1

Assignment on entrepreneurship and economic

development

Contents

1. In Ethiopian context why entrepreneurs are important to the economic development?

Discuss briefly.
2. The rationales for small enterprise intervention suggest that small enterprise development
strategy is in reality just a private sector development strategy what is/are the
reason/reasons?
3. Analyze and explain how firm grow and what it means for society as a whole?
4. There are varieties of indicators that economist use to measure the level of economic
development in a country. Though explain them briefly?
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1. In Ethiopian context why entrepreneurs are important to the economic

development? Discuss briefly?

Small businesses are the heart of any countrys economy and a country that does not play with its
entrepreneurs has a better chance of an improved economy. The future of Ethiopian economy
depends largely on its entrepreneurs as well as government policies on entrepreneurship.

An entrepreneur can be regarded as a person who has the initiative skill and motivation to set up
a business or enterprise of his own and who always looks for high achievements. He is the
catalyst for social change and works for the common good. They look for opportunities, identify
them and seize them mainly for economic gains. An action oriented entrepreneur is a highly
calculative individual who is always willing to undertake risks in order to achieve their goals.

Why entrepreneurs are important to our country?

Because entrepreneurs have a lot to offer to their country of residence. an entrepreneur can do
the following for his country;

1. Create jobs
2. Provide services and products needed in the country
3. Create wealth (For themselves and their country)

Entrepreneurs pay tax when they sell goods, when they pay their employees and when they
import goods; they pay the duties that are due, according to the law.

In broader sense Entrepreneurs helps in the process of economic development in the

following ways:

1) Employment Generation:

Growing unemployment particularly educated unemployment is the problem of Ethiopia.

Entrepreneurs generate employment both directly and indirectly. Directly, self employment as an
entrepreneur and indirectly by starting many industrial units they offer jobs to millions. Thus
entrepreneurship is the best way to fight the evil of unemployment.
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2. national income

National Income consists of the goods and services produced in the country and imported. The
goods and services produced are for consumption within the country as well as to meet the
demand of exports. The domestic demand increases with increase in population and increase in
standard of living. The export demand also increases to meet the needs of growing imports due
to various reasons. An increasing number of entrepreneurs are required to meet this increasing
demand for goods and services. Thus entrepreneurs increase the national income.

3. Balanced Regional Development

The growth of Industry and business leads to a lot of Public benefits like transport facilities,
health, education, entertainment etc. When the industries are concentrated in selected cities,
development gets limited to these cities. When the new entrepreneurs grow at a faster rate, in
view of increasing competition in and around cities, they are forced to set up their enterprises in
the smaller towns away from big cities. This helps in the development of backward regions.

4. Dispersal of economic power

Industrial development normally may lead to concentration of economic powers in a few hands.
This concentration of power in a few hands has its own evils in the form of monopolies.
Developing a large number of entrepreneurs helps in dispersing the economic power amongst the
population. Thus it helps in weakening the harmful effects of monopoly.

5. Better standards of living

Entrepreneurs play a vital role in achieving a higher rate of economic growth. Entrepreneurs are
able to produce goods at lower cost and supply quality goods at lower price to the community
according to their requirements. When the price of the commodities decreases the consumers get
the power to buy more goods for their satisfaction. In this way they can increase the standard of
living of the people.

6) Creating innovation

An entrepreneur is a person who always looks for changes. Apart from combining the factors of
production, he also introduces new ideas and new combination of factors. He always tries to
introduce newer and newer technique of production of goods and services. An entrepreneur
brings economic development through innovation.

Entrepreneurs also help in increasing productivity and capital formation of a nation. In short, the
development of the entrepreneurship is inevitable in the economic development of the country.
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The Role played by the entrepreneurship development can be expressed in the following words:

" Economic development is the effect for which entrepreneurship is a cause

IN CONCLUSION

Entrepreneurs are nation builders. We therefore urge entrepreneurs to be more creative and move
up with trends. Ethiopia must learn to value her entrepreneurs, as real partners of development.
We must acknowledge their contributions, and celebrate them.

Adopted from

1. http://www.indiastudychannel.com/

2. http://thetotalentrepreneurs.com/

2. The rationales for small enterprise intervention suggest that small enterprise
development strategy is in reality just a private sector development strategy what is/are the
reason/reasons?

As noted by Kristin Hallberg (2001) of the Inter-American Development Bank (and formerly of
the International Finance Corporation), the goal of MSE development programs is to harness the
potential human capital and entrepreneurship that already exists in most economies:

because they account for a large share of firms and employment, in other words, because
they are there. Searching for further justification to promote smallness as an instrument of
poverty alleviation is not necessary: it is enough to recognize that microenterprises and SMEs are
the emerging private sector in poor countries, and thus form the base for private sector-led
growth.

The reasons are:

The majority of firms are small, that they may face different constraints and opportunities
than large firms, and
The types of institutions and instruments best suited to their needs may be underprovided
in distorted and segmented markets.
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It points to government action toward market-completing interventions and the elimination of

policy bias by addressing the market failures that create cost disadvantages for small enterprises
(such as the costs of acquiring information), restrict their access to markets, or inhibit the
development of markets for a diverse range of financial and non-financial services appropriate
for small firms.

Adopted from

www.value-chains.org/

3. Analyze and explain how firm grow and what it means for society as a whole?

Firms are set up so that resources can be converted to end products suitable for consumption. If
we look at the economies, we can see that there are many firms of different sizes. And the size of
the firms changes over time.

Firms grow:-

1. To increase profit
Firms grow to increase profit so that its shareholders get higher returns. A sole trader may want
to invest more and grown bigger so that the owner can enjoy a higher status of living. As the
definition of Economics tells us, individuals always wants to increase satisfaction, while the
firms try to increase profit.

2. To enjoy economies of scale

When a firm grows, it could be possible for it to enjoy economies of scale. For example:
purchasing economies, marketing economies, technical economies, etc.

3. To reduce risk
As the firm grows, it can reduce risk in many ways. It can grow large enough to fight-off
competition or it can create barriers so that other firms find it difficult to enter the industry. A
firm also grows by diversifying its production, so that it can reduce risks.

How do firms grow?

There are two methods by which firms can grow

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1. Internal growth

This is when the firm increases its own size by producing more under its existing structure of
management and control.

This can be done by:

Borrowing money
Using retained profits
Obtaining funds from other financial institutions
Issuing debentures and shares

2. External growth

The second and more common method of growth today, is my amalgamation (integration). This
occurs when one or more firms join together to form a large enterprise.

Firms can amalgamate or integrate in two ways:

Take-over: A take-over or acquisition occurs when one company buys all or at least 50% of the
shares in the ownership of another company. In this way, the firm being taken over by the other
company loses its own identity and becomes part of the other company.

A merger occurs when two or more firms agree to join to form a new enterprise.

Horizontal integration: When two businesses in the same industry at the same stage of
production become one for example a merger between two car manufacturers or drinks
suppliers.

Vertical integration: When two firms at different stages of the production of the same product
join together, it is known as vertical integration. For example, a furniture maker taking over a
wood logger firm, a car manufacturer taking over a firm that makes car components.
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Vertical integration: can happen in two directions. If a firm takes over another firm in a higher
stage of production, it is called forward integration. This would be the case if an oil refinery
combined with a chain of petrol stations. Firms can also undertake backwards integration, for
example, a bread manufacturer combining with a wheat producers association.

Lateral integration:-This happens when firms in the same stage of production, but producing
different products combine. This is often termed as conglomerate merger to form conglomerates.
Conglomerates often produce wide ranging products. This may be reduce the risk of a fall in
demand for one of their products or to seek out the profit making potential of selling other
products in the market.

Joint Ventures: Some businesses join forces with other businesses to share the cost of a project
because it is too expensive for one business, share expertise of staff and machinery etc. This is
known as a joint venture. The benefits of joint ventures are:

Businesses have all the advantages of merges but can still keep the company identity.
Each business can specialize in its field of expertise.
Expensive costs of mergers/takeovers are not incurred.
Mergers/takeovers can be unfriendly and do not work staff are concerned about job
losses.
Competition may be reduced due to joint venture.

By growing, a firm can expect to reduce its average costs and become more competitive.

This means societies benefit from the growth of firms in such a way that the get goods and
services with lower prices and near to them. Both the firms and the society are benefited from the
economies of scale results from the growth of firms.

Adopted from

http://www.economicsguide.me/
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4 There are varieties of indicators that economist use to measure the level of economic
development in a country. Though explain them briefly?

Measurement of economic development and express in definite index is very difficult task in
economics. So many opinions are found to indicate level of economic development of a nation.
However, some common and popular indicators that used to measure development are discussed
below:

Volume of Per Capita Income

Per Capita Income is first and most important indicators of economic development of a nation. It
is commonly used by all nations in the world along with UN while measuring economic position
of the nation.

Rise in Factor Productivity

Development means rise in production and productivity of factors of production. Productivity

implies increased per unit of production of factors of production land, labor, capital and
organization in terms of rent, wages, interest and profit.

Rise in Living Standard

Another indicator of development is living standard of common people which should go on

rising to higher levels. The very objective of development is to provide better life to people. It
refers to increase in average consumption level of individual and society.

Physical Quality of Life Index

Physical Quality of Life Index is a common indicator of development. It is computed from life
expectancy at birth, infant mortality rate and literacy rate of a country. If people live longer and
are literate, PQLI value will be high. It is measured in scale of 1 to 100.
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Human Development Index

The Human Development Index as an indicator was introduced by UNDP in the World Human
Development Report in 1990. Since then, it has been the most popular indicator of development.
Its range of measurement is in between 0 to 1.

Poverty Alleviation and Inequality Reduction

As a nation develops, poverty must be reduced and the gap between the rich and poor must be
narrowed down. Poverty limits opportunities of common people to uplift their life. It weakens
their income earning capability. Their access to health, education and skill development is most
essential to minimize poverty rate.

Adopted from

http://economydetail.blogspot.com/
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Assignment on agricultural entrepreneurship

Contents

1. Why a business plan is important? Explain briefly

2. Define value chain and discuss the importance of value chain?
3. Draw/describe framework for agricultural business planning and explain details?
4. How to upgrading agribusiness
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1. Why a business plan is important? Explain briefly

Introduction

Future outcomes are a function of todays decisions. Although there is a high degree of
randomness and uncertainty associated with the future, you can increase the probability of a
successful outcome by planning ahead. This is true in nearly every aspect of our lives, both
personal and professional. For those who operate their own businesses, planning becomes
increasingly important because the personal and professional aspects become more difficult to
untangle. In agricultural businesses, planning may be even more vital because of the inherent
uncertainty associated with agricultural production. Some important sources of uncertainty
include production risk, price risk, financial (or interest rate) risk, and changes in government
programs. Here under we will discuss the importance of business planning for agricultural firms.

The Business Plan

A Business Plan is a written description of your businesss future. It is to a document that

describes what you plan to do and how you plan to do it. Business plans can help perform a
number of tasks for those who write and read them. They reused by investment-seeking
entrepreneurs to convey their vision to potential investors. They may also be used by firms that
are trying to attract key employees, prospects for new business, deal with suppliers or simply to
understand how to manage their companies better.

Simply stated, a business plan conveys your business goals, the strategies youll use to meet
them, potential problems that may confront your business and ways to solve them, the
organizational structure of your business (including titles and responsibilities), and finally, the
amount of capital required to finance your venture and keep it going until it breaks even.

Perhaps most importantly, the written plan provides a well-defined direction for the business.
Therefore, it can be used to keep all employees moving toward the common goals established
within it. Again, the systematic review of the business plan forces the owner, and potentially
others, to look at the business as a whole and make better-informed decisions.
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In a business plan there are several issues that should be addressed, corresponding to the four
functional areas of management: marketing, production, finance, and human resources.

To answer the question, business plan is important, because of many reasons. Some of the
Reasons for writing a business plan include:-

Business plan:

Support a loan application

Rise equity funding
Define and fix objectives and programs to achieve those objectives
Create regular business review and course correction
Define a new business
Define agreements between partners
Set a value on a business for sale or legal purposes
Evaluate a new product line, promotion, or expansion

What makes a successful business plan?

A well thought out idea
Clear and concise writing
A clear and logical structure
Illustrates managements ability to make the business a success
Shows profitability

ADOPTED FROM: AEM-202 Agri-Business and Entrepreneurship Development

Published by
National Institute of Agricultural Extension Management,
Rajendranagar, Hyderabad 500 030, Andhra Pradesh, India
First Published: 2008
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2. Define value chain and discuss the importance of value chain?

Definition: - Value Chain can be defined as the set of actors (private, public and including
service providers) and the sequence of value adding activities involved in bringing a product
from production to the final consumer. In agriculture it is referred as farm to fork set of
processes and flows.

The value chain concept allows for the integration of various players in agricultural production,
processing and marketing. It defines the various roles of players while at the same time, scope
and purpose of partnership that can be established. Equity Bank Kenya (Muiruri, 2007)

Schematic representation of agricultural value chain

Source: SENCE Agric

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Importance of Agricultural Value Chain

Expand opportunities in the sector (production, storage, agro-processing, packaging,

marketing etc.)
Improves efficiency.
Consolidation of linkages among the participants in the chain.
Lower risks and costs due to diversity of actors.
Offers guaranteed transactional security (inputs, finances & guaranteed market).
Improves general effectiveness of the sector.

Adopted from: - How the New Agricultural Policy & Legislative Framework Would Impact
on Value Chain Actors.

Presentation during the Food Security Workshop organized by Heinrich Bll Stiftung at
Sirikwa Hotel, 14th August, 2013

By Mr. Edwyn Odeny Odhiambo

3. Draw/describe framework for agricultural business planning and explain details?

A good business plan follows generally accepted guidelines for both form and content. There are
three primary parts to a business plan:

The first is the business concept, where you discuss the industry, your business structure, your
particular product or service, and how you plan to make your business a success.

The second is the marketplace section, in which you describe and analyze potential customers:
who and where they are, what makes them buy and so on. Here, you also describe the
competition and how youll position yourself to beat it.

Finally, the financial section contains your income and cash flow statement, balance sheet and
other financial ratios, such as break-even analyses.
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Breaking these three major sections down even further, a business plan consists of eight key
components, and is considered as the frame work of agricultural business plan.

I. Introductory Contents
II. Business Description
III. The Market Description
IV. Development & Production Description
V. Management and Organizational Structure
VI. Sales & Marketing Plan
VII. Financial Documents
VIII. Appendix

I. INTRODUCTORY CONTENTS

The cover page, executive summary, and table of contents will determine what kind of first
impression one makes on readers. In many cases, the introductory elements, especially the
executive summary, will influence whether readers read the rest of the plan at all.

The Cover

The cover of the document is often the "First Impression" of a business for any interested parties
or investors. The purpose of a cover is to tell the reader what the document is about. Your cover
should say the words "Business Plan," and should include:
1) Name and business name 4) Telephone number
2) Company logo 5) Fax number
3) Address 6) E-mail address

7) Other contact information

The cover should be attractive and professional looking. Fonts used should be easily read, and
color contrasts should be pleasant to the eye.
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Executive Summary

The executive summary is what most readers will read first. Lenders in particular read executive
summaries before looking at the rest of a plan to determine whether or not they want to learn
more about a business. An executive summary may also be used singularly to attract potential
curiosity in your company and can be "followed up" with a complete plan if investors are
interested. The executive summary is the first part of your plan, but it should be written last. It is
an abstract of the pertinent essentials of your business plan. The wording should be chosen very
carefully. The executive summary should be short, attention getting, and understandable.

Table of Contents

All pages of your business plan should be correctly numbered and the table of contents should
include page numbers. Be sure to list headings for the major sections as well as for important
subsections. Thumb tabs for the documents headings are a nice feature and indicate a
professional document.

II. BUSINESS DESCRIPTION

The business description is the "Business Vision", and includes: who the company is, what it will
offer, what market needs it will address, and why the idea will work. A business without vision is
a business that will not know what it is doing! The description should include:

1) An overview of the industry the business 3) Descriptions of the company's products or

will be in. services.

2) A description of the company. 5) The company's pricing strategy.

4) The company's positioning.

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The Industry Overview

Begin the business description with a brief overview of the field the company will be competing
in. This is not a discussion of your competition. One is providing an overview of the industry
where it and other companies like it will vie. Describe trends in the industry, some history and
projections. Do not rely on "best guesses," but use actual industry data from trade associations,
government reports and trade journals to support the descriptions. Do not just report the positive
side of the industry, include the negative too! For example a discussion of an Internet Services
business may include problems anticipated with the number of telephone lines available, or other
infrastructure problems with the phone companies involved. Show that all conceivable aspects
have been considered.

The Company Description

Begin with your mission statement - a one or two sentence description of the purpose of the
business and to whom the product or service is targeted. It is vital that an entrepreneur know
what business they are in. Not being clear in the mission statement indicates that one is not clear
about the purpose of one's company. It can also indicate that a business is not prepared for the
market.

Describe the business. Give a brief history and include information like whether it is a
corporation, a retail, or service business. Be complete as to ownership status, location of
operations and other pertinent information.

The company's Products or Services

Describe each of the products or services. Go into as much detail as necessary for the reader to
get an understanding for what the enterprise will be. Make it interesting. It is important to point
out how your particular enterprise is different from other similar businesses. Just saying "It is
better" is not enough. You must tell how it is better.
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Positioning

Position is your place in the marketplace. How the customers and your competitors perceive your
company's product or service refers to its position. This is based on your customers and
competition, not your product or enterprise alone. It is the relationship to customers and
competition that is emphasized.

Pricing

Describe what the charge for the product or service is, and how one calculated the price. Once
the pricing and rationale are explained, discuss where this pricing strategy places the company in
the spectrum of the other providers of this product or service. Also, explain how the price will
affect getting the product or service accepted. Tell also how price will affect the companys
market share.

III. THE MARKET

This section is designed to provide enough facts to convince an investor, or potential partner that
the business has enough customers to garner sales despite the competition. It is one of the most
important parts of the plan, taking into account current market size and trends, and may require
extensive professional level research. Having accurate and factual information about the market
and presenting it in a cohesive and understandable way shows that the entrepreneur understands
your business endeavor.

Includes

1) Customers 3) Competition

2) Market Size and Trends 4) Estimated Sales

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Customers

It is important to be specific when describing the customers who will call for the product or
service. This description defines the characteristics of the people the endeavor wants to sell to.
An existing business should list their current key customers and any sales trends or patterns. A
new business should look at the demographics of the potential customers.

Market Size/Trends

This section defines the total market size as well as the slice of the market the business will
target. Use numbers as well as trend information to describe the current market and its potential.
Growth, declines, and new markets opening up are key types information. Recognizing the
significance of the statistics and explaining them may require a professional's assistance.

Competition

Present a short discussion of each of the businesses' primary competitors. If available, include
annual sales and market share statistics. Each assessment should include the degree to which
these companies meet their customers' needs. Explain how one can capture a share of their
business.

Estimated Sales

This should include sales in units and dollars for the next three years, with the first year broken
down by quarters or even months if appropriate to the endeavor. These numbers will also be used
in other financial documents presented later in the plan. Justify the projections.
IV. DEVELOPMENT AND PRODUCTION

In this section describe the current state of the company's product or service and the plan for
completing the development. This is also where one familiarizes the reader with how their
product is created or services sold. New processes must be contrasted to the old ways, with
emphasis on effectiveness and efficiency.
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Focused

1) Development Status 4) Labor Requirements

2) Production Process 5) Expenses and Capital Requirements

3) Cost of Development

Development Status

Describe the current status of the company's product or service and what remains to be done to
make it ready to be marketed. Include a schedule detailing when this work will be completed.
Also, detail the contingencies which must be met before the next phase is commenced.

Production Process

An investor will only provide money for a business he or she understands, so explain the stages
of production from the inception of the idea to when it can be sold. With a service company,
describe the process of delivering the service. Manufacturing processes and delivery methods
also need to be detailed for those enterprises involved in making products.

Also discuss physical location for the production of your product or service. Justify this decision
as well, by talking about savings in rent or lease, convenience to suppliers, labor, materials, or
other factors important to your business.

Cost of Production and Development

Present and explain a design and development budget. This budget should include the cost of the
design of a prototype as well as the expense to take it into production. Testing and evaluation
expenses should also be included. Be sure to include labor, materials, consulting fees, and the
cost of professionals such as patent attorneys.
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Labor Requirements

The management team is outlined in the management section. This section provides details of
other labor one will need to start up and run the business. Address how many people are required
and what skills they need to possess. Be sure to cover the important issues such as labor pool,
recruitment, training, cost of labor, and future labor pool. Training and evaluation of employees,
and having enough support personnel to accomplish the mission of the business must be planned
for.

Expenses and Capital Requirements

One must also create at least three financial forms that will build a foundation for the Financial
section of your plan: operating expenses, capital requirements, and cost of goods. Generate
spreadsheets for the year in which one establishes the business as well as projections for two
years or more after.

Operating Expenses

By creating a financial form called Operating Expenses, you pull together the expenses incurred
in running your business. The attention of a business consultant and an accountant is most
needed in these preparations. All expenses, the obvious as well as the hidden, must be
considered. An experienced consultant can ask the questions that a new entrepreneur would not
think of.

Capital Requirements

This form details the amount of money you will need to procure the equipment and resources
used to start up and continue operations of the enterprise. Capital Requirements also includes the
depreciation details of all purchased equipment. To determine your capital requirements, think
about anything in your business that will require money to procure.
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Cost of Goods

For a manufacturing company, the cost of goods is the cost incurred in the manufacturing of the
product. For a retail or wholesale business, the cost of goods (sometimes called the cost of sales)
is the purchase of inventory. To generate a Cost of Goods table, you need to know the total
number of units you will sell for a period as well as what other inventory may be on hand, and at
what stage of production these units exist. For a manufacturing company, the cost of goods table
will include materials, labor, and overhead related specifically to product manufacturing. Cost of
waste and byproduct disposal must also be included.

V. SALES AND MARKETING

This section of a business plan describes both the strategy and tactics one will use to get
customers to buy their products or services. The three components of the sales and marketing
section include:

1) Sales and Marketing Strategy 3) Advertising and Promotion

2) Method of Sales

Sales and Marketing Strategy

Think of this statement as an action plan for how a business will get customers to buy their
products. It will support the tactics described later on in this section. How will the customers be
targeted for the company's products and services?

Method of Sales

Describe available distribution channels and how one will use them. In this section the writer
demonstrate her ability and knowledge to get the company's products into the hands of the
targeted customers. It also details transaction methods, such as terms for financing the sale,
credit card acceptance, check handling, cash transactions, and method of product or service
delivery.
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Advertising and Promotion

This section should include a description of all advertising vehicles the enterprise plans to use.
This includes flyers, newspapers, magazines, radio & TV, Yellow Pages, Internet, etc. It should
also include the public relations program, sales/promotional materials (such as brochures and
product sheets), package design, trade show efforts, videos, and any other methods.

VI. MANAGEMENT

A good management team can take even a mediocre idea and make it work. In fact, strong
entrepreneurial teams have been known to move from business idea to business, repeatedly
creating and running thriving companies. These same teams can even turn around a struggling
company. When looking for capital to turn around a company, special attention should be paid to
this area. Often the people make the difference!

1) Description 3) Board of Directors/Board of Advisors

2) Ownership 4) Support Services

Management Description

Use this section to describe company management including the responsibilities and expertise of
each person. Many lenders and venture capitalists base their investment decisions on the strength
of the company's principals. Include special skills and abilities, as well as complementary aspects
of the team's relationship.

For positions that have yet to be filled, detailed job descriptions, and who needs to be hired to
achieve success must be described. Describe the talents these persons need to possess and how
the addition of that person will help the company meet its objectives. Methods of recruitment and
hiring should also be detailed.
 24

Ownership

A short section on who owns and controls the company will help readers derive a better
understanding of who will be making decisions. Potential lenders, many of whom will require a
significant stake in the company in exchange for funds, will also be interested in what portion of
the company's equity is available.

Board of Directors/Board of Advisors

A strong board of directors or board of advisors is an asset to a business. If the board members
have industry connections, good reputations, or potential to raise capital for your business, be
sure to include these facts. A good board of advisors can also open doors for "networking" that
would otherwise not be available. Attention to these details may be the difference between
obtaining financial and other resources needed.

Support Services

Strong support services, including consultants, attorneys, accountants, advertising agencies, as

well as industry-specific services also help to indicate other's faith in the business. This also
shows the ability to attract needed talent to the company.

VII. FINANCIAL DOCUMENTS

This is the section in which one makes the case in words, and backs up what one says with
financial statements and forms that document the viability of the business and its soundness as an
investment. If one is writing a plan for investors, be sure to include the following sections:

1) Risks 5) Funding Request and Return

2) Cash Flow Statement

3) Balance Sheet

4) Income Statement
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Risks

No business is without risks. The ability to identify and discuss them demonstrates skills as a
manager and increases a planners credibility with potential investors. Be realistic, not admitting
risks is the surest way to failure. Knowing your risks helps one have ready-made solutions.

Cash Flow Statement

A cash flow statement shows readers of the business plan how much money will be needed,
when it will be needed, and where the money will come from. In general terms, the cash flow
statement looks at cash and sources of revenue minus expenses and capital requirements to
derive a net cash flow figure. This is done with respect to a given time frame. Initial cash flow
statements should reflect the time frames of operation, whether weekly, monthly, or quarterly.
The time frame selected most often corresponds to a natural period of the businesses cycle.

Balance Sheet

Unlike other financial statements a balance sheet is created only once a year to calculate the net
worth of a business. If your business plan is for a start-up business, you will need to include a
personal balance sheet summarizing your personal assets and liabilities. A new business almost
always requires the strength of personal financial commitments. Proving that the entrepreneur
can keep commitments is important. If the business exists already, include several of the past
years balance sheets. Analyze the results of the balance sheet briefly and include this analysis in
the business plan. As with all financial documents, have the balance sheet prepared or at least
reviewed by a reputable accountant. Decisions about assets and whether they should be classified
as owner debt equity or capital investment will greatly influence the perceived strength of the
balance sheet.

Income Statement

The income statement is where a planner makes a case for the business potential to generate
cash. This document is where the writer records revenue, expenses, capital, and cost of goods.
 26

The outcome of the combination of these elements demonstrates how much money a business
made or will make, or lost or will lose, during the year.

Funding Request and Return

State the amount of funding and the type (debt or partner equity) of investment sought. It is
important to provide a breakdown of how the money will be applied. Discuss what effect the
capital will have on the business potential to grow and profit, when the money is needed, and
what investment has already been made in the company.

Finally, create an exit plan that describes how investors will get their money out of your
company.

VIII. THE APPENDIX

The Appendix is where related documents and support materials are included. For example if the
companies goods or services are featured in a magazine article or trade journal, a copy of the
article may be provided. Any reports or other information that would make the Business Plan
more complete should also be included here.

Conclusion

A complete and thorough business plan must have attention to detail and cover all the major
areas of concern. Business plans most often require the aid of professional writers, lawyers,
consultants and accountants. A properly planned business is the first step to a successful
business. Proper presentation may make the difference between a well funded program and the
one looking for money.

4. How to upgrading agribusiness

Upgrading is defined as the ability of the firm to make better products, make them more
efficiently, or move to more skilled activities in the value chain. Mitchell, Coles, and Keane
define upgrading as a process to acquire the technological, institutional, and market capabilities
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that allow resource-poor rural communities to improve their competitiveness and move to higher
level activities. It is a collaborative action undertaken by all actors in a value chain.

Upgrading the value chain focuses on changes in the nature and mix of activities. The concept of
upgrading aims to replace lower paid activities with those that have higher return. Four types of
upgrading, cited in Kaplinsky and Morris (2001), have been discussed in Mwamila et al.,

A. Process upgrading. This improves the efficiency of internal processes to make the
firm more competitive than its rivals.
B. Product upgrading. This refers to introducing sophisticated product lines,
introducing new products, or improving old products faster than rivals.
C. Functional upgrading. This refers to a number of things: adding new functions in
the chain (up- or downstream), changing the mix of activities conducted within a
firm, or moving from lower return to higher return activities.
D. Chain upgrading. This refers to employing the competence gained in one chain to a
new and more profitable chain.

Mitchell, Coles, and Keane note additional upgrading strategies that include:

A. Horizontal coordination. This is a collective structure, typically of a producer group. In

developing countries this strategy is acknowledged to be very important for rural people
since horizontal coordination allows producers to achieve economies of scale in supplies
and reduction in transaction costs.
B. Vertical integration. This strategy moves away from a one-off spot transaction to longer
term, inter-nodal relationships. This strategy may result in greater certainty about future
revenue flows of the poor producers. The strategy involves building trust between buyers
and sellers.
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