend all the meetings.













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GOALS FOR
YOUR BUSINESS




CHAPTER THREE.

GOALS FOR YOUR BUSINESS

WHAT YOUR BUSINESS HAS DONE AND WILL DO.
Before you expand or grow your business, you should write out a business plan. In a
business plan you will think about and work out what will happen in your business. This
helps you put everything in order, it also helps you plan how your business will grow and
see the problems your business may face when it starts.

A business plan may be written for a number of reasons as is listed below;

It can be written to test how strong a business idea is.
To help a lender know whether they should give you any money or
assistance.
It will help you see how the business will grow in the future.
It will also help you see problems in the business before the problem starts.


Mr. Nsubuga has decided to go on a journey. He is walking from Luwero to Katikamu.
This is like business because business is like a journey which a traveler decides to
embark on, if a traveler is to be able to reach their destination, they must know where
they are coming from and where they are going, otherwise they will get lost and not be
able to reach their destination. In the same way inside business, you must know where
you are coming from and where the business is going in order for you to realize benefits.


This section is designed to help you clearly set out why you are in business, what you
intend to achieve in business and what you have already achieved in business.



STEP 1.


THE REASON FOR YOUR BUSINESS.
To make a profit and money is the main reason why people go into business, but you
may go into business for other personal reasons, for the benefit of your group or for the
benefit of your community.

A) What products or service do you plan to produce?



B) What are your personal reasons for starting this business?



C) For what reasons did your group start this business?



D) How will your community benefit from this business?




STEP 2.


EXPLAIN YOUR ACHIEVEMENTS AS A BUSINESS OR BUSINESS GROUP.
Over the period of time that your group has existed, your group should have worked
closer and closer towards reaching the reasons why you started the business. Inside
this section you write out what your group has done and find out if what you have done
lines up with the reasons why you started the business, this will help you to know how
far you have gone in your journey towards business success.
A) What have you been able to do since your business began?



B) What grants has your business received? When? From whom? How much
was the grant? How was it used?



C) What loans has your group received? When? From whom? How much was
the loan? How was it used? Has it been paid back? If it has not been paid back, when do
you plan to pay it back?

D) What are your other sources of funds?



E) Why do you think your business has been successful?



F) What problems has your business faced?



























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MANAGEMENT
AND ORGANIZATION






CHAPTER FOUR

MANAGEMENT AND ORGANIZATION OF YOUR BUSINESS
The number of people working in the business can be divided into two groups of
management and labor.

Management
These are the people who direct the business and make decisions in the
business. For a group, the management may be the executive of the group.
While in other businesses the management may be the person or the people
who started the business.



Labor
The people who follow the direction of the management and are actually involved
in producing the goods and services are actually called labor. These may be
members of a group or people who are hired to do a particular job.



When starting a new business it is important that you consider the amount of
labor you will require to efficiently operate the business. You will also need to
know what kind of skills the labor should have, and where you will get the labor
from, how much money you will pay them and how you will encourage them to
perform well. The Managers will be responsible to direct the labor and keep them
encouraged.

Follow the following steps to determine the requirements for management and
organization in your business.


STEP 1.

IDENTIFY THE ACTIVITIES THAT NEED TO BE PERFORMED IN YOUR
BUSINESS
Every business has a number of activities which take place within the business to
know how many people you need for labor, you need to know the activities that
take place in the business.

A) What are the activities in your business?




STEP 2.

IDENTIFY THE NUMBER OF EMPLOYEES YOU WILL REQUIRE IN EACH
ACTIVITY

Now that you have identified the activities in your business you will need to know
how many people you will need to perform each activity. In this section you will
identify the number of people you need to perform each activity in the business. It
is important that you use labor as effectively as possible. Therefore one person
can do more than one activity. Then you will be making the best use of the labor
you have.


A) Which activities can be done by one person?



B) Which activities need to be done by more than one person?



C) How many people will you need for each activity?

D) How many of them will be hired?

E) How many will be family members?




STEP 3.

EXPLAIN HOW YOU WILL OBTAIN THE EMPLOYEES FOR EACH TASK.

When running a business you can use labor from your family or from your group.
If you are not able to find skilled labor from your group you will have to hire labor.
You therefore need to know how many people you need to hire and when you
will get them from.

A) How many people will your business need to hire?



B) Where will you get them from?







STEP 4.

EXPLAIN HOW YOU WILL PAY YOUR EMPLOYEES
When you use family or group labor you will need to pay them for the services
that they perform. In order for you to calculate how much you should pay them it
will be good for you to pay them the way you would pay an outsider doing the
same job.

How much will you pay your staff:

a) Management

b) Hired labor or group members

c) Family labor

d) What will you do to keep them happy and working hard?





STEP 5.

EXPLAIN THE ROLES AND STRENGTHS OF YOUR EMPLOYEES

In order to ensure that you are using all the potentials of the management and
labor in your business you will need to identify;

The name or title of employee:
It is necessary that even before you start a business you at least have an
idea of the people that will work in the business. Should you not have an idea
of who they will be you should at least know their title.

Areas of Responsibility:
This refers to the activities that an employee will carry out in the business.
Inside a business both the management and the labor have roles to perform.
Here you will identify the roles that each of them will do in the
business.

The skills of each employee:
Here you are identifying the skills and training related to the
business that different persons in the business have and their years of
experience. You will also identify the strengths that they have in the
business you are doing.
NAME AREAS OF RESPONSIBILITY SKILLS OF EMPLOYEE























Conflict

To avoid conflicts in the business and in their group the members of Pamela have come
up with rules by which their business will operate. These rules are contained in their by-
laws. Every member of the group knows exactly what activity they are to do and they are
paid for it. When ever problems arise they refer to their by-laws to solve the problems.
They also have rules to solve problems when they arise.



STEP 6

HOW TO SOLVE CONFLICT
When you are running a business either as a group or as an individual a number of
conflicts may arise in the business. Should this happen you will need to know how to
deal with that conflict, so that your business will be able to continue to function properly.
This means that if you are a group your by-laws will need to cater for conflicts.

A) How will your group handle conflict?



B) What have you done or are you doing to overcome these problems?



C) Many groups develop problems trusting each other, what will each member your
group do to increase trust in the group?




















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V


MARKETING PLAN



CHAPTER FIVE.

YOUR MARKETING PLAN
In making a marketing plan it is important for you first to know what a market is.

What is a Market?
The word market has two different meanings;
Market refers to the place where people meet to buy and sell goods and
services. Like a municipal or village market where people meet to sell goods and
services.



Mrs. Nsubuga needs to go to Mr. Otim's shop in the market to buy sugar and salt.




Market also means people or other businesses that want to buy your goods and
services. Like people who want to use a boda boda (bicycle transport) for transport are
the market for the boda boda.


Mr. Mugisha says that his market for the 'boda boda' are those shop-keepers in the
market, like Mr. Otim, who want to transport their commodities from their supplier to their
shops in the market.


After knowing what a market is you now need to know what marketing is.

What is Marketing?
Marketing is the process where you get the right product or service, at the right price, at
the right place and time to the right customer, informing and attracting them so that you
make a profit.

There are several steps before a product moves from producer to consumer.



Mr. Otim must provide the right product at the right price using the right place to the
consumer, and at the same time inform and attract people to come to his business
instead of other businesses. This is marketing. By doing quality marketing, he is doing
better than his friend Mr. Musoke, who has a shop in the back streets of town, he does
not provide the goods that customers want, his prices are also high and he does not
treat customers well, therefore he does not have many people buying goods from his
business.


EXERCISE.

A) What makes Mr. Otim's business different from Mr. Musoke's business?


B) What did Mr. Musoke do wrong?


In order to develop an effective strategy every business needs to develop a marketing
plan for its product.

What is a Marketing lan?
A marketing plan tells you what and how to market your product to your customers and
who your competitors are. To develop a good marketing plan it is necessary to collect
information about your market so that you can use it in your business this is called
market research. To do market research you should look at the four parts of the market.


THE FOUR Ps AND THE TWO Cs OF MARKETING

PART 1.

PRODUCT

Mr. Otim provides his customers with PRODUCTS that they need and want. A product
is a final commodity that your customer needs and wants.


Mr. Mulungi is a service operator because he provides services that his customers need
and want. To provide a SERVICE, is to facilitate an activity for someone else for which a
charge is made. A SERVICE can also be called a product.

PRODUCT.
To be successful in business you must have a product or service your customer wants
and is willing and able to pay for it. A successful business finds out what customers
want and what they need and provides the product or service to meet that need or want,
even if it means changing the product or service, or starting a new business idea.

Here is the information you need to collect on your PRODUCT or your SERVICE.


A) What product or service does your business produce?



B) What need or want of customers does your product or service meet?



C) Who are your customers?


C) What makes your goods or service different from goods or services
offered by other businesses?



E) Why should customers buy from you?



F) How much of each product or service will be available each month?



MONTH PRODUCT AMOUNT

..................... ..................... ....................

.................... ..................... ....................

.................... ..................... ....................

.................... ..................... ....................

.................... ..................... ....................


PART 2.

PRICE.
Price is the money people will pay to buy your product or service. The price must be
right if you are to get customers to buy from you and for you to make a profit.

A) How much does your product or service cost? (for answer refer to
chapter IX )



B) How much are your customers willing and able to pay?
(Ask some people who might be your customers how high a price they
would be willing to pay for your product or service.)



C) What is the price that other businesses charge for providing similar
products or services?




D) What price do you charge for your product or service?



E) Why did you set this price?




PART 3

PLACE
Place means where your business will operate from.

It also means how will you get your goods and services to your customers? You can
choose to take your goods and services to your customers or you can choose to have
your customers come to you, for the goods and services.
A) Will you take your goods or services to your customer?

Yes No

B) Will your customer come to get the product from you?

Yes No

C) Where will the business operate from?


D) How far are you from your suppliers?


E) Where are your customers located?



F) How can you find new or different customers?


PART 4.

PROMOTION.

Otim in his shop with many Customers in attendance, and some body advertising on a
microphone 'new radios from China' and another giving handouts of the same.



Sales Promotion.

Informing and attracting customers to buy your product or service is called promotion.
Promotion can be done through what is called advertising and sales promotion.

This is everything you do to make customers buy more of your goods and services. You
can make customers buy more from you by;

Making your goods and services be easily seen
Arranging your goods so that it looks like you have a lot of goods
Being clean
Selling products that go together like a torches and batteries.



WAYS OF DOING PROMOTION

Using a sign post for your business


Giving handouts and posters for your business


Using the radio to tell people about your business



Using the newspaper to tell people about your business





Word of mouth



Displaying your goods or services



Improving the quality of your product



Advertising
Advertising is simply spreading information to customers about your goods and services.
Here you are informing customers and making them interested in your product. This can
be done through;


Word of mouth
You can tell people about your business. Customers who like your business will also tell
people about your business. If customers are happy with your goods and services, they
will tell their friends, relatives and other people about how good your business is, the
word about your business will then travel from person to person.

If your business is bad then bad words about your business will also travel from person
to person.


A) How will you inform people about your business?

B) How will you attract people to come and buy more from your business?



THE TWO Cs OF MARKETING

PART V

CUSTOMERS.
The people who buy from your business are called CUSTOMERS. Before you start your
business it is important that you know who your customers are.
How to treat your customers.
The sales of your business will depend on the way you talk to your customers and treat
them. If you do not treat them in the right way your sales may go down. If you treat
them well, they will want to come and buy from your business and will also tell other
people about your business.

What kind of customers will you have?

Individual persons.
These are people who buy your goods or services. They could be your relatives or
friends or people from your village or town.

As a business you need to know, who these people are, where they live, if they are men
or women, how old they are, how much money they have, this will help you to always
give them what they want and also know where to find them.

Other businesses.
Other businesses may also want to buy your goods and services. You need to know
who they are and how much they are willing to pay for your goods or services.

A) Are most of the people who buy from you men or women?


B) Between what age are most of your customers?

below 16 yrs. 16 - 25yrs. 26 - 35yrs. 36 - 40yrs. over 40yrs.
C) Where do most of the people who buy from your business come from?



D) How will you treat customers in your business?



PART VI

YOUR COMPETITION
Other businesses trying to sell the same or similar goods and services as the ones you
are selling are called your competitor. You need to ask yourself if your business is
better than theirs or not, so that you can always improve yours. It is not good for your
business, if customers go to other businesses and do not come to yours.

A) Who else in your area is providing the same goods and services as your
business?


B) How many customers does your major competitor have?

C) Are your competitors business getting bigger or smaller?

D) Do you think you will be able to attract additional customers?

E) Compare your business to that of your competitor and tick ( ) the
correct answer:

Better Same Worse
Quality of your goods or services


Easy for customers to reach your
business

Price of your goods and services


Appearance of your business


What customers say about your
business


Areas where you find that you are worse or the same as your competitor should show
you the areas you need to improve or make changes, if your business is going to attract
customers so that you can make a profit.

F) What changes will you make to your business so that more people buy from
you?




At the business workshop, Mr. Otim found out that he should pay attention to the four Ps
and two Cs of marketing.
He is now getting the products that customers want and need. He is also charging
good prices and is well located in the market. People are talking well about Mr.
Otim's business and are being attracted to his business because it is clean and well
organized. He even has a sign on his lock-up shop. Mr. Otim is doing his best to make
sure that does not lose any customers and that he attracts more people to buy from his
business. One way he does this is by asking his customers what goods he should supply
them with so that he can better serve them.

Mr. Otim is different from his competitors in that he displays goods well, treats customers
well, and has organized his shop very well.




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VI


YOUR WORK PLAN






CHAPTER SIX.

YOUR WORK PLAN.

In any business there are a number of activities that need to be performed to produce a
product or provide a service. For the business to function well, it must know, what these
activities are, who will perform these activities and when these activities will be
performed. Further to this it is important for the business to know what resources are
required for each activity.

To get all this information, a business will need to write up a work plan.


STEPS IN PREPARING A WORK PLAN.
The work plan will vary from business to business and will depend on what goods and
services the business is providing and where the business wants to get to.


STEP 1.

STATE THE PRODUCTION GOALS FOR YOUR BUSINESS.
You will need to clearly state what your business intends to achieve within a given time
period. For example, your business may intend to make five thousand (5,000) bricks in
one month or to supply five hundred (500) fish in a month. You should have specific
targets in the short term that will help you meet the long term goals of your business.
This means you should know where your business is going in the next six months or one
year.

A) Please write down how much your business will produce each month;

MONTH/WEEK

AMOUNT PRODUCED












TOTAL


STEP 2.

LIST THE ACTIVITIES TO BE PERFORMED IN YOUR BUSINESS.

After stating the goals of your business, you will need to list the activities to be
performed in the business. The activities should be listed in order of the time periods in
which they will take place. You will therefore have to list activities from the first activity to
the last activity to take place in the business. All the steps necessary to complete an
activity should be listed in this step.

A) Please list the number of activities to be performed in your business;

ACTIVITIES IN THE BUSINESS








STEP 3.

GIVE THE NAMES OR NUMBER OF LABORERS WHO WILL PERFORM EACH
ACTIVITY.

For each activity to be performed in your business, you will need to give the names of
the employees to perform each activity.

A) Please give either the name or number of laborers that will perform
each activity

ACTIVITY

NAME OF LABORER/ No. OF LABORER












STEP 4.

ESTIMATE THE MATERIAL RESOURCES YOU NEED TO PERFORM EACH
ACTIVITY.

After knowing what activities need to be carried out in your business and the laborers
that need to perform each task, you need to estimate what material resources you need
to perform each activity. To make sure that you have a complete list of resources, you
will need to have completed STEP 2., in this step you will therefore need to estimate all
the resources you need to complete each step of activity.
A) Please give each activity and the amount of resources necessary to
complete that activity.

ACTIVITY

MATERIAL RESOURCES









STEP 5.

ESTIMATE THE CASH REQUIRED FOR EACH ACTIVITY.
From the amounts that you will pay the labor in your business and the amounts you will
pay on material resources you can estimate the amount of cash you require for each
activity.

A) Please give the amount of cash you will need for each activity given your
estimate for labor and material resources;

ACTIVITY LABOR MATERIAL
RESOURCES
CASH









STEP 6.

FILL OUT THE WORK PLAN.
Based on your answers to the five steps above you can proceed to fill out the work plan
below. From the details that you fill into the work plan you will be able to know how
much labor, material resources, cash and other necessities you will require in the
business.


ACTIVITY

MONTH/ WEEKS

No. OF
LABORERS
MATERIAL
RESOURCES
CASH






TOTAL





The members of Pamoja have decided to cultivate four acres of land where they will
plant groundnuts. To do this they will need to buy tools, seeds and higher oxen and a
plough they also need to know how many laborers they need for each activity and how
much each activity will cost.

ACTIVITY

MONTH/ WEEKS

No. OF
LABORERS
MATERIAL
RESOURCES
CASH
Clearing land Week 1 10 axes, pangas &
hoes
25,000/=
Ploughing Week 2 12 oxen & plough 42,000/=
Buying seeds Week 3 1 bicycle 80,000/=
Ploughing Week 4 12 oxen & plough 42,000/=
Planting Week 5 24 hoes & seeds 24,000/=
Spraying Week 7 4 pesticides &
sprayer
10,000/=
Weeding Week 13 40 hoes 40,000/=
Harvesting Week 19/20 40 sacks, basins &
baskets
80,000/=

TOTAL


343,000/=













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VII

START-UP CAPITAL




CHAPTER SEVEN

START - UP CAPITAL.
The money that you need to start a business is called start-up capital.

In this chapter you will find out how much it will cost you to start your business.

If you are to start a business you will need money for what is called investments and
working capital.

INVESTMENTS:
Investments are one-time costs of starting your business. This includes the money you
spend on land, buildings, equipment, tools, furniture and other items needed when
starting your business. These items usually have a high value and last for a long time.


WORKING CAPITAL:
Working capital is the money you need to produce goods or provide services before you
start getting money from selling goods and services.

Somebody who is a manufacturer, for example a brick maker will need to buy raw
materials and pay people who work for him before he can get money from selling bricks.
The money he uses for making bricks and keeping the business going is called working
capital.

Somebody who is running an agribusiness for example a maize mill will need money to
buy stock and pay people who work for him before he can get money from his maize
mill. The money he uses to buy stock and keep his business in operation is called
working capital.

Somebody who is a retailer, for example a person selling second hand cloths or running
a shop, will need money to buy stock and pay people working for him before he can get
money from selling cloths. The money he uses for buying clothes and keeping the
business going is called working capital.

This means that some businesses may require working capital for three months, others
six months, or one year depending on how long it will take before money starts coming
in from the sale of goods and services.

To find out how much working capital you need, look at how much you will spend on raw
materials, finished goods, advertising, wages, rent, and other costs before your business
starts selling. This means that you will need to look ahead to what is likely to happen in
the future.



HOW TO CALCULATE WORKING CAPITAL.
To calculate working capital you need to estimate how much you will spend on:

A) RAW MATERIALS OR FINISHED GOODS.
If you are a manufacturer you need to estimate how much raw material
you need to buy before you start selling what you have made.

If you are a retailer, selling second hand cloths or running a shop you
need to estimate how much you will spend buying stock before you start
selling.

B) WAGES.
Before you start selling in your business you will need to hire people to
work for you and produce the goods and services. The money used to
pay their wages is called start-up capital for wages.

START UP CAPITAL = TOTAL WAGES X NUMBER OF MONTHS
(WAGES) IN A MONTH BEFORE YOU START SELLING.


C) RENT.
The money you pay for renting the buildings or the land you use in your
business will have to be paid right from the time you start your business.
This is calculated as start up capital for rent. This will apply only if you are
renting a building or land.


START UP CAPITAL = TOTAL RENT X NUMBER OF MONTHS
(RENT) IN A MONTH BEFORE YOU START
SELLING.


D) OTHER COSTS
There will be a number of other costs to pay before you start selling in
your business. You may need to pay for licenses, transport, stationary,
electricity, advertisement and promotion etc. This is calculated as start up
capital for other costs.


START UP CAPITAL = TOTAL OTHER X NUMBER OF MONTHS
(OTHER COSTS) COSTS IN A BEFORE YOU START
MONTH SELLING


E) WORKING CAPITAL

To estimate your working capital you need to add up all your start up capital
for raw materials or finished goods, wages, rent and other costs.


WORKING CAPITAL = START UP CAPITAL (RAW MATERIALS OR FINISHED
GOODS) + START UP CAPITAL (WAGES) + START UP
CAPITAL (RENT) + START UP CAPITAL (OTHER COSTS)



HOW TO CALCULATE START-UP CAPITAL
SUMMARY OF START UP CAPITAL SHS
A) INVESTMENT
1. TOTAL MONEY FOR LAND AND
BUILDINGS
2. TOTAL MONEY FOR EQUIPMENT,
TOOLS AND FURNITURE etc.




+
SUBTOTAL
WORKING CAPITAL
1. TOTAL MONEY FOR RAW
MATERIALS OR FINISHED GOODS
2. TOTAL MONEY FOR WAGES
3. TOTAL MONEY FOR RENT
4. TOTAL MONEY FOR OTHER COSTS




+
+
+
SUBTOTAL
GRAND TOTAL
TOTAL START UP CAPITAL


SOURCES OF START UP CAPITAL
When you have estimated how much start up capital you need for your business, the
next question is; where do I get the capital from?

You can get your start up capital from;
Personal or group savings
Loans from banks, money lenders, relatives, friends and non
governmental organizations.
Grants from organizations willing to give you money for business purposes.














Before Mr. Otim could open his shop for business, he had to arrange money for renting
the shop, buying stock, buying furniture and other fixture and for e promotion and
advertising. He was able to get this money from loans given to him by his friends and
relatives.

Before he could start the business, Mr. Otim had to estimate his start-up capital for the
first three months of the business before any money could start coming in from the sale
of goods.

The start-up capital he got on loan can be divided into two. First investment, this is the
money he spent for acquiring furniture and fixtures and secondly the working capital, he
used to buy stock and pay for the rent, electricity and pay for the wages of a shop
assistant.



Mr. Otim's calculation for start-up capital looked like this;

START-UP CAPITAL FOR OTIM AND SONS
DESCRIPTIONS SHS
A) INVESTMENT
1. TOTAL MONEY FOR LAND AND
BUILDINGS
2. TOTAL MONEY FOR EQUIPMENT
TOOLS AND FURNITURE Etc.



+100,000/=
SUB - TOTAL 100,000/=







B) WORKING CAPITAL
1. TOTAL MONEY FOR RAW MATERIAL OR
FINISHED GOODS
2. TOTAL MONEY FOR WAGES
3. TOTAL MONEY FOR RENT
4. TOTAL MONEY FOR OTHER COSTS

1,500,000/=

+225,000/=
+150,000/=
+60,000/=
SUB-TOTAL
GRAND-TOTAL
1,935,000/=
2,035,000/=
TOTAL START-UP CAPITAL 2,035,000/=

Mr. Otim spent One hundred thousand shillings (100,000/=) to buy shelves, a stool and
a table at the start of his business.

For working capital he had to spend 1.5 million to buy stock for the business.

Mr. Otim will pay his shop assistant UShs.30,000/= per month and himself
UShs.45,000/= per month, he therefore needs a total of 75,000/= per month to pay
wages. His working capital. For the first three months the business will need
Ushs.225,000/= to pay for wages.


75,000 x 3 = 225,000/=


He therefore needs UShs.225,000/=. Working capital for wages, in the first three
months.

Mr. Otim is renting a small lock-up shop in the market for UShs.50,000/=
per month, he therefore needs a total of;


50,000/= x 3 = 150,000/=


UShs.150,000/= as working capital for rent in the first three months of the business.

He will also need to pay some money to buy a sign board to advertise his business to
pay for electricity, as well as make transport available. Otim will spend
UShs.60,000/= on this in the first three months of the business.

This brings his total start-up capital for this business to UShs. 2,035,000/=.





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VIII

COSTING AND
PRICING YOUR GOODS
AND SERVICES



CHAPTER EIGHT

COSTING AND PRICING YOUR GOODS AND SERVICES.


PART 1

COSTS
Costs are all the money your business spends to produce a good or a service.

COSTING
This is the way you calculate all the costs of making a good or providing a service.
Costing is important to your business, because it helps you to;

Set prices of your goods and services
Reduce costs
Control costs
Plan for the future.

TYPES OF COSTS
Total cost is made up of two types of costs;

Direct costs
Indirect costs


Total cost = Direct cost + Indirect cost

You must understand the different types of costs to be able to calculate the cost of your
goods or services.


DIRECT COSTS
Costs of items which become part of the product that you produce or are directly related
to the product is on service what is called DIRECT COSTS.

There are two types of DIRECT COSTS.

Direct material costs
Direct labor costs.

Direct cost = Direct material cost + Direct labor cost



Direct material cost.
Direct material cost are the costs of all materials used in making your goods or services.

Direct labor cost.
Is the money your business spends on the salaries and wages of your workers who
directly produce your goods and services.

The labor working in the office or shop like shop supervisors, secretaries, clerks is not
direct labor but it is an indirect cost.

INDIRECT COSTS
These are the costs of all other items except direct costs that you need to run a
business. This includes costs of renting land and buildings, electricity, water, salaries of
workers that do not directly produce a good or service, office costs, interest on loans,
taxes etc.


TOTAL COSTS

Total cost = Direct material cost + Direct labor cost + Indirect cost



PART 2.


PRICE
Price is the amount charged for your good or service.

PRICING
Pricing is the setting of right prices to charge for your goods or service.

Before you set prices of your product you need to:

Know if you are making a profit.
Know the cost of producing your product or service.
Know if you are making a profit.
Know your competitors prices.
Know how much your customers are willing and able to pay.


HOW TO MAKE A PROFIT.

MARK-UP
Retailers and wholesalers have to add a little to the prices of the goods they buy before
they sell the goods to customers. This is called adding a mark-up to the goods. The
extra money collected goes toward the profits and the running of the business. Mark-up
is usually a percentage of the cost of the good.


MARGIN
All business owners add a mark up in order to make a profit. In others words, they need
a trade margin so that they can cover their costs. The margin is usually stated as a
percentage of the selling price.


EXAMPLE



If Mr. Otim paid Ushs.450/= for a package of tea, and he wants to sell it at Ushs.500/=.

COST + MARK-UP = SELLING PRICE
450 + 50 (11%) = 500



The DIRECT MATERIAL COST for a business like Otim and Son's is the stock that they
buy for resale. This includes the sugar, salt, cooking oil, torches, batteries, fixtures and
the furniture in the business.

Otim and Sons does not have any direct labor costs because they are not directly
involved in production. They simply take the product from the supplier to the customer,
but they have indirect costs. These costs are the costs of rent, electricity, water,
stationery, transport and salaries in the business.

Mr. Otim is always looking for ways to cut the costs of operating his shop. In the
Business Training workshop, he learned that there are two types of costs. These are
Direct Costs and Indirect Costs. He looks for ways to cut them by lowering the cost of
wages, by negotiating prices of the goods he buys from his suppliers, and by reducing
waste.

When setting his prices Otim considers his costs of buying goods, competitors' prices
and the amount of profit he wants to make on each item.


EXERCISE

A) What are the Direct Costs of the "Pamoja" business group?

Direct Material Costs? ___________________________________________

______________________________________________________________

______________________________________________________________

Direct Labor Costs ____________________________________________

______________________________________________________________

______________________________________________________________

B) What are the Indirect Costs for the "Pamoja" business group?

______________________________________________________________

______________________________________________________________

______________________________________________________________










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IX

PROJECTED INCOME
STATEMENT




CHAPTER NINE.

PROJECTED INCOME STATEMENT.
This statement tells you how much, revenue, expenses and profit you can expect from
your business. A projected income statement is your "projection" of what you expect
your revenue, expenses and profit to be in the future. It must cover a specific period of
time.


GROSS PROFIT
Gross profit is calculated by subtracting direct costs from your total sales.


NET PROFIT
Net profit is calculated by subtracting your indirect costs from your gross profit. This is
the amount you would earn from your business after paying for all your labor and
expenses. It is also called net income.


THE COMPONENTS OF THE PROJECTED INCOME STATEMENT.

SALES
Sales is the money you expect to receive from the sale of goods and services.

In the projected income statement, you estimate your future sales as follows:

SALES = NUMBER OF ITEMS SOLD x PRICE OF EACH ITEM.

ITEM SOLD PRICE OF ITEM NUMBER OF
ITEMS SOLD
TOTAL SALES
1.
2.
3.
4.
TOTAL SALES IN
A MONTH




DIRECT MATERIAL COSTS (DMC)
Direct material costs are the costs of all materials used in making your goods or
services.


QUANTITY OF EACH MATERIAL USED X COST OF EACH UNIT USED = DIRECT MATERIAL COSTS


NAME OF MATERIAL


QUANTITY USED COST OF EACH UNIT
USED
TOTAL DIRECT
MATERIAL COSTS
1.


2.


3.


4.


5.


6.


7.


8.


TOTAL DIRECT
MATERIAL COSTS IN A
MONTH






DIRECT LABOR COSTS.

Direct labor costs is the money your business spends on the salaries and wages of
your workers who directly produce your goods or services.

To calculate direct labor costs use the following table:

No.

NAME OF EMPLOYEE/ACTIVITY PAY PER MONTH
1.


2.


3.


4.


5.


6.


7.


8.


TOTAL DIRECT LABOR COST IN A
MONTH



INDIRECT COSTS

Indirect costs are the costs of all items except direct costs used to run a business. This
includes costs of renting land and buildings, electricity, water, salaries of workers that do
not directly produce a product or service such as managers and secretaries, office costs
like stationery and furniture, interest on loans, taxes etc.

Use this table to calculate your indirect cost.

ITEM

AMOUNT USED

PRICE OF EACH ITEM TOTAL INDIRECT COST
Rent for land


Rent of building


Electricity


Water


Owner's salary


Worker's salary


Stationery


Furniture


Loan interest


Tax



Depreciation




Others


TOTAL INDIRECT COSTS
IN A MONTH












DEPRECIATION.
Business assets like buildings and equipment have a long useful life. If the entire use of
these items was reported on the income statement in the year they were purchased, it
would make the profit for the year look much lower than it really was. To avoid this, the
cost of these items is spread over the number of years they will be useful to the
business. The process of allocating the cost to the different years is called "Depreciating
on the asset" and the amount allocated to each year is the "Depreciation" for that year.



HOW TO CALCULATE DEPRECIATION



=





=







EXAMPLE
For example if Mr. Otim paid 501,000/= for his shop furniture and its expected life is five
(5) years depreciation will be:


=



Amount of depreciation per month:
=











PROJECTED INCOME STATEMENT FOR OTIM AND SONS
FOR THE PERIOD OF JANUARY - MARCH 1996
Months
DETAILS JAN FEB MARCH TOTAL
SALES 500,000 550,000 650,000 1,700,000
Less DIRECT
MATERIAL
COSTS
400,000 400,000 450,000 1,250,000
Less DIRECT
LABOR
0

0

0

0

8333/= Per Month
100,000/=
12 Months
100,000/= Per year
500,000/=
5 Years

DEPRECIATION FOR A
YEAR
NUMBER OF MONTHS
IN A YEAR (12)
AMOUNT OF DEPRECIATION
EVERY MONTH
TOTAL COST OF ITEM
NUMBER OF YEARS
OF EXPECTED LIFE
AMOUNT OF DEPRECIATION
EVERY YEAR
COSTS

GROSS
PROFIT

100,000

150,000

200,000

450,000

INDIRECT
COSTS

Rent for land 50,000 50,000 50,000 150,000
Rent for
building

Electricity 20,000 20,000 20,000 60,000
Water
Workers salary 50,000 50,000 50,000 150,000
Owners salary 25,000 25,000 25,000 75,000
Stationary
Furniture
Loan Interest
Tax
Depreciation
Others
TOTAL
INDIRECT
COSTS
145,833 145,833 145,833 437,499

NET PROFIT
(Gross profit minus
Total)

(45,833) 4,167 54,167 12,501


Mr. Otim has developed a projected income statement for 3 months, he estimates that
all his indirect costs covering renting of land, electricity, workers' salary, owners' salary
and depreciation will remain constant for the three months.

He plans to start by charging low prices in January increasing a little in February and
March so that his sales revenue will increase. However, he thinks he will sell the same
amounts of goods in January and February so that his direct material costs will remain
constant for the two months. However, in March, his direct material costs will increase
because he expects to sell more than in the previous months. His total net profit for the
three months is 12,501/=.

Mr. Otim calculated depreciation based on the cost of the furniture he bought at
50,000/= when starting the business (ref. page 49 of Your Business Plan Handbook).










































The following form can be used to make your projected income statement:


PROJECTED INCOME STATEMENT FOR..

For the Period beginning ---------------------------------------------- and ending ----------------
Details Months
Jan. Feb. Mar. Apr. May June Sub Total
Sales
Less DIRECT MATERIAL
COSTS

Less DIRECT LABOR
COSTS

GROSS PROFIT
INDIRECT COSTS

Rent for land



Rent of Building

Electricity
Water
Workers salary
Owners salary
Stationary
Furniture
Loan Interest
Tax
Depreciation
Others
Total Indirect Costs

NET PROFIT
(Gross profit minus Total

Indirect Costs

PROJECTED INCOME STATEMENT

Details Months
JUL. AUG SEP OCT NOV DEC TOTAL
Sales
Less DIRECT MATERIAL
COSTS

Less DIRECT LABOR
COSTS

GROSS PROFIT
INDIRECT COSTS

Rent for land



Rent of Building

Electricity
Water
Workers salary
Owners salary
Stationary
Furniture
Loan Interest
Tax
Depreciation
Others
Total Indirect Costs

NET PROFIT
(Gross profit minus Total
Indirect Costs






















C
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X


CASH FLOW PLAN





CHAPTER TEN.

CASH FLOW PLAN.

A cash flow plan shows you how much money you can expect to flow into your business
(cash receipts) and how much money you can expect to flow out (cash payments) during
a given period of time. It is commonly prepared month by month, but it can be week by
week if that is convenient for your business.

A cash flow plan enables you to be sure that your business will always have enough
money to pay for any needs that may arise. It will show you if there are any money
shortages that could arise in the future. It also shows you where you will get your money
from and where you will use it.

Therefore, a cash flow tells you when there are surpluses or short-falls of cash to pay
expenses in your business. You will then know how much money is flowing in and
flowing out.


THE DIFFERENCE BETWEEN A CASH FLOW PLAN AND A PROJECTED INCOME
STATEMENT

A cash flow plan is used to show how much cash is available from time to time. It
includes all cash receipts and payments in the business. While an income statement is
used to show whether the business is making or losing money and whether it is
profitable.


HOW TO MAKE A CASH FLOW PLAN
To make a cash flow you should estimate the following;

A) Sources of cash.

1. CASH AT THE START OF THE MONTH.
This is cash that was left in your business from the last month. This is the
money you have in your cash box or bank account at the beginning of the
month. It is therefore carried over from one month to the next. It is zero at
the beginning of the first month.

2. CASH IN FROM SALES
This is the cash in from sales of goods and services in your business.


TOTAL SALES = NUMBER OF ITEMS SOLD X PRICE OF THE ITEMS

3. CASH FROM MEMBERS AND OWNERS
This is all the cash you receive from members of your business group
or your partners, as a contribution to the business.

4. CASH RECEIVED FROM DEBTORS
This is money received from debtors, that is people who owe your
business money. Commonly these will be cash payments from customers
for previous credit sales.

5. CASH LOAN RECEIVED
This refers to all the money you receive that is lent to the business.
Loans will need to be paid back by the business.

6. CASH GRANT RECEIVED
This refers to all the money you receive as a donation. This money will
not need to be paid back.

7. OTHER CASH IN
This is any other money received which does not fall into any of the
above categories.

8. TOTAL CASH IN


TOTAL CASH IN = CASH IN FROM SALES + CASH IN
FROM ALL OTHER SOURCES (Sum of No.2
through No.7)


To make a cash flow you will also need to estimate the payments that your business will
make.

B) This includes all the money that will go out of the business.

9. CASH OUT FOR DIRECT MATERIAL COST (DMC)
Cash out for direct material costs are the costs of all materials
used in making your goods or providing your services.


QUANTITY USED X COST OF EACH UNIT USED = DIRECT MATERIAL
COSTS


10. CASH OUT FOR DIRECT LABOR COST (DLC)
Cash out for direct labor cost is all the money your business spends on
the salaries and wages of your workers who directly produce your goods
or services.


11. CASH OUT FOR INDIRECT COSTS (IC)
Cash out for Indirect costs are the costs of all other items except direct
costs that you need to run a business. This includes costs of renting land
and buildings, electricity, water, salaries of workers that do not directly
produce a good or service such as managers and secretaries, office costs
like stationery and supplies, interest on loans, taxes etc.

Indirect costs may occur even when a product is not being made or a
service not being performed.

12. CASH OUT FOR PLANNED INVESTMENT IN EQUIPMENT
This refers to money that you will spend buying equipment and furniture.

13 CASH OUT TO THE MEMBERS OR OWNERS
This refers to money you will be paying out to the owners or
members, as a distribution of profit or return on investment. It does not
include salaries, wages or allowances.

14. LOAN PRINCIPAL REPAID
This refers to the amount of money you will be paying back each
month to repay money lent to you.

15. LOAN INTEREST PAID
This refers to the interest you will pay each month to the individual or
institution that lent you money. This is paid based on the amount of
money you received as loan.

16. OTHER CASH OUT
This refers to any other money that you will pay out of your business
which does not fall into the above categories.

17. TOTAL CASH OUT

THIS IS THE SUM OF ALL CASH PAID OUT OF THE BUSINESS






=

CASH OUT FOR DIRECT MATERIAL COST +
CASH OUT FOR DIRECT LABOR COST +
CASH OUT FOR PLANNED INVESTMENT IN
EQUIPMENT + CASH OUT
TO MEMBERS OR OWNERS + LOAN PRINCIPAL
REPAID + LOAN INTEREST PAID + OTHER
CASH OUT
TOTAL CASH OUT









18. MONTHLY NET




=
TOTAL CASH IN - TOTAL CASH OUT
MONTHLY NET



This indicates whether more cash moved into the business than out. A
negative amount for "monthly net" indicates a serious problem for the
business. It means there was not enough cash available during the month
to pay the costs you expected. To solve the problem, you will have to find
a way to increase cash in or reduce cash out.


19. CASH AT THE END OF THE MONTH



+
CASH AT THE BEGINNING OF THE MONTH
MONTHLY NET









































CASH FLOW PLANS











YOUR CASH FLOW PLAN.

CASH FLOW PLAN MONTHS
JAN FEB MAR APRIL MAY JUNE
SOURCES OF CASH
1. CASH AT THE START
OF THE MONTH

2. CASH IN FROM SALES
3. CASH FROM MEMBERS
4. MONEY RECEIVED
FROM DEBTORS

5. CASH LOAN RECEIVED
6. CASH GRANT
RECEIVED

7. ANY OTHER CASH IN
8. TOTAL CASH IN (SUM OF
NO.2 THROUGH NO.7)

USES OF CASH
9. CASH OUT FOR DIRECT
MATERIAL COSTS


10. CASH OUT FOR
DIRECT LABOR COSTS


11. CASH OUT FOR
INDIRECT COSTS

12. CASH OUT FOR
PLANNED INVESTMENT IN
EQUIPMENT


13. CASH OUT TO
MEMBERS

14. LOAN PRINCIPAL
REPAID

15. LOAN INTEREST PAID
16. ANY OTHER CASH
OUT

17. TOTAL CASH OUT
18. MONTHLY NET (No. 8 -
N0. 17)

19. CASH AT THE END OF
THE MONTH (No. 1 - No.
18)



CASH FLOW PLAN MONTHS
JUL AUG SEP OCT NOV DEC
SOURCES OF CASH
1. CASH AT THE START
OF THE MONTH

2. CASH IN FROM SALES
3. CASH FROM MEMBERS
4. MONEY RECEIVED
FROM DEBTORS

5. CASH LOAN RECEIVED
6. CASH GRANT
RECEIVED

7. ANY OTHER CASH IN
8. TOTAL CASH IN (SUM OF
NO.2 THROUGH NO.7)

USES OF CASH
9. CASH OUT FOR DIRECT
MATERIAL COSTS


10. CASH OUT FOR
DIRECT LABOR COSTS


11. CASH OUT FOR
INDIRECT COSTS
12. CASH OUT FOR
PLANNED INVESTMENT IN
EQUIPMENT


13. CASH OUT TO
MEMBERS

14. LOAN PRINCIPAL
REPAID

15. LOAN INTEREST PAID
16. ANY OTHER CASH
OUT

17. TOTAL CASH OUT
18. MONTHLY NET (No. 8 -
N0. 17)

19. CASH AT THE END OF
THE MONTH (No. 1 - No.
18)





This is my cash flow. I write it out in months because that is more useful to my
business.


EXERCISE

With reference to the projected income statement for Otim and Sons in the previous
chapter (page 59), comment on the details of the cash flow plan for Otim and Sons from
October 1995 to March 1996.

______________________________________________________________________

______________________________________________________________________

______________________________________________________________________
_

______________________________________________________________________

______________________________________________________________________

______________________________________________________________________

______________________________________________________________________





CASH FLOW FOR OTIM AND SONS

MONTHS
DETAIL
S
OCT. NOV. DEC. JAN. FEB. MAR. TOTAL
Cash at
the start
of the
month
0 1,655,00 1,155,000 500,000 650,000
SALES 500,000 550,000 650,000

Loans 2,035,000
Other
Total
cash in
2,035,000 0 500,000 550,000 650,000 0

Materials 200,000 300,000 1,000,000 400,000 400,000 450,000
Equip. 25,000 25,000
Labor 75,000 75,000 75,000 75,000 75,000 75,000
Rent 50,000 50,000 50,000 50,000 50,000 50,000
Other 30,000 50,000 30,000 20,000 20,000 20,000
Total 380,000 500,000 1,155,000 545,000 545,000 595,000
Cash
Out
Monthly
Net
1,655,000 (500,000) 0 45,000 40,000 (595,000)
Cash at
end of
month
1,655,000 1,155,000 500,000 505,000 610,000 15,000









PAMOJA CASH FLOW
Weeks 1 2 3 4 5 6 7 13 20 21
Cash on 0 75,000 253,000 173,000 131,000 107,000 107,000 97,000 57,000 157,000
hand
start of
week
Cash sales 800,000
Cash from
members 100,000
Loan 220,000 180,000
Other
Total cash
in 100,000 220,000 0 0 0 0 0 0 180,000 800,000
Production
costs 25,000 42,000 80,000 42,000 24,000 0 10,000 40,000 80,000 100,000
Principal
payment 400,000
Interest
payment 18,320
Cash to
Members
Other
Total cash
out 25,000 42,000 80,000 42,000 24,000 0 10,000 40,000 80,000 518,320
Monthly
Net 75,000 178,000 (80,000) (42,000) (24,000) 0 (10,000) (40,000) 100,000 281,680
Cash on
hand end
of week 75,000 253,000 173,000 131,000 107,000 107,000 97,000 57,000 157,000 438,680

The interest is calculated as follows:

220,000 borrowed in week 2 and repaid in week 21
220,000 x .004 interest per week x 20 weeks = 17,600

180,000 borrowed in week 20 and repaid in week 21
180,000 x .004 interest per week x 1 week = 720

Total interest cost is 18,320

This is our cash flow. We write it out in weeks because that is more useful to our
business.


Pamoja members at one of their monthly meetings.

EXERCISE

Question: What will be done with the cash on hand at the end of the project?

______________________________________________________________________

______________________________________________________________________

______________________________________________________________________

______________________________________________________________________

______________________________________________________________________

______________________________________________________________________

______________________________________________________________________
_

(for answer refer to page 98)



C
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XI




BREAK EVEN ANALYSIS















CHAPTER ELEVEN.

BREAKEVEN ANALYSIS.
There are two ways to think of the Break Even Point analysis. One is referred to as the
break even sales level. This refers to the amount of sales you need to make in order to
cover your costs in the business. The second, is a break even point price level. This
refers to the price you need to charge in order to cover your total cost on a particular
product.

HOW TO CALCULATE THE BREAK EVEN POINT
Step one of this chapter will cover the Break Even Point sales Level. It is to be used by
people who are providing many products, while step two will cover the Break Even Point
Price Level. It is to be used by people who are supplying a single product.


STEP 1.

BREAK EVEN POINT SALES LEVEL
This level tells you how many goods or services you need to sell to cover your total costs
at a given price.

At the Break Even Point your sales will exactly cover your total costs. At this point there
is no loss and there is no profit. It is the point where the business sales and the business
expenses are equal to each other.

If you sell more than the break even point sales level you will make a net profit and If you
sell less you will make a net loss. Knowing how much of the product you need to sell in
order to cover your costs is very important in planning and budgeting your cash.

Below, you will see how to calculate your break even point sales level. To know how to
calculate your sales, total direct costs and indirect costs, refer to CHAPTER SIX on
costing and pricing your goods and services, however, gross margin is defined as
follows:

Gross Margin - is also known as gross profit on sales. It is the difference between the
amount of total sales and the cost of goods sold.

The formula to calculate it is: GROSS PROFIT = GROSS MARGIN
TOTAL SALES


Use the table on the following page to calculate your own Break Even Point Sales Level.

BREAK EVEN POINT SALES LEVEL
BREAK EVEN SALES LEVEL FOR ____________________________________

I. CALCULATE GROSS PROFIT
TOTAL SALES IN YOUR BUSINESS SHS.
/=
Less
TOTAL DIRECT COSTS (DIRECT
MATERIAL COSTS AND DIRECT
LABOR COSTS)
GROSS PROFITS

SHS


SHS

II. CALCULATE GROSS MARGIN
GROSS MARGIN = GROSS PROFIT
TOTAL SALES

GROSS MARGIN




0


---------------------

III. CALCULATE TOTAL INDIRECT COST
INDIRECT COSTS
Rent for land
Rent of building
Electricity
Water
Workers' salary
Stationery
Furniture
Loan interest
Tax
Depreciation


TOTAL INDIRECT COST



IV. BREAK EVEN POINT SALES LEVEL
TOTAL INDIRECT COSTS
GROSS MARGIN



BREAK EVEN POINT SALES LEVEL






Mr. Otim needs total sales of 1,682,688.46/= to cover all his costs to break even. Any
sales over this amount would ensure a profit.


Mr. Otim calculated his break even point sales level for the months of January to March
1996. He calculated a break even point sales level because he run a retail store. He
therefore supplied many products and calculated his break even point sales level.



























I. CALCULATE GROSS PROFIT
TOTAL SALES IN YOUR BUSINESS SHS. 1,7000,000

Less
TOTAL DIRECT COSTS (DIRECT
MATERIAL COSTS AND DIRECT
LABOR COSTS)
GROSS PROFITS

SHS 1,250,000


SHS 450,000

II. CALCULATE GROSS MARGIN
GROSS MARGIN = GROSS PROFIT
TOTAL SALES


GROSS MARGIN

450,000
------------
1,700,000

= 0.26 or 26%


---------------------

III. CALCULATE TOTAL INDIRECT COST
INDIRECT COSTS
Rent for land
Rent of building
Electricity
Water
Workers' salary
Owners Salary
Stationery
Furniture
Loan interest
Tax
Depreciation


150,000
0
60,000
0
150,000
75,000
0
0
0
0
2,499
TOTAL INDIRECT COST

437,499

IV. BREAK EVEN POINT SALES LEVEL
TOTAL INDIRECT COSTS
GROSS MARGIN

437,499
.0.26
BREAK EVEN POINT SALES LEVEL

1,682,688.46



STEP 2.

BREAK EVEN POINT PRICE LEVEL
Break even price level is the price which exactly equals the cost of producing the
product. It is used for a single product so a producer knows what price they
should charge for the product. This cannot be used for a retail store or
somebody producing many products.


BREAK EVEN PRICE LEVEL

I. CALCULATE TOTAL COST
TOTAL COST

= DIRECT COST + INDIRECT COST

TOTAL COST




II. CALCULATE TOTAL YIELD

TOTAL YIELD

= NUMBER OF PRODUCTS PRODUCED IN
THEIR UNITS OF MEASUREMENT e.g. Kg.



TOTAL YIELD


=



III. CALCULATE BREAK EVEN POINT PRICE LEVEL
BREAK EVEN POINT PRICE
LEVEL (TOTAL COST OF
MANUFACTURING A GOOD
_____________________________
__
TOTAL YIELD OR TOTAL PRODUCTION OF
THE GOOD)

____________________________









C
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XII

THE BALANCE SHEET




CHAPTER TWELVE

YOUR BALANCE SHEET
The balance sheet is a statement that tells you the financial position of your business on
a specific date.

YOUR BALANCE SHEET CONSISTS OF THREE PARTS:
Assets - Things you own
Liabilities - Money you owe others
Owners Equity - Assets minus liabilities, the new worth of the business.

It is the monetary (money) picture of your business at a given time.

A balance sheet will therefore list the assets and liabilities of your business.


COMPONENTS OF A BALANCE SHEET.

PART 1

ASSETS.
An asset is anything owned by the business that has value. Assets must be owned, not
rented by the business. The assets of a small business normally include:
1. Cash
2. Items in the store
3. Land
4. Buildings
5. Equipment
6. Furniture and fixtures
7. Money other people owe to the business.

ASSETS can be divided into two categories, based on how quickly they will be turned
into cash in the course of business.

CURRENT ASSETS.
Current assets are cash or any other item that would become cash within
one year from the date of the balance sheet.
These include:
1. Cash
2. Items in the store
3. Money other people owe to your business.


FIXED ASSETS.
Fixed assets are items in your business which will not become cash
within one year. They are usually purchased for long term use. These
include;
1. Land
2. Buildings
3. Equipment
4. Furniture and fixtures


BALANCE SHEET FOR .........................................................

ASSETS

CURRENT ASSETS

1. Cash
2. Items in the store
3. Money other people owe to your business


SHILLINGS

+
+
+

TOTAL CURRENT ASSETS


FIXED ASSETS
1. Land
2. Buildings
3. Machinery
4. Tools
5. Equipment
6. Furniture



+
+
+
+
+

TOTAL FIXED ASSETS


TOTAL ASSETS (TOTAL CURRENT + TOTAL
FIXED)



LIABILITIES

SHILLINGS
CURRENT LIABILITIES
1. Interest on short term loans, long term loans
2. Taxes
3. Wages and salaries earned but not paid
4. Money owed to other businesses for goods
purchased on credit



+
+
+
+
TOTAL CURRENT LIABILITIES

LONG TERM LIABILITY
1. Loans incurred to buy land
2. Loans incurred to buy buildings
3. Loans incurred to buy equipment
4. Loans incurred to start a business

+
+
+
+

TOTAL LONG TERM LIABILITY

TOTAL LIABILITY (TOTAL CURRENT +
TOTAL LONG TERM)


OWNERS EQUITY
(TOTAL ASSETS - TOTAL LIABILITY)
SHILLINGS
+
TOTAL LIABILITY PLUS OWNERS
EQUITY





































BALANCE SHEET FOR OTIM AND SONS AS ON MARCH 31, 1996

ASSETS

CURRENT ASSETS

Cash
Items in the store
Money other people owe to your business


SHILLINGS

15,000/=
1,500,000/=
+0
TOTAL CURRENT ASSETS

1,515,000/=
FIXED ASSETS
Land
Buildings
Machinery
Tools
Equipment
Furniture



0
0
0
50,000/=
0
2,499/=

TOTAL FIXED ASSETS

47,501/=
TOTAL ASSETS (TOTAL CURRENT + TOTAL
FIXED)

+1,562,501

LIABILITIES

SHILLINGS
CURRENT LIABILITIES
Interest on short term loans, long term loans
Taxes
Wages and salaries earned but not paid
Money owed to other businesses for goods
purchased on credit


0

0
0
0
TOTAL CURRENT LIABILITIES
0
LONG TERM LIABILITY
Loans incurred to buy land
Loans incurred to buy buildings
Loans incurred to buy equipment
Loans incurred to start a business


+1,000,000/=
0
0
0
TOTAL LONG TERM LIABILITY
+1,000,000/=
TOTAL LIABILITY (TOTAL CURRENT +
TOTAL LONG TERM)
+1,000,000/=

OWNERS EQUITY
START UP OWNERS CAPITAL
SHILLINGS
+1,000,000/=
LESS OCTOBER-DECEMBER NET LOSS
PLUS JANUARY-MARCH PROFIT
BALANCE OF OWNERS EQUITY
-485,000/=
+12,501/=
562,501
TOTAL LIABILITY PLUS OWNERS
EQUITY

1,562,501


PART 2

LIABILITIES.
Liabilities are debts that your business owes to other people.

Liabilities can also be divided into two categories, based on how long they will be paid.

CURRENT LIABILITIES.
These are debts that your business must pay within one year from the
date of the balance sheet. These can include:
1. Short-term loans
2. Interest on long term loans
3. Taxes
4. Wages and salaries earned but not paid.
5. Money owed to other businesses for goods purchased on credit.

LONG TERM LIABILITIES.
These are debts which are not due within one year. These can include:
1. Loans to start a business
2. Loans incurred to buy land
3. Loans incurred to buy buildings
4. Loans incurred to buy equipment.


PART 3.

OWNERS EQUITY.

Owners equity is the difference between assets and liabilities.

Owners equity will be equal to:
Owner's original investment in the business
Any later investments in the business by the owner
Plus profits earned by the business
Less losses suffered by the business
Less withdrawals from the business by owners.


C
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XIII

PROFIT AND LOSS
STATEMENT



CHAPTER THIRTEEN.

PROFIT AND LOSS STATEMENT.
This statement will show the income and expenses of a business over a given period of
time. It will help you to calculate if your business is making a profit or making a loss. The
profit and loss statement gives a picture of a business over a given period of time.

Basically the profit and loss statement shows revenue minus expenses which gives you
your profit. From the profit and loss account you can see:

whether your profits have increased or decreased
whether your sales have increased or decreased
whether your costs have increased or decreased

You can then take the necessary action to help your business

As a business you should do a profit and loss statement at the end of every month.

A profit and loss statement should include the following;

TOTAL SALES
This will tell you your total sales in a month. This is calculated by;

NUMBER OF ITEMS SOLD X PRICE OF THE ITEM = TOTAL SALES.


TOTAL DIRECT COST
This will tell you your total direct cost in a month.

DIRECT MATERIAL COST + DIRECT LABOR COST = TOTAL DIRECT COST


GROSS PROFIT

Your gross profit must be high enough to cover all the costs in your business.

GROSS PROFIT = SALES - DIRECT COSTS.


NET PROFIT

This will show you the total result of your business. It will tell you how well or
how badly your business is doing.

NET PROFIT = GROSS PROFIT INDIRECT COSTS.
PROFIT AND LOSS STATEMENT ...................................................

TOTAL SALES


Less MATERIAL COSTS


Less DIRECT LABOR COSTS


GROSS PROFIT


Less INDIRECT COSTS


Rent for land


Rent of building


Electricity


Water


Workers salary


Stationary


Furniture


Loan interest


Tax


Depreciation


Others


TOTAL INDIRECT COSTS



NET PROFIT









THIS IS PROFIT AND LOSS STATEMENT FOR OTIM AND SONS
FOR THE MONTH OF MARCH 1996

TOTAL SALES


Less MATERIAL COSTS

650,000
Less DIRECT LABOR COSTS

450,000
TOTAL DIRECT COSTS OF GOODS SOLD

0

GROSS PROFIT

200,000

Less INDIRECT COSTS


Rent for land

50,000
Rent of building

0
Electricity

20,000
Water

0
Workers salary

Owners salary

50,000

25,000
Stationary

0
Furniture

0
Loan interest

0
Tax

0
Depreciation

833
Others

0
TOTAL INDIRECT COSTS

145,833

NET PROFIT

54,167









This is my profit and loss statement for the month of March 1996.




Mr. Otim finds that his business Otim & Sons is making a profit in the month of March,
1996. He is making a net profit of UShs.54,167 and above is his profit and loss
statement for the period March 31, 1996.




















C
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XIV




EXECUTIVE BUSINESS
PLAN SUMMARY





CHAPTER FOURTEEN.

EXECUTIVE SUMMARY
The executive summary is a brief statement of the most important points in your
business plan. It is very important because many people who may be interested in your
business may not have time to read your whole business plan. To get a quick picture of
your business, they will read the executive summary. It is therefore important that the
executive summary is well presented and contains all essential information.
The group ___________________________ located in ______________________
It was formed for the following purposes _________________________________
______________________________________________________________________
Since we were formed we have accomplished _____________________________
______________________________________________________________________
In the next year, we plan to _____________________________________________
______________________________________________________________________
We produce (or render service) _________________________________________
______________________________________________________________________
We sell our products or services to ______________________________________
______________________________________________________________________
We have a plan of activities to produce our product/service outlined in the following
Business plan.
Decisions are made by _________________________________________________
We expect to make a profit of __________________ during __________________
We will use the profit to ________________________________________________
______________________________________________________________________
If the activity goes as planned the benefit to the group and the community will be
___________________________________________________________________
______________________________________________________________________
_
Our cash flow analysis shows that we will have enough money to pay our bills on the
requested loan of ________________________ which will be used to
______________________________________________________________________
We will repay the loan by__________ with money from the sales of ________
______________________________________________________________________


LOAN REQUEST
(Complete only if seeking a loan)

Business (Group) _____________________________________________________

How large a loan do you need? ________________________________________

______________________________________________________________________

When will you need the money?________________________________________

______________________________________________________________________

How will the money from the loan be used? _____________________________

______________________________________________________________________

______________________________________________________________________
___

How will the loan help you make a profit? _______________________________

______________________________________________________________________

______________________________________________________________________

What security do you have to guarantee the loan? ________________________

______________________________________________________________________

______________________________________________________________________

When will you repay the loan? _________________________________________

______________________________________________________________________

How will you be able to repay the loan? Where will you get the money to repay the
loan?

______________________________________________________________________

______________________________________________________________________
__

Why do you think you should receive the loan? __________________________

______________________________________________________________________

______________________________________________________________________











































Answers to Exercise one on page 77.

That is for the group to decide. Options include:
using it to plant more ground nuts without having to borrow;
divide it among the members
divide part of it among members and use part to plant more
groundnuts;
some other use they decide upon.