Manual: Start Your Business
Manual: Start Your Business
Manual: Start Your Business
your buSineSS
MANUAL
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International Labour Office
Start your business: manual / International Labour Office, Enterprises Department. - Geneva: ILO,
2015
ISBN: 9789221287612; 9789221287629 (web pdf); 9789221287636 (set)
International Labour Office Enterprises Dept.
Enterprise creation / corporate planning / small enterprise
03.04.5
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Introduction | i
Several icons are used within the manual to help guide your study. Examples of the icons and
their meanings are listed below:
When you see this icon, you have activities to do or questions to answer.
When you see this icon, it signifies that the information in this part is extremely important.
When you see this icon, you will know you have just completed one part and the important
ideas that were presented are being summarized here.
When you see this icon, it tells you where to find more information or what to do.
Before you decide to start your own business, you should assess whether or not you are ready to
run a business of your own. The success of your business will depend on your entrepreneurial
abilities (personal characteristics, situation and skills) and your commitment to the environment
and community. You should consider which of your characteristics needs improvement and then
try to change your situation and skills.
To help you decide if you have what it takes to be in business, think about each of the following
factors. Decide if each of these factors is a strength or an area in which you need to improve. For
example, if you have knowledge in business management, this is a strong point. But if you lack
such knowledge and you plan to hire someone else to manage your business and make decisions,
then this may be an area of improvement.
AREAS THAT
AREAS OF
PERSONAL CHARACTERISTICS AND YOUR SITUATION NEED
STRENGTH
IMPROVEMENT
Commitment
Motivation
Making decisions
You are in charge of your business, which means that you have to
make decisions that may lead to either success or failure. Important
decisions cannot be postponed or passed on to someone else. Can
you make difficult decisions by yourself?
Ability to handle stress
Entrepreneurs are subject to a lot of stress. Stress may be the result
of either difficult decisions that must be made, dealing with
stakeholders in the business or working long hours. Are you excited
about your business prospects? Do you derive a great deal of
enjoyment from your work?
Problem solving
Running your own business requires that you are able to solve
problems. Do you have the ability to solve the root cause of
problems in creative ways?
Goal orientation
One feature that differentiates an entrepreneur from an employee
is the ability to develop and achieve goals. You should be able to
envision where your business is headed and to see the bigger
picture, rather than just focusing on minor details. Have you drawn
a vision and set a goal for your business?
Social support
Running your business will take a lot of time and effort. It is
important to have adequate support from family, friends and other
business people. Do you have a social network of people and
organizations that will support the realization of your dream?
Financial situation
Access to financial resources to start your business is important.
Have you set money aside to get your business started? If you need
additional funds, do you have family or friends who might be willing
and able to lend you money, to use their assets to guarantee your
loan with a financial institution? Do you have a savings or credit
history with a financial institution that offers loans to new
businesses?
AREAS THAT
AREAS OF
ENVIRONMENTAL AND COMMUNITY CONCERNS NEED
STRENGTH
IMPROVEMENT
Your business and the environment
As an entrepreneur, you need to know the environmental issues
affecting your line of business. Do you know how to sustain the
natural capital or resources on which your business depends?
Commitment to your community
Your business needs to be community friendly. Entrepreneurs are
important members of the community and you need to have a
commitment to the advancement of the community as a whole. Do
you have a good relationship with the community?
Number of Number of
areas of areas that need
strength improvement
Count the number of areas of strength and the number of areas
that need improvement and write the total here. ………………. ………………………
Read: Research on books about businesses Attend training: Find and attend university
that can be found in most libraries; also read or privately funded training programmes in
Learn from successful business people: You Seek help from others: Talk about the areas
should be able to find successful business that need improvement with your friends
people who will talk to you about their and family. You could also join a business
businesses. If they allow you to visit their association and discuss the issues with other
business locations, observe them as they members in the association.
work and learn from them. If possible, work
as an apprentice in a related successful
business.
You might want to think about finding a partner who complements your abilities, instead of going
into business entirely on your own. A partner might also be able to bring financial resources,
collateral or relationships with financial service providers that could be helpful if your business
ever needed a loan.
There are a number of successful business people who did not have much experience or practice
in a business situation before starting their businesses. What is important is to be aware of the
areas that need improvement and develop a plan of action to deal with these before they
negatively affect your business.
Complete the following Action Plan to help you think about ways to improve your
entrepreneurial abilities.
“Include these issues in your capacity development plan in the Action Plan at the
end of this manual.”
Now do you feel comfortable about starting your own business? Yes No
If you are comfortable about starting your own business and think that you will be able to work
on the areas that need improvement, you are ready to start planning. The following parts will
guide you in the process of creating an Action Plan to actually start the business.
If you have answered “No” to the question above, think more about what you can do to improve
your abilities as an entrepreneur. Remember, not everyone can run a business. If you still do not
feel comfortable about starting a business, maybe you should work for somebody else instead.
“It is important to continually take the time to find new and better information. Feel
free to go back and change the Business Plan at any time as you work through the
manual.”
Executive The executive summary is an outline of your business idea. You will, therefore,
Summary need to complete all the other parts of the plan before doing the executive
summary. It must be clear and organized, because it is the first impression one
gets of your business idea.
The business idea All business plans are based on an idea. Part III helps you to think about the
concept of your business idea so that you can put your idea in writing at the
beginning of your Business Plan.
Staff You need to think about staffing your business. Part V helps you to think about
all the jobs that need to be accomplished in your new business and to decide
who will do them.
Organization and Part VI explains the different types of businesses and helps you to decide which
Management type suits you best. Part VI also helps you to understand the legal requirements
of your business and shows you how insurance can provide a form of financial
security against risks.
Buying for your Whatever business you are in, you need to buy before you make or sell your
business products. Part VII will advise you on what you should consider when you buy to
start your business.
Greening your Different businesses depend upon and use natural resources in their production
business processes in different ways. Part VIII introduces the three “Rs” strategy: Reduce,
Reuse and Recycle to help your business have a positive impact on the
environment and be more profitable.
Costing To be able to set your prices and make a financial plan, you need to calculate the
cost of your products. Part IX shows you how to do costing.
Financial All businesses need to plan for the future. Part X helps you plan how to make a
Planning profit and how to handle the cash flow for your new business.
Required Start- To start a business, you need money for equipment, materials, rent, wages, etc.
up Capital Part XI helps you to calculate how much capital you need to start your business.
Sources of Start- When you know how much start-up capital you need, you have to figure out
up Capital how to source that amount. Part XII explains how you can get start-up capital
from both the owner’s equity and loans.
When you see a business opportunity, you need to develop your thoughts into a business idea. A
business idea is a short and precise description of the basic operation of the business. Your
business idea will tell you:
What good or service will your business sell? Your business idea should be based on a
particular skill that you have. Maybe you have experience with or have been trained in a
specific line of business.
Who is your business going to sell to? Will you only try to sell to a specific type of
customer or to everyone in an area? It is important to be clear about who you intend to
sell to.
How is your business going to sell its goods or services? You can sell in many different
ways. A manufacturer can, for example, sell either directly to customers or to retailers.
Which need will your business fulfil? Your business idea should always have the
customer and the customer’s needs in mind. It is important to find out what customers
want when you work out your business idea.
What impact will your business have on the community and the natural environment?
Your attitude and people’s view on your business will determine your success. If you
exploit labour and damage the natural environment (waste generation, water wastage,
deforestation) people might avoid your business.
To make sure your business idea is concrete and feasible, answer following questions:
1. What good or service will your business sell?
4. Which needs will your good or service fulfil for which customers?
If you are not sure about answers to the above questions, you may need to study the
GENERATE YOUR BUSINESS IDEA MANUAL.
Prior to starting the business, John and Mary attended a training course on organic farming which
was conducted by a non-governmental organization (NGO). They believe that organic farming will
be touted as the best approach to modern farming techniques.
So they decided to form a partnership and start a business - City Garbage Recyclers
They decided to focus on producing and packaging organic manure.
packaging materials, small businesses, vendors, farmers for storing vegetables in freezers, plus individual consumers who use bags for
he bags as follows:
to bulk buyers and individuals can purchase them from the shop.
fy the following needs of the customers:
onmentally-friendly bags
packaging materials of different sizes to meet the needs of the different business and individual consumers
carriage and storage of goods
Jane has been interested in environmentally-friendly products for a long time. While surfing the
internet and watching television, she noticed a demand for alternative packaging materials that
were not made from plastic. She has also become aware of businesses that are producing
Think through your own business idea and write it down in section 1: “Business idea” in the
Business Plan booklet. The business idea will guide you as you write the rest of the Business Plan.
Marketing is an important part of starting and running a business. It helps you to sell your goods
or services in the right way and to the right people.
Marketing is the ability to identify the needs of potential customers and to satisfy those needs
better than your competitors, in order to make a profit.
You need to find out more information about the market from a variety of sources. List all the
sources that you are aware of.
Here are some examples of ways to find out more about your customers and competitors:
Talk to potential customers. Ask them:
- What goods or services do they want to buy?
- What do they think about your competitors?
Observe your competitors’ businesses. Find out about:
- What goods or services do they provide?
- What prices do they charge?
- How do they attract customers?
Ask suppliers and friends in the business:
- Which products do they sell the most?
MARKET RESEARCH
Laundry Households The need for a pretty, Shops that The trend to be more
bags compact bag that can be sell plastic environmentally-
easily stored (as plastic bags and friendly, to use more
containers take up too containers of recyclable products and
much space) all sizes and to reduce the use of
designs bags and containers
Shopping Retail shops The need for reusable that are not good for
bags shopping bags that are Shops that
the environment
foldable (disposable plastic give away
bags break easily and are disposable The desire to have a
not environmentally - plastic bags to different lifestyle, to
friendly) shoppers avoid using bags and
containers that
Green Urban The need for strong everyone else uses and
waste households, storage bags that can be to want something that
garden hotels and used in multiple ways is more creative
bags restaurants, Good quality with
offices, etc. certification
Do market research for your own proposed business by collecting information about your goods
or services, customers and competitors. The five columns in the Market Research form will guide
you.
MARKET RESEARCH
2.1 Product
Product can mean more than a single good or service or a range of goods or services you offer.
You will attract more customers if your product is certified by reputable organizations, as you are
making them aware that your products are guaranteed to meet the high standards that have
been set.
You should not only describe your goods or services in general terms, but the more detailed the
description of your goods or services (i.e. their quality, colour, size, packaging etc.), the more the
customers will understand how you will satisfy their needs.
Customers buy goods and services to satisfy their basic needs and their specific needs. Meeting
their basic needs is only the first step your business should take. Meeting their specific needs may
make your business more competitive and sustainable. The following are examples of how
companies can meet specific needs:
Fresh Satisfy the need to consume food Vegetables that are cleaned, cut and ready for
vegetables daily cooking, satisfy a need to save time in the
kitchen.
Mobile phones Satisfy the need to communicate A mobile phone shop that offers a decoration
and to be entertained service for mobile phones satisfies the need
to be fashionable and stylish.
“Many customers even go beyond the need for a quality product. People are
increasingly aware of social and environmental issues and prefer products from
companies that do not use child labour or that do not adversely affect the
environment.”
Let’s see how the City Garbage Recyclers and Tosama Cloth Bags described their “Products”.
MARKETING PLAN
Product
ty Compost with a high percentage of manure, Compost made from organic garbage, without
suitable for plants in the early stage to help any heavy metals and other toxins, suitable for
develop leaves and flowers soil regeneration before planting
ur N/A N/A
10 kg bags 20 kg bags
MARKETING PLAN
Product
1. Laundry bags 2. Shopping bags 3. Green waste garden bags 4. Vegetable stora
Small, medium and large Small, medium and large Small, medium and large Small, medium and
fication Fair trade label Fair trade label Fair trade label Fair trade label
2.2 Price
Price is the amount you will charge your customers for your goods or services. Price also includes
any discount you will give and if you are going to offer credit. There are many factors that you
must consider before setting your price.
List all the factors that may influence the price of your goods or services:
“You have to know your costs before you can set your prices, so you cannot
finalize your prices until you have calculated your costs in Part IX: Costing your
goods and services. At this stage, gather all the information you can and decide on
a probable price, which you can come back and change later.”
See how City Garbage Recyclers and Tosama Cloth Bags set their “Price” on pages 28-29.
Decide what price you will charge, what discounts you will give and if you are going to give credit
to any customer. Fill your decision in section 2.3: “Price” in your own Marketing Plan in the
Business Plan booklet.
John and Mary spoke to potential clients and found out what prices the customers are willing to
pay and what prices their competitors charge. They think that setting a lower price will be one of
the best ways to compete with other companies producing manure. However, they will not
compete against the cheap “home-made” compost provided by individual farmers.
MARKETING PLAN
Price
The price that customers are willing $1.2 per kg $0.8 per kg
to pay
Competitor’s price $1.1 per kg (offered by other factories) $0.7 per kg (“home-made” compost offered by
individual farmers)
Reasons for setting this price To be lower than competitor’s price and still maintain a Meet the customers’ expectations in terms of price and
19% profit margin quality and still maintain a 14% profit margin
Discounts will be given to the Discount of 10% to hardware shops and plant Discount of 10% to hardware shops and plant nurseries,
following customers nurseries, free delivery to all other customers free delivery to all other customers
Reason for giving discounts Motivate retailers to stock and sell our products to end Motivate retailers to stock and sell our products to end
users users
Credit will be given to the following No credit will be given No credit will be given
customers
Jane has no benchmark to use in order to price her bags as there is currently no product similar to hers in the area. However, customers perceive that
Shopping bags Laundry bags Green waste garden bags Vegetable storage bags
The price is higher than plastic items, as it provides added value to customers. They look more trendy and more environmentally- friendly
Reason for setting this price
when using our products. It is also slightly more expensive to produce recycled cloth bags than plastic or paper bags.
The City Garbage Recyclers need lots of space and a place near the source of the food waste and
chicken and goat manure which are the main ingredients for the compost.
Marketing Plan
Place
Location:
The business will be located on a plot situated 15 kilometres from the city centre.
This location has been chosen for the following reasons:
Its proximity to the raw materials, as it is near both a household and restaurant food waste collection plant and some small chicken and
Its proximity to neighbourhoods with unemployed youth needed for labour.
It is also located near some greenhouses.
Method of distribution:
�Direct� Retail
Wholesale Others
This form of distribution has been chosen for the following reasons:
The manure would be available to farmers who buy small amounts from the retailers and also those farmers who w
Marketing Plan
Place
Location:
I will rent a shop in the nearby mall, which is a shopping complex for affluent people.
This location is chosen for the following reasons:
All the potential customers have easy access to this location, complex is located in a wealthy neighbourhood.
Method of distribution:
This form of distribution has been chosen for the following reason:
The target customers will be approached directly and get educated about environmental issues as well as the solu
Now decide where you should locate your business. Write down the location that you have
chosen in section 2.4: “Place” in your Marketing Plan in the Business Plan booklet.
If you plan to start a manufacturing business, decide which type of distribution you will use and
write it in your Business Plan booklet.
MARKETING PLAN
Promotion
Discount Buy one product and get a discount voucher of 5% on the next $100
purchase (applicable for only the opening week)
MARKETING PLAN
Promotion
Advertising
Brochures Details about the company and the product 1,000 brochures
$200
Demonstration Provide demonstrations on how to use the compost manure Three demonstrations,
for crops, flowers and other plants; invite the target $ 600
customers and local newspapers and television journalists to
attend the demonstration.
Sales promotion
Discount 5% discount for all initial orders, applicable for the first $70
two months only
Think about the different methods you can use to promote your business. When you have
decided what methods you will use, fill in section 2.5: “Promotion” of your own Marketing Plan in
2.5 People
Please refer to Part V for a discussion about staff in general. From a marketing point of view, the
term “People” refers to the question: “Who will develop the unique characteristic that
differentiates your product?” For example, if you decide to provide better customer service than
the competitors, you will need staff who are customer-oriented. It means they should be
responsible, patient, flexible, sympathetic and enjoy working with different people.
For your Marketing Plan, you will need to:
Identify the key positions that could make a difference in your business
Decide the criteria for recruiting people to fill those key positions
Plan relevant training and coaching for people in the key positions
MARKETING PLAN
People
MARKETING PLAN
People
Position Recruiting criteria Training plan
Sales staff They must have a background in Train them on the various product
agriculture and good communication specifications and consultative sales skills
skills
Think about the key positions you need for your business. When you have decided what they
should be, fill in section 2.6: “People” in your own Marketing Plan in the Business Plan booklet.
2.6 Process
Process includes the various mechanisms and procedures that you use to get the product to your
customers. For example, if a customer goes to a pizza restaurant, he or she not only consumes a
pizza, but also enjoys going through the entire process. This includes easily finding convenient
parking, enjoying the ambiance of the restaurant, reading an attractive menu, getting information
on the menu items from staff and listening to good music while waiting for the pizza. Therefore
you should make sure that each step of the process is a pleasant experience for your customers.
While compost is a tangible product, John and Mary still believe that they should enhance the
customer experience by providing consultative service before and after the purchase. They
decide to create a hotline so that customers can call and ask for advice about how to effectively
use compost products.
Jane thinks that the more time customers spend in her shop, the more chance she has to sell
them a bag. She, therefore, designs a process to make her customers enjoy their stay.
Customers stop
They
atare
Tosama’s
invitedThey
shop
to step
watch
in and
a cliptake
and
They
alook
seat
They
listen
at are
the
to bags
invited
the shopkeepers
onto
display
have a cup
whoof
explain
tea the benefitThey
of the
decide
bags to
orbuy
discus
Think about a process that would please your customers and make them decide to buy your
product. When you have decided on a process, fill in section 2.7: “Process” in your own
Marketing Plan in the Business Plan booklet.
John and Mary would like customers to perceive their products to have a green image. They
decide to use the following physical evidence:
Uniforms: Green technician style uniforms for the sales staff.
Packaging: They use second hand bags with waterproof printing labels showing a picture
of a flower on the bags for the “Super Organic compost” and a picture of a freshly
ploughed field for the “Organic compost”.
Jane knows that the decoration of her shop should create an environmentally-friendly image for
her customers. She lists the following for the physical evidence:
Shop decoration: Use brown and green colours, wooden display hooks, indoor green
plants and background sounds of nature.
Shopkeepers: Wear light colours, simple styles and natural make-up.
Think about the key physical evidence that you would implement for your business. When you
have decided on the appearance you want to give to customers, fill in section 2.8: “Physical
Evidence” in your own Marketing Plan in the Business Plan booklet.
3. Sales estimation
For those businesses that use direct distribution, sales start low and pick up continuously over
time. If you use wholesale or retail distribution methods, sales may be quite good for the first
couple of months because you are sending a supply of your product to wholesale warehouses
and stores, where it is initially stockpiled or put on display before being distributed or purchased
by consumers. Sales may drop for a few months until the wholesalers or retailers sell the product
and place additional orders. Then sales will become more stable and reflect the actual amount of
purchases by the end users.
With their competitive pricing strategy, John and Mary expect to capture at least ten percent of
the compost manure market after six months. The current size of the local market for compost
manure is approximately 8,000 tons per year. They will sell about half directly to small farms,
greenhouses and landscape businesses and distribute the other half to retail hardware stores and
nurseries. Following is their projection of sales from their launch in June to the end of the year.
Total Total
Product Distribution Jun Jul Aug Sep Oct Nov Dec
(bags) (tons)
In the first 6 months, Jane intends to open one shop. All of her sales will be made through this
shop directly to consumers. Jane is conservative when projecting sales, as this is quite a new
concept. It will take some time for customers to be educated, to get excited about the idea and
then to actually buy the bags. She targets to gain about five percentage of the current size of the
plastic bags market in the first six months.
Total
Product Jan Feb Mar Apr May Jun
(pieces)
Shopping bags 100 200 300 400 500 500 2,000
Laundry bags 200 400 600 800 1,000 1,000 4,000
Green waste garden bags 300 600 900 1,200 1,500 1,500 6,000
Vegetable storage bags 500 1,000 1,500 2,000 2,500 2,500 10,000
Total 1,100 2,200 3,300 4,400 5,500 5,500 22,000
Total sales volume 22,000
Total sales in the market for six months 400,000
Market share 5%
When starting your new business, you may need to hire employees. If you employ staff you will
need skills to manage them. You should also adhere to the laws and regulations which apply to
the labour market.
The productivity of your business will largely depend upon the people you employ.
The IYB PEOPLE AND PRODUCTIVITY MANUAL goes into more detail about
how to recruit, motivate and manage your staff to achieve a higher productivity.
You can hire members of your family. To prevent conflicts of interest or resentments by other
employees, make sure that the family members you employ have the required skills and are not
employed just because they are family members. They should not be given special privileges and
should have the same working conditions as other employees.
Part V – Staff| 45
2. Staff costs
Consider the costs associated with the staff that you have decided to hire. Your staff costs will
include their monthly salaries, as well as payments for statutory contributions such as insurance,
health services and allowances.
As the owner of the business, you should also determine the salary and other benefits that you
will receive. This amount should not be too low so that the capital of the business is not eroded
by personal or household needs of the owner. It should also not be very high because the more
profit is consumed by the owner, the less a new business can grow.
You may consider employing temporary staff to meet unexpected work demands. You pay
temporary staff an hourly wage, but they receive no other benefits like paid holiday entitlement
or sick leave payments. When you hire temporary staff, you must know in advance when you
need them and for how many hours.
This is how John and Mary decided on their staff requirements and the related costs:
Contributions to
Task Required skills and experience Performed Monthly pension fund and health
by pay insurance
Factory Manager Degree in commerce John $900 $90
Factory Science degree with a diploma in
Mary $800 $80
Supervisor administration
Diploma in veterinary science
Assistant Factory
from a recognized institution with Michael $450 $45
Supervisor
three years experience
Advanced diploma in sales and
Marketing Officer Joan $500 $50
marketing
Driver /general
Driver’s licence Alex $250 $25
handyman
Part-time Part-time
Certificate in organic farming $3/hour
labourers labourers
At least one year of experience Mark,
Sales Assistant selling compost manure to $600 $60
Mario
farmers
Total number of permanent staff 7 $3,500 $350
TOSAMA CLOTH BAGS Jane plans to start small. She will perform all the
management duties herself.
She plans to start with only one shop assistant. If this is not
enough, she will employ another assistant later when the
business can afford it. Jane fills in the “Staff” section in her
Business Plan.
Part V – Staff| 47
STAFF REQUIREMENTS AND COST
Contributions to
Required skills and Performed Monthly
Task pension fund and
experience by pay
health insurance
Purchasing, stock
Business management and
control, administration Jane $600 $60
sales
and sales
Turn to section 4.1:“Organizational structure” and section 4.2:“Staff requirements and cost” in
the Business Plan booklet. Fill in the form describing the tasks for which you need to hire staff,
the qualifications required of each employee, how many employees you need to hire and how
much you will pay each employee per month.
1. Form of business
Before you start, select the type of business structure that is best for your business. The choice of
the form of business is important and can make a difference with regards to the:
Cost of a start-up and the amount of legal fees for registering the business
Simplicity or complexity of starting and administering the business
Financial risks for the owner of the business
Possibility of having business partners
Way decisions are made in the company
Taxation of business profits
“The rules and regulations for different forms of business vary from country to
country. Find out exactly what rules and regulations apply in your country before
you decide what form of business you will choose. Do not let anyone persuade you
to select one form until you fully understand the advantages and disadvantages of
each structure.”
Registration Must obtain a business Must obtain a business licence Must obtain a business licence and Must obtain a business licence
licence and register a partnership deed register as a cooperative and register as a limited
company
Legal cost of starting a The cost of the business The cost of the business licence Legal fees to write the Articles of Legal fees to write the Articles of
business licence and the registration fee for a Incorporation, the cost of buying the Incorporation, the cost of
partnership deed shares and annual membership fees various forms, stamp duty, plus
plus licence and registration fees licence and registration fees
Level of legal difficulty Simple Simple Complicated, requiring legal counsel Complicated, requiring legal
counsel
Financial responsibility of Complete personal Complete responsibility by the No personal liability by the members No personal liability by the
the owner for the responsibility for all future owners for all future debt for the debts shareholders for the debts
business debts debts
Decision-making in the All the decisions made by All decisions are made jointly by Every member has one vote. A The shareholders appoint the
business the owner all the owners unless other management committee is often board of directors who can
arrangements are written into the appointed to run the business. appoint managers to run the
partnership agreement business
Taxation The owner is taxed for The owners are taxed individually The cooperative pays tax on business The company pays tax on
business profits for their share of the business profits business profits
profits
Think about the advantages and disadvantages of each form of business. When you have made
your decision, fill in section 5.1: “Legal form of business” in the Business Plan booklet.
The business will need the following licenses and permits Cost
Trade license per Year $300
City Council license per Year $300
The business will need the following licenses and permits Cost
Business licence $0
Go through the list below and think about what legal responsibilities apply to your business and
what insurance you will need. Add things to the list if necessary.
EMPLOYEES
Minimum wage
Allowable number of hours an
employee can work per day
Holidays
Occupational safety and health
Sick leave
Business licence
INSURANCE
Property
Damage
ENVIRONMENTAL MANAGEMENT
Environmental licence
Review all of these legal responsibilities and insurance, fill in section 5.2: “Legal responsibilities
and insurance” in the Business Plan booklet.
If your business is manufacturer or service provider, you need to buy equipment and raw
materials to make goods or services. If your business is retailer or wholesaler, you need to buy
finished goods to resell.
1. Equipment
Equipment is all the machines, tools, workshop fittings, vehicles etc. that your business needs to
make goods or supply your services. To choose good equipment, you should consider:
Does the equipment work well? How often does it break down?
Is there another new kind of equipment that would be better?
Which equipment is the cheapest to run and easiest to operate?
Do I need special training to use the equipment? Can I get it? Is it free?
How long will the equipment last?
Does the supplier give a written guarantee?
Will the supplier install the equipment and service it?
Are spare parts available locally? How quickly can I get them? How much do they cost?
You may get advice from suppliers on the equipment, but also talk to your family members,
business friends and people who use the same or similar equipment. You can also find
information on equipment specification, reliability and limitations on the internet.
Finally, you should decide what is the best use of your business money. Should your business:
Buy new equipment?
Buy second-hand equipment?
Borrow, rent or lease equipment?
Pay another business that has the equipment to do the work for you?
Investment in renewable energy
There are three major reasons why you might want to invest in renewable energy (such as solar
power, wind energy, bio-gas, etc.) equipment:
Your planned business is in a place where there is no electricity or the national grid is
very unreliable and power outages will disturb your production and business.
It is cheaper to produce energy using renewable forms. You will save on energy costs in
the long run even if the equipment is more expensive.
Governments incentivize the investment in renewable energy. Subsidies are paid in the
form of feed-in tariffs, either for the electricity generating equipment or for the
investment.
If you are considering buying renewable energy equipment, find out what equipment is needed,
the capacity of the available equipment, the amount of electricity you will need and the
investment costs taking the government subsidies into consideration.
John and Mary need to buy equipment to produce compost manure. They have asked equipment
suppliers in the city and also taken advices from a NGO. The NGO provided them with useful
information on several types of equipment. Finally, John and Mary decide to buy duo-energy
equipment, which is operated by electrical power and bio-gas. It is more expensive than the
electrical equipment but it can save on energy costs.
2. Raw materials
Raw materials are all the materials and parts that go into the products you make. Planning the
raw material your business needs is important to ensure that the business has sufficient raw
materials for production so that products are delivered timely to the customers. You may need to
stock raw materials to ensure they are available when you need them. But overstocking will
waste your money so you should keep the stock of raw materials as minimum as possible. Based
on the sales estimation in Part IV: Marketing Plan, you can estimate the right amount of raw
materials that your business needs.
You should buy the materials from reliable suppliers and make sure the quality is good, which will
increase the acceptance of your products in the market place.
3. Finished goods
When you buy finished goods, you should consider:
Which types of goods do your customers want?
Do your customers want quality assured goods?
What are your customers’ environmental concerns? Any health concerns?
What prices are your customers willing to pay?
How many of each type of good can you expect to sell per week or per month?
Can you buy the goods directly from the manufacturer or should you buy from a
wholesaler?
Similar to buying raw materials, you can estimate the amount of finished goods needed based on
the sales estimation so that you can keep stock of finished goods as minimum as possible.
Some suppliers are willing to provide goods on credit to increase sales. Buying on credit is often
expensive, as you might be required to pay interest fees on top of the base purchase price.
However, it could help you to get through your start-up phase, if you do not have sufficient
capital.
Jane visited some suppliers and asked them to make special recycled cloth bags according to the
pattern that she provided. Finally, she selected a company that can make bags in the quantity and
A good buying process will save costs for your business. The IYB BUYING AND
STOCK CONTROL MANUAL goes into more detail about how to buy well and
control stock efficiently.
Think about your business and list down all things that you need to buy to start your business.
Equipment:
Raw materials:
Finished goods:
Reducing unnecessary consumption and therefore, waste is the most important step. It can be
done if we change our consumption behaviour by buying more durable products, keeping them
longer and not turning them in for each new “innovative” product in the marketplace.
Reusing things is another way to diminish the amount of waste we produce. Old objects can be
used in new ways. Using old objects to create new objects is a reuse.
Recycling is the third priority in the three “Rs” efficiency strategy. It can be done when reduction
and reuse are not possible. Recycling can provide new raw materials from waste materials.
Therefore, recycling prevents waste disposal and the need to extract more raw materials from
the natural environment to create more new products. It establishes a cyclical production
process.
Disposal is the last resort. It is chosen after all the other waste management options have been
exhausted. Disposal involves the dumping and incineration of waste. Therefore, the waste should
undergo pre-treatment before being ultimately disposed in order to decrease the quantity of
waste or its toxity.
In Part IV “Marketing Plan” you have learned how to determine the prices for your goods or
services. Another factor that you should consider is the cost of making and selling your goods or
services. This will help determine whether the prices you have set will make your business
profitable.
City Garbage Recyclers have listed some of the following costs that they will have for making
organic compost. Tick all of the Variable Costs?
Costs Costs
Product:
Estimated Estimated
Cost of
Input quantity per cost per
purchase
item item
You will need to make a separate Product Costing Form for each of your product. You will learn
how to do each step and how to fill in the form.
STEP 1: ESTIMATE THE VARIABLE COST PER ITEM
To estimate the Variable Cost for each of your goods or services, follow these five steps:
1. List all your inputs that have costs which fluctuate with production volume or the amount of
services provided in part 1 of the Product Costing Form, column 1.
2. Get the cost of purchase for each unit of input and write that cost in column 2.
3. Estimate the quantity of input needed to make one good or service and write that amount in
column 3.
4. Calculate the cost of each input needed to make one good or service by multiplying the unit
City Garbage Recyclers is going to make two types of compost fertilizer, one with a moderate
amount of nitrogen and packed in 20 kilograms bags with the title “Organic” and the other with a
high amount of nitrogen packed in 10 kilograms bags with the title “Super Organic”. They filled
out part 1 of the Product Costing Form for their Super Organic compost as follows:
Here are some notes on how City Garbage Recyclers completed part 1 of the Product Costing
Form:
1. Input
City Garbage Recyclers lists the input with costs that vary depending on the production volume.
The input includes waste vegetables, chicken manure, second hand bags and the wages for
production labour.
They also use herbs. The cost of herbs varies with the production volume. However, the herbs
needed for a bag of Super Organic compost cost very little and it is difficult to calculate how much
herb they need for one bag, so John and Mary have decided that herbs are not a Variable Cost.
On page 72, you can see how City Garbage Recyclers include herbs in their Fixed Cost.
“While the Variable Cost per month in your business will vary with production
volume or the amount of service being provided, the Variable Cost per item will
not change unless the market price of the raw materials you use changes.”
When you have estimated the Variable Cost per item, you have completed step 1 of your costing.
STEP 2: ESTIMATE THE FIXED COST PER ITEM
To estimate the Fixed Cost per item for each of your goods or services, use part 2 of the Product
Costing Form and follow these four steps:
1. Estimate the total Fixed Cost per month; write the amount in the space for item (2) on
the Product Costing Form.
2. Estimate the total Variable Cost per month for your business; write the amount in the
space for item (3) on the Product Costing Form.
3. Calculate the ratio between the total Fixed Cost per month and the total Variable Cost
John and Mary at City Garbage Recyclers filled out their Fixed Cost Form, as follows:
1 2
Details Cost per month
Rent 2,000
Labour 3,850
Depreciation 500
Transport 450
Herbs 150
Here are some notes to help you fill out your Fixed Cost Form.
Small Variable Costs which are considered Fixed Costs: You should first estimate the
total amount of the input that your business needs each month based on your estimation
of production or sales volume and then multiply the total amount of the input needed
per month by its unit cost.
$600
= $50
12 months
City Garbage Recyclers also pays $300 once a year for the trade licence and $300 once a year for
City Council licence. So they calculate that their cost per month for the licences is $50.
Marketing expenses for the first year will be $1,370. So the marketing expense per month is
$114:
$1,370
= $114
12 months
Decide if your business will have equipment for which you should calculate depreciation. In
general, only calculate depreciation for equipment which:
$20,000
= $4,000
5 years
They also calculate depreciation cost per year for the mixing machine as $2,000.
To calculate the total depreciation cost per month for your business, divide the total depreciation
cost per year of all the equipment by twelve months. City Garbage Recyclers’ total depreciation
cost per month is $500:
($4,000 + $2,000)
= $500
12
DEPRECIATION FORM
Now John and Mary know that their estimated total Fixed Cost per month is $8,964. They write
this figure in the space for item (2) in part 2 of the Product Costing Form for their Super Organic
Quantity produced per Variable Cost per Total Variable Cost per
Product
month item month
Super Organic compost 2,000 bags $6.05 $12,100
Organic compost 2,400 bags $10 $24,000
Total $36,100
John and Mary write City Garbage Recyclers’ estimated total Variable Cost per month in
the space for (3) on the Product Costing Form.
3. Calculate the ratio between the total Fixed Cost and the total Variable Cost per month
The total Fixed Cost per month is for the entire business and must be divided and shared by each
good or service your business makes or sells. The Fixed Cost for one item depends on the Variable
Cost of making that item. Therefore, to calculate the Fixed Cost for one item, we first calculate
the ratio of Fixed Cost to Variable Cost for the entire business.
John and Mary must add a part of their total Fixed Cost of $8,964 to the cost for each Super
Organic compost bag and each Organic compost bag. They divide the total Fixed Cost of $8,964
by the $36,100 total Variable Cost. They write the result (0.25) in the space for item (4) on the
Product Costing Form.
4. Calculate the Fixed Cost per item
When we know the ratio of Fixed Cost to Variable Cost for the whole business, we can easily
calculate the Fixed Cost per item by multiplying the ratio by the Variable Cost of each item.
John and Mary multiply the $6.05 Variable Cost for a bag of Super Organic compost by the ratio
of Fixed Cost to Variable Cost, which works out to be 0.25. They come up with a Fixed Cost for
each bag of $1.51. They write that number in the space for item (5) on the Product Costing Form.
City Garbage Recyclers is a multiple product manufacturer. For single product manufacturers or
service providers the Fixed Cost per item is estimated by simply dividing the total Fixed Cost per
month by the number of items that will be made each month.
“While the Fixed Cost per month in your business will be constant, the Fixed Cost
per item will vary with the production volume or the amount of services provided.
The more items you make, the lower the Fixed Cost per item and therefore, the
lower the cost is for your product.”
Now that you have estimated the Fixed Cost per item, you have completed step 2 of your costing.
STEP 3: ADD UP TO GET THE TOTAL COST PER ITEM
Upon completing steps 1 and 2, you are ready to work out the estimated total cost per item.
John and Mary have completed steps 1 and 2 for costing their bag of Super Organic compost. To
do step 3, they add up the figures on the Product Costing Form:
They follow the same three steps for costing their Organic compost. They use a separate Product
Costing Form for Organic compost.
Estimated Estimated
Cost of
Input quantity per cost per
purchase
item item
1 2 3
Variable Cost per item Fixed Cost per item Total cost per item
Product
(1) (5) = (1) x (4) (6) = (1) + (5)
1 2 3
Variable Cost Fixed Cost per item Total cost per item
Product
per item(1) (5) = (1) x (4) (6) = (1) + (5)
Shopping bags $5.00
Laundry bags $7.00
Green waste garden bags $7.00
Vegetable storage bags $1.20
1 2
Details Cost per month
Rent 2,000
Electricity and water, including waste water 100
Insurance at $600 per year 50
Transport 100
Labour 990
Depreciation 142
Miscellaneous, including recycling and disposal 20
Marketing expenses at $600 per year 50
Total Fixed Cost per month 3,452
Now Jane knows that her estimated total Fixed Cost per month is $3,452. She writes this figure in
the space for item (2) on the Product Costing Form.
2. Calculate the total Variable Cost per month
Total Variable Cost per month is the expenses your business has each month when buying goods
to resell. To estimate the total Variable Cost each month, you will need to use your estimate of
monthly sales.
Using the sales estimation for Tosama Cloth Bags (see the Sales Estimation in Part IV, page 39),
Jane calculates monthly average sales of each product, then fills in the Monthly Purchase Form
and calculates the total Variable Cost as follows:
Jane writes Tosama Cloth Bags’ total Variable Cost per month of $15,334 in the space for item (3)
on the Product Costing Form.
3. Calculate the ratio between total Fixed Cost and total Variable Cost
3,452
x 100% = 23%
15,333
It means that Jane must add 22.5% to the Variable Cost of each product to find the total cost.
4. Calculate the Fixed Cost per item
Fixed Cost per item = Variable Cost per item x Fixed Cost Charge
Here is how Jane calculates the amount to add to each shopping bag:
The Fixed Cost for a shopping bag is $1.12. Now Jane knows that she must add $1.12 to the cost
of each shopping bag that Tosama Cloth Bags sells.
Jane uses the same Fixed Cost charge of 22.5% to calculate the amount to be added to each
product in the column 2 of the Product Costing Form.
On the Product Costing Form, you can see how the total cost of a shopping bag and the other
products is calculated for Tosama Cloth Bags:
1 2 3
Variable Cost Fixed Cost per item Total cost per item
Product
per item(1) (5) = (1) x (4) (6) = (1) + (5)
Shopping bags $5.00 $5.00 x 22.5% = $1.12 $6.12
Laundry bags $7.00 $7.00 x 22.5% = $1.57 $8.57
Green waste garden bags $7.00 $7.00 x 22.5% = $1.57 $8.57
Vegetable storage bags $1.20 $1.20 x 22.5% = $0.27 $1.47
When you know your total cost, refer to the Price Form in the Marketing Plan of your Business
Plan booklet. The final price for your good or service should be set using all of the following:
The total cost of your good or service: If your total cost exceeds the price customers
would be willing to pay, your good or service is not likely to be profitable.
The price customers are willing to pay for it: The amount customers are willing to pay for
your goods or services also depends on how you market them.
The price charged by your competitors: It will be difficult for you to charge higher prices
than your competitors for identical products, even if customers would be able to pay
more.
Normally during the first few months after a business begins operating, it is difficult to recover
costs or to make a profit. It takes some time before money from sales starts to come in. During
this time your business is very vulnerable and you must keep a careful eye on the financial
situation.
When you start your new business, these two things are very important:
Do not run out of cash
Make sure that the operation you have created will eventually become profitable
Profit is the amount of money left after you have subtracted all the costs of your business from
its total sales. So, before making a Profit Plan, you must make both a Sales Plan and a Cost Plan
for your business.
SALES PLAN
Sales volume 480 720 800 1,000 1,200 1,400 1,400 7,000
Sales value ($) (1) 4,320 6,480 7,200 9,000 10,800 12,600 12,600 63,000
Super organic –
Sales volume 1,600 2,000 400 600 680 800 920 7,000
Sales value ($) (2) 12,800 16,000 3,200 4,800 5,440 6,400 7,360 56,000
Organic- Direct
Sales price ($) 14.38 14.38 14.38 14.38 14.38 14.38 14.38
Sales volume 600 800 1,000 1,200 1,400 1,600 1,800 8,400
Sales value ($) (3) 8,628 11,504 14,380 17,256 20,132 23,008 25,884 120,792
Organic- Retail
Sales volume 2,000 2,400 400 600 800 1,000 1,200 8,400
Sales value ($) (4) 26,000 31,200 5,200 7,800 10,400 13,000 15,600 109,200
John decides to produce as much as he can sell, so the production volume will be the same as the
sales volume. He fills in the “Production volume” rows in his Cost Plan.
John then reviewed his costing and found the following information:
The Variable Cost for one Super Organic compost bag is $6.05.
The Variable Cost for one Organic compost bag is $10.
The total Fixed Cost of the business per month is $8,964.
The Cost Plan for City Garbage Recyclers is on the next page.
COST PLAN
($) (5) 10 10 10 10 10 10 10
Below is the completed Profit Plan that John made for City Garbage Recyclers.
Total Sales (1) 51,748 65,184 29,980 38,856 46,772 55,008 61,444 348,992
Total Variable Cost (2) 38,584 48,456 21,260 27,680 33,374 39,310 44,036 252,700
Gross Profit (3) = (1) - (2) 13,164 16,728 8,720 11,176 13,398 15,698 17,408 96,292
Total Fixed Cost (4) 8,964 8,964 8,964 8,964 8,964 8,964 8,964 62,748
Net Profit (5) = (3) – (4) 4,200 7,764 (244) 2,212 4,434 6,734 8,444 33,544
Net profit is negative in August. This is shown by writing the figures within brackets, which means
that City Garbage Recyclers will show a loss during this month. Because of the low sales in
August, the gross profit will not cover the Fixed Cost.
Jane also follows the same steps and creates the Tosama Cloth Bags Profit Plan for the first six
months, as follows:
Total Sales (1) 6,500 13,000 19,500 26,000 32,500 32,500 130,000
Total Variable Cost (2) 4,600 9,200 13,800 18,400 23,000 23,000 92,000
Gross Profit (3) = (1) - (2) 1,900 3,800 5,700 7,600 9,500 9,500 38,000
Total Fixed Cost (4) 3,452 3,452 3,452 3,452 3,452 3,452 20,712
Net Profit (5) = (3) – (4) (1,552) 348 2,248 4,148 6,048 6,048 17,288
Now follow the same steps to make your own Sales Plan, Cost Plan and Profit Plan for the first
year of your business in sections 7.1, 7.2 and 7.3 in the Business Plan booklet.
Jane makes a Cash Flow Plan for the first six months.
1.Cash at the beginning of the month 15,000 2,990 8,180 15,270 24,260 35,150
2.Cash from cash sales 6,500 13,000 19,500 26,000 32,500 32,500
3.Cash from credit sales
CASH IN
4.Other cash in
To make your Cash Flow Plan, follow the 12 steps in the plan. Steps 2-5 are for Cash In. Steps 6-11
are for Cash Out. Look at each step for January.
Step 1 - Cash at the beginning of the month: This is the amount of cash that Jane has, plus the
amount of money she expects to have in her bank account when she starts.
Step 2 - Cash from cash sales: This is cash Jane will receive from her customers for sales during
the month of January. Look at Tosama Cloth Bags’ Sales Plan to find the forecast for
cash sales in January.
Step 3 - Cash from credit sales: This is the amount of cash the business can expect to get from
their credit customers during the month. Jane leaves the section blank because she will
not sell on credit.
Step 4 - Other cash in: This is the amount of cash that Jane forecasts she will get from other
sources, such as a loan.
Step 5 - Total cash in: Jane adds up all the amounts from steps two to four.
Step 6 - Purchase of goods: Jane pays her supplier on the first day of the following month, so she
will pay for the goods purchased in January in February. She will write the amount for
January in the February row.
Step 7 - Payment of wages: Jane takes this amount from her Staff Requirements and Costs Plan.
Step 8 - Purchase of equipment: Furniture and other fittings need to be purchased for Tosama
Cloth Bags during January. Jane writes the amount she will pay here. She finds the
amount in her Fixed Costs Form.
John and Mary at City Garbage Recyclers make their Cash Flow Plan for the first year. They start in April, so their Cash Flow Plan is as follows:
Month Apr May Jun Jul Aug Sep Oct Nov Dec
1.Cash at the beginning of the month 47,200 5,750 (700) 4,164 11,922 12,392 15,118 20,266 27,514
2.Cash from cash sales 51,748 65,184 29,980 38,856 46,772 55,008 61,444
4.Other cash in
7.Salaries 3,850 3,850 3,850 3,850 3,850 3,850 3,850 3,850 3,850
CASH OUT
9.Loan repayment
10.Other payments 7,600 2,600 4,450 5,120 4,400 4,600 4,400 4,600 4,400
11.Total cash out 41,450 6,450 46,884 57,426 29,510 36,130 41,624 47,760 52,286
12.Cash at month end 5,750 (700) 4,164 11,922 12,392 15,118 20,266 27,514 36,672
The Cash Flow Plan shows that at the end of May City Garbage Recyclers will have negative cash flow. This means the business will run out of money.
2.Cash from cash sales 51,748 65,184 29,980 38,856 46,772 55,008 61,444
5.Total cash in 0 3,000 51,748 65,184 29,980 38,856 46,772 55,008 61,444
7.Salaries 3,850 3,850 3,850 3,850 3,850 3,850 3,850 3,850 3,850
10.Other payments 7,600 2,600 4,450 5,120 4,400 4,600 4,400 4,600 4,400
11.Total cash out 41,450 6,450 47,884 58,426 30,510 36,130 41,624 47,760 52,286
12.Cash at month end 5,750 2,300 6,164 12,922 12,392 15,118 20,266 27,514 36,672
It is absolutely necessary that you know how much start-up capital you need and where you will
get it before you start setting up your business. You will need start-up capital for:
Capital investments
Working capital
Rate which factors are important or not for your choice of business premises by ticking in the
appropriate column below. Add more factors if needed.
When you know what sort of premises you require, you need to decide if you should:
Build the premises
Buy the premises
Rent the premises
Run the business from your home
Building or buying your own property can be the best option if your business has special
requirements for the building or the location of the building. However, this option will require a
I will
“If your decision is different now from what you wrote down in the “Place” section
of the Marketing Plan in your Business Plan booklet, go back to that section and
change the location. If the altered location has new cost implications, go back to the
Fixed Cost Form and adjust the fixes accordingly.”
Equipment
Buying equipment may require a large capital investment when you start up the business. Instead
of buying equipment, you can sometimes lease it for a specific time period. You would make
monthly payments for the duration of the lease. You should compare the cost and benefits of
asset loans that may be needed to buy the equipment and leases.
If you decide to lease equipment, you will not have to add the cost of new equipment onto the
amount of initial capital required, but you must add the lease payments to your calculations for
working capital.
INVESTMENTS
Business premises
Marketing 600
INVESTMENTS
Business premises
Conversion or reconstruction of 0
business premises
Equipment
When you have estimated how much start-up capital you need for your business, the next
question is where to get that capital?
The most important types of start-up capital are:
Owner’s equity
Loans
1. Owner’s equity
The equity or the contribution from owners to start the business is the private money that is put
into the business. An entrepreneur’s savings can be a possible source of owner’s equity.
Entrepreneurs can use targeted savings accounts to accumulate some or all of the funds they will
need to start their business. Savings that an entrepreneur does not want to invest in the business
could serve as cash collateral for a loan.
The owner’s equity is called risk capital, because the owners are risking their own money on the
business. Whatever form of business you start, you will have to invest some of your own money.
If you do not have enough money yourself, you can consider finding a partner or partners who
are interested in investing in the business. You should not allow the partner to own more than
half of the business. If you own less than 50 percent, you will forfeit the right to make decisions
for the business.
2. Loans
You will have to repay the amount borrowed and you will probably have to pay interest charges
and/or fees. You can pay the loan back either in instalments or all at once, depending on the
agreement with the lender.
If you borrow money from a lending institution, you usually will have to comply with two major
requirements:
1 The institution will want to see a viable and clear Business Plan with a business idea that
is believable and feasible. An unclear Business Plan will leave a bad impression and make
it difficult for the lending officer to grant loan.
2 The lending institution will probably also need some kind of collateral to make sure that
you repay your loan. If you cannot repay the loan, the lending institution has the right to
take possession of the collateral instead. Machines and other equipment in your business
can sometimes be used as collateral. If you do not own any of these, you may also use
your home or the home of a family member as collateral. This is a big risk, which must be
thought through very carefully.
Here are a number of different sources you can access when you are applying for a loan to start
your business.
Banks: Several banks have specialized departments for giving loans to small businesses. To obtain
loans from banks you need a viable business idea presented in a well thought out Business Plan
and some kind of collateral.
Government credit schemes: Many governments have lending programmes to help
entrepreneurs who want to start small businesses. You may not need collateral for these
government loans, but the requirements for your Business Plan are just as strict as with the
banks.
Microfinance institutions: These financial service providers focus on the low-income market and
exist in many legal forms- sometimes as banks, sometimes as regulated non-bank financial
institutions and sometimes as unregulated non-profit organizations. They have more flexible
collateral and documentation requirements than mainstream banks, but loan amounts are
relatively small, especially for first-time borrowers. They rarely offer start-up business loans, but
may make capital available to an entrepreneur through other loan products based on the
entrepreneur’s household cash flow.
Membership based associations: To be able to borrow from these associations, you will need to
be a member and to buy shares. You will also be required to have money deposited in an
association savings account.
Other sources: You might be able to get a loan from your family or friends. But remember that if
your business fails and you have difficulty in paying back loans, then relationships can suffer. You
can also take loans from private moneylenders. But these loans usually have extremely high
interest rates.
Other sources
Total (must be the same amount as the required start-up capital) 38,930
Other sources
Total (must be the same amount as the required start-up capital) 52,300
Go through the questions in the checklist. Tick either “YES” or “NO” for each question. If you are
not sure about the answer, tick NO.
YES NO
1. Have you decided what goods and/or services you are going to
sell?
3. Have you asked any potential customers what they think about
your proposed goods or services?
4. Do you know who your competitors will be?
9. Have you decided what kind of promotions you are going to do?
11. Have you decided what staff you will need and how much staff
will cost?
12. Have you calculated a wage for yourself that will enable you to
meet your household’s basic needs?
13. Have you decided which legal form your business will take?
15. Have you decided what insurance your business will need?
18. Do your Sales Plan and Cost Plan show a profit for the first year?
20. Does your Cash Flow Plan show that you will not run out of cash
during the first six months?
21. Have you calculated how much start-up capital you need to start
your business?
22. Have you raised the money for all your required start-up capital?
23. Have you found out what assistance you can get from business
development service providers, associations, finance institutions
and government agencies?
24. Have you assessed the positive or negative impact your business
has on your community and the natural environment?
Number of Number of
“Yes” “No”
answers answers
………………… …………………
2. Start or not?
When you have answered all the questions and counted the number of “YES” and “NO” answers,
look at the table below. It will help you to assess the efficacy of the preparations you have made
to start your business.
Number of “YES” answers:
24 You are well prepared and should probably go ahead and start your business.
11 - 22 You should analyze the reasons that you answered “NO” to some questions and
decide what you need to do so that you can honestly and comfortably answer
‘YES’ to all the questions.
0 - 10 It would be very risky to start your new business. You should go back and start
from the beginning of your Business Plan. Maybe you need to change your
Product
Price
Place
Promotion
People
Process
Physical Evidence
Staff
Form of business
Buying
Costing
Financial planning