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Passion, Markets, Resources and Holistic Fit are foundations for creating a new enterprise. Then go through this simple process for seeing if you have a viable business plan.
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Back-of-envelope business planning• Two stages• Initial exploration
– 1. Motivation – 2. Product/Service ---> Markets, Price– 3. Resources
• If, after these first three steps, you know you have the necessary motivation, a specific product, and price and volume information, you’re ready for:
• One hour quickie cash flow– 4. Production Process and Costs – 5. Cash flow – 6. Sensitivity – 7. Income Statement– 8. Balance Sheet
If it doesn’t work, try another product or service
Market for Product
or Service
Resources
Motivation
Whenever a product meets the motivation, resources and market criteria list the tasks from where you are now till the cash from sales comes in.
1. Then list equipment/supplies2. Attach costs3. Put costs and income on
spreadsheet and you have a cash flow.
1. Motivation What are you passionate about? •What do you like most about your product or enterprise?•Is your enterprise the first thing you think about in the morning? •Do you wake up at night with ideas about your enterprise?•Determine what about your enterprise is intrinsically interesting to you. •How much investment (time, money, land) have you made in your business? •How much more are you willing to invest in the future?
2. Product ---> Markets, Price
• What is the exact product you want to sell? • Do you just like growing them and want to
sell a few now and then to cover costs? • What processing is required?• What are the market standards for the
product?• Will you need to build a processing facility
and transportation/distribution system?
2. Product Market, Price, Volume
• What is the demand for this product? • Do prices given for it vary over the year? • Is demand for the product increasing? • How much of this can you sell every month
or every year? • The result of this will be a price and a
volume of sales expected.
3. Holistic Resources1. Know tools/resources (especially intellectual and
other skills) you have and those you lack• E.g., Are you better at production, marketing or
finances/accounting? • Who has your back? Any enterprise takes a team.• Can you really stand to send those cute little kids off?• What resources do you lack? • Do you know where to get what you don’t have?
• What are your long-term goals for you, your family, and the community where you live? How well does this enterprise fit into those goals
• How are decisions made at your house?
Back-of-envelope business planning
• If, after these first three steps, you know you have the necessary motivation, a specific product, and price and volume information, you’re ready for:
• One hour quickie cash flow– 4. Production Process and Costs – 5. Cash flow – 6. Sensitivity – 7. Income Statement– 8. Balance Sheet
4. Production Process and Costs
1. Write down every task required to produce what your buyer wants.
2. Start with right now and end with having money in your pocket from selling the product.
3. You’ll end up with a list of required tasks.4. Then attach cost to equipment, supplies,
or personnel required for each task.
Costs and IncomeHazda Milk Collection
0.5/literVillager return
5600 litersTotal production/week
0.9/literIncome
15/container/day or 2100/week
Transport costs
100/wkPersonnel: controller
400020 40 Liter milk collection containers
3000Milk Cooling Tank
2240.001920.001600.001280.00960.00640.00320.000.00 Ending balance
0000000 Loan remainder
0000000 Loan payments
25202520252025202520252025207000 Total revenue
2520252025202520252025202520 2520sales revenue
0.5villagers' percentage
5600total units
0.9unit price
7000 grants
0.00 loans
Income
2200.002200.002200.002200.002200.002200.002200.007000.00 Total expenses
2100210021002100210021002100 15Transport
100100100100100100100 100Controller (village)
0000000 0Counter (mountains)
4000.002040 litre containers
3000.001Milk Cooling Tank
PriceEquipment/suppliesTasks
Production Process
1920.001600.001280.00960.00640.00320.000.000 Beginning balance
Week 7Week 6Week 5Week 4Week 3Week 2Week 1Hazda
Not so hard, was it?
Other necessary Financials for the Bank or potential investors
• Income Statement (Profit and Loss)– Takes cash flow and summarizes over months
or years
• Balance Sheet– Lists expected assets and liabilities and end of,
for example, 3 months, 6 months, 9 months– Assets minus liabilities = owner’s equity
Income Statement=
Profit and Loss
=P & L
Just summarizes cash flow
Examples from a sheep dairy in
Ukraine.
If it doesn’t work, try another product or service
Product or Service
Resources
Motivation
Whenever a product meets the motivation and resources criteria list the tasks from where you are now till the cash from sales comes in.
1. Then list equipment/supplies2. Attach costs3. Put costs and income on
spreadsheet and you have a cash flow.
Jim Worstellwww.deltanetwork.org
870-673-6346
