Techno Serve

7/29/2019 Techno Serve

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Catalyzing SME Growth Through

Business Plan Competitions:Innovative Examples from Latin

America

Washington D.C., March 9th 2011


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Who we are

2

Background

The role ofentrepreneurshipin povertyreduction

The problem athand and

Evaluation of

Methodology Strategic

planning

Access to capital

Other problems

Overview of BPCimpact study andresults

Next Steps

Results

Lessons learned

Beyond BPCs

Q and A

Introduction


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TechnoServe is an nonprofit international developmentorganization providing business solutions to poverty

Empower people in the developing world tobuild businesses that break the cycle of poverty

Work in more than 30 countries throughout LatinAmerica, Africa and Asia

Founded in the U.S. in 1968

2009 revenue of $50M

Obtain funding from diverse sources includingU.S. and foreign government agencies, multi-lateral organizations, corporations, foundationsand individuals

3


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4

From BPC we evolved to SME Promotion, and thento Business Accelerator

Began with McKinsey-

based BPC format for 15

competitions between 2002and 2006


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5


Follow up ofCentral Americaeffort began in2003


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6


SME Promotion effort

created in six countries in

2008 with MIF grant.

Replication in Africa in

2010.


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Who we are Background



Evaluation of

Methodology Strategic

planning

Access to capital

Other problems


Next Steps

Results

Lessons learned

Beyond BPCs

Q and A

Agenda

502


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,502

Increase and decrease in poverty inL.AC between 1999 and 2007 (relativeto 1999 figures) *

2004 20071999

* In terms of number of people living on less than $8/daySource: Universidad de los Andes

Conglomerate

Businesses by size in LAC

Big

MSE

Micro

27% 4.5%

Entrepreneurshipdevelopment is key to

effecting change

TNSFocus

9

Latin America lacks thriving SMEs

502


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,502

Training inL.A.C. needsto be taken to

the next level

Source: GEM 2008 and TechnoServe analysis

L.A.C.

Overall EntrepreneurialActivity

Europe

North America

Others

Business DevelopmentTraining

10

Despite strong entrepreneurial activity in Latin America,the region lags in Business Development Training


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Training inkey aspects

EntrepreneurshipEntrepreneurship

in L.A.C.in L.A.C.

DifficultyAccessing

Capital

Issues for SMEsat an early stage

DifficultyAccessing

SustainableMarkets

TechnoServe focuses its efforts on three key areas


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Evaluation ofMethodology

Strategicplanning

Access to capital

Other problems


Next Steps

Results

Lessons learned

Beyond BPCs

Q and A

Agenda


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We continuously evaluate and develop our entrepreneurshipprograms

Innovation

Conclusions

AdjustmentNew Focus

M andE

Re-formulation

ImpactEvaluation

Conclusions

New FocusImplementation

2003-2006 Central America 2008-2012 South America and Africa, Haiti 2012


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Convene businessesin different industriesthat are looking tostart or grow

Convening andFiltering

Business PlanDevelopmentTraining

FilteringFinal Selection andAward

BPC Basic Process

Provide practicaltraining for creating auseful business plan

Selection based onquality of businessplan

Provide seed capitalto most promisingbusinesses

Selection

Is our selectionprocess effective?

Are we attractingstrong applicants?

How can it be

improved?

How useful is it? How does impact

breakdownamongst groups?

How effective is it? How effective is

our selection?

What happens tothe winners?

1st Round Training 2nd

Round Training(Finalists)

Winners

KeyQuestions

The BPC is a cornerstone of the solution envisionedby TechnoServe


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Research plan based on

previous study by HarvardProfessor Bailey Klinger andother academic papers

Survey designed based oninput from seniorTechnoServe team members

Interns thoroughly trained

Preparation Data Collection Data Analysis

Process

Results

4 interns administered

survey over phone Reached out to each person

multiple times at differenttimes of the day, both viaphone and email

Each survey checked bysupervisor. Data doublechecked and compared with

previous surveys

Employed a process to

approximate randomizedsampling (crediblecounterfactual) to measuretrue impact

Multiple regression analysisallows us to control for avariety of variables and seeimpact of specific pieces of

training Simple comparisons

demonstrate robustness

Survey efficiently designedwith study goals andmethodology in mind

Interns prepared

Large dataset, confidence indata integrity, and reductionof response bias

Confidence in measurementof impact

Wide variety of metrics

analyzed

Study Methodology (Summer 2009)


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590 entrepreneurs surveyed: 60% participants, 40% non-participants

Almost 85% of the people we spoke to completed the survey

CompanyInformation

Sector

Annual Sales (by year)

Annual full time and part timeemployees (by year)

EntrepreneurInformation

Demographic information (age, education) Previous companies founded

Other companies founded aftercompetition (including sales, employees,capital raising, formality)

Capital raised (by source,before and after BPC)

Level of formality

Year and reason for failure

Key areas of training

Additional training desired

Use of business plan

16

Dataset


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(a) Based on multiple regression analysis, controlling for age, gender, year, country and selection bias. Otherfactors include these variables as well as unobserved differences.

Impact of Acceptance on $ Sales Growth (a)

Key Insights

The BPCs as a whole have a strongimpact

Notes on Analysis

Multiple regression and otheranalyses confirm a strong impact,even controlling for selection bias

Strong impact also seen in 1-yearsales growth, capital raised, initialsuccess, new business survival rateand rate of formalization

ImpactofT

rainin

g:146%

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$16,000

$18,000

Non-Participants Participants

Series3

Series2

Series1

Impact

of

Training

Impact

of

OtherFactors

2-Year Sales Growth ($)

The BPCs had a strong impact on sales growth


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Impact of Phase I on $ Sales Growth (a)

Key Insights

The impact of training is not statisticallysignificant at a 95% level. This meansthat there is a very good chance that itdoes have an impact.

The standalone impact of Phase I isambiguous

(a) Based on multiple regression analysis, controlling for age, gender, year, country and selection bias. Otherfactors include these variables as well as unobserved differences.

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

Non-Participants Participants NotAccepted as

Finalists

Series3

Series2

Series1Impact

of

Training

Impact

of

Other

Factors


Impact of

training NOT

significant

Notes on Analysis

Neither multiple regression nor othermethods found a significant impactof phase I, BUT data set is smalland selection bias exists

Impact of Phase I not found acrossother KPIs

Phase I (Business Plan Training) Appears to Have an Impact


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Impact of Training on Sales Growth(a)

Key Insights

The second round of trainingcombined with the possibility of theprize has a significant impact onbusiness success and growth

Notes on Analysis

Regression analysis, controlling for

age, gender, country, year,selection bias shows strongpredicted impact, even controllingfor effect of prize

Results robust through a variety oftechniques and across other KPIs

(a) Based on multiple regression analysis, controlling for age, gender, year, country and selection bias.

Impac

tofPh

aseIITrainin

g:25

3%

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

$45,000

$50,000

Non-Finalists Finalists

Series3

Series2

Series1

Impact

ofTraining

Impact

of

Other

Factors


Phase II (Business Plan Improvement) and the PrizeAwarding Have a Strong Impact


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Impact of Prize on Sales Growth(a)

Key Insights

The prize is a major advantage,however we could not test theimpact of the prize withouttraining.

Focus groups and 1-on-1interviews suggest that the prizesimpact was multiplied by thetraining.

Notes on Analysis

Results robust through a variety oftechniques and across other KPIs

Selection bias is not controlled fordue to a small sample size

(a) Based on multiple regression analysis, controlling for age, gender, year, and country. Selection bias is not controlled for as all finalists areassumed to be of high-quality.

Impact

ofPrize:483%

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

$80,000

$90,000

Finalists (Non-Winners)

Winners

Series3

Series2

Series1

Impact

of

Training

Impactof

Other

Factors


Prize AwardingHas a Very Substantial Impact


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Final Selection Round

8,081

24,651

38,306

16,101

78,154

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

$80,000

1.0

Score (Std. Dev.'s Away From Cutoff)

AverageTw

oYearSalesGrowth(US

$)

(1,346)

Adjusted Score vs. Sales Growth

($100,000)

($50,000)

$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

$400,000

(3.0) (2.0) (1.0) 0.0 1.0 2.0 3.0

Round 1 Adjusted Score

2YearS

alesGrowth(US$)

Isolating participants

and non-participants,

irst round score is a

weak predictor of

success

TechnoServes Original Participant SelectionMethodology was Not a Predictor of Success


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Sales Growth Breakout - NewBusinesses

Sales Growth Breakout - ExistingBusiness

In both new businesses and existing businesses, the distribution of sales growth is veryuneven

As in venture capital, our impact relies on a few very successful businesses

8

10

5

87

0

5

10

15

20

25

$0 $1-$10,000 $10,000-$29,999

$30,000-$92,000

100

80

# of businesses

Range of 2-Year Sales Growth Range of 2-Year Sales Growth

5

7

6

4

3

0

1

2

3

4

5

6

7

8

< $0 $0-$30,000 $30,000-

$99,999

$100,000-

$199,999

$200,000-

$760,000

# of businesses

Distribution of Impact was Found to be Extreme


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2 Year Survival Rate (2)Self-Described Success Rate (1)

Impact ofother factors

Impact ofBPC

Impact ofBPC

Impact ofother factors

(1) Answer to the question were you successful in founding or expanding your business?(2) Only includes new businesses.

The BPCs also had a Strong Impact on Successand Survival Rate


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Strategicplanning

Access to capital

Other problems


Next Steps

Results

Lessons learned

Beyond BPCs

Q and A

Agenda


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Take away from C.A. Study

Primary selection non-predictive

Winner selection too simple

Training follow-up lacking

Additional marketing andfinancing training required

Following the evaluation insights, we modified our approach

Improvement from 2008 and on

Incorporated psychometrictesting in collaboration withHarvard University

Introduced psychologicalinterviews and panelpresentations

Introduced 1 year aftercare

Developed pilot to focus ontraining for extra 6-12 months inmarket linkages and access tocapital

Comment

Increased commitmentfrom participants

Allowed assertivesegmentation of thegroups

Provided means tocontinuously follow-up

Created practicalapproach and shortterm results

Impactobserved


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Psychometric testgiven on-line to+20 participantsper country

2008-2009

To improve the primary selection we collaboratedwith Harvard Universitys CID in 2008

2008

Winners of

Colombia, Peru,Chile, andTanzaniacompetitionswere given 90minute test toassesspersonality andintelligence

First selectionparticipants inEcuadorcompetition pilottested to providedata for firstselection

Results used tofine tune test

Test reduced to 1hour given onpaper

2009-2011


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Winner selection made more robust through increased focuson entrepreneur

Interview

HHRR focus

Presentation

7 minsummary ofBP in front ofpanel

Comprehensive judge analysis

6 point analysis of BPquality and potential

Concept pioneered inEcuador in 2010 andfollowed in Bolivia


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Aftercare Criteria

Aftercare became a core activity after 2008

Prioritize activitiesof the BusinessPlan

Provide supportin key areasaiming at mediumterm development

Serve asmonitoring tool inthe use ofresources as wellas performance

Business PlanAssessment

Specialty Training

Alliance Development

Marketing Plan

Aftercare Objective : Provide specific support to finalists to promote continued use of businessplans as practical tools to guide them through implementation and growth

Review the BP and make it achievable Quantify real economic needs

Investment Plan

Undertake in depth financial training Communication and network access practice

Create environment for entrepreneurs todevelop strategic partnerships with suppliers,

clients, and capital providers

Build a commercial, milestone based plan inorder to encourage sales generation

Build a realistic approach for the use ofresources

Identify real capital needs


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Complemented by market and capital access support after2010

PILOT PROG

Market linkages andcapital follow up

Build marketrelations endingin real contracts

Begin efforts forexport

Obtain capitaland recurrentrelationships

Evolution of participants during first year

79%

35%

29%

18%36%

3%

RegularParticipants

Increased sales

Businesses withadditional support

(Pilot in Peru)

Started generating sales

Current sales but no

increase


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72%

28%

Gender equity and outcomes are tracked closely

COLOM

Female ledbusinesses

Male ledbusinesses

Source: TNS Data

Business LeadersSales generating

businessesEmploymentGeneration

57%

43%

69%

31%


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Traditional BPC(Central America)

Beyond SME PromotionSME Promotion(South America)

The next step in entrepreneurship is to go beyondSME Promotion

Learn to create businessplans and obtain seed capital


Improved selection

Aftercare

Training and toolkits onaccessing markets andcapital


Improved selection

Training and toolkits onaccessing markets andcapital

Push the businesses with the

greatest potential to generategrowth and job creation

Targeted consultinginterventions to achievesustained growth


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The new model will provide access to capital and markets topromote rapid growth: Business Accelerator

Access toCapital

Access toMarkets

Growth

Marketlinkages

Market info Marketing

training Market niches Specific issues

(packaging)

Financial planningaccounting

Rationalization ofcapital needs

Intro to capitalsources

Help withnegotiation

Strategicplanning

Humanresources


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33





Strategicplanning

Access to capital

Other problems


Next Steps

Results

Lessons learned

Beyond BPCs

Q and A

Agenda


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Appendix


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Initial Success the percent of businesses that responded yes to the question didyou succeed in founding or expanding your business?

Formalization the percent of businesses that were formally constituted beforegovernment authorities or that paid taxes

Survival Rate the percent of businesses that survived one or two years

Sales Growth the dollar value of the growth in annual sales from before thecompetition to either one or two years afterwards

Capital Raised total capital raised from founders, partners, banks, microfinanceorganizations, and other sources

Employee Growth the change in the number of either full-time or total employees inthe one or two years following the competition

Throughout the presentation, we will focus most heavily on two-year dollar salesgrowth, as a holistic measure of business growth and TechnoServe impact

35

Key Performance Indicators


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(a) Based on multiple regression analysis, controlling for age, gender, year, country and selection bias.

New Business: Training Impact (a) Existing Business: Training Impact (a)

Impact

ofT

rainin

g:2

68%

($40,000)

($20,000)

$0

$20,000

$40,000

$60,000

$80,000

$100,000

Non-

Participants

Participants

Impact

of

Training

Impact

of

Other

Factors


Impact

ofT

rainin

g:140

%

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

Non-Participants Participants

Series3

Series2

Series1

Impact

of

Training

Impact

ofOther

Factors


Training has a

substantial impact

on both new and

existing

businesses

Impact: New and Existing Businesses


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The difference in sales growth isstatistically significant

The pattern holds across other KPIs,although not always statisticallysignificant

Comparison of Impact Amongst Existing Businesses of Different Ages (a)

Key TakeawaysAnalytical Notes It appears that among existing

businesses, the youngest ones havethe greatest potential for impact

(a) The younger participants are heavily influenced by one entrepreneur with two-year sales growth of $760,000.The difference holds, but is smaller, when he is excluded.

$25,036

$57,333

$15,397$23,669

$0

$20,000

$40,000

$60,000

$80,000

Non Participants Participants Non Participants Participants

Greater than 4 years oldLess than 2 years old

One-year sales growth (US$)Training appears to have had the greatest

impact amongst young businesses

Impact by Age of Existing Businesses


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Overview on Various KPIs

Various KPIs: Participant and Non-Participant Averages and Predicted Impact (a)

(a) Based on multiple regression analysis that controls for age, gender, country, year, and selection bias.

(b) *** 99% confidence; **95% confidence; *90% confidence. Phase II includes impact of prize.(c) Refers to the question: Did you succeed in establishing or expanding a new business?(d) Percent of new businesses founded that were formally constituted before the authorities.

Participation and Phase II completion have an enormous impact on sales, capital mobilized, and initialsuccess

The impact of Phase I is ambiguous across variables. The program impact on employment growth isambiguous as well.

Predicted Impact of(b)

Participant

Average

Non-Participant

Average Participation Phase I Phase II

1-Year Sales Growth $12,476 $3,738 110% *** 38% 333% ***

2-Year Sales Growth $17,053 $5,925 146% *** 55% 253% ***

1-Year Full Time Employee Growth 1.33 0.48 39% 26% 2%

2-Year Full Time Employee Growth 1.23 0.77 18% (12%) 58% *Total Capital Mobilized $16,803 $8,173 172% *** 91% * 224% ***

Initial Success Rate (Self-Described)(c)

46.6% 30.4% 42% *** 4% 81% ***

2-Year Survival Rate (Only New Bus.) 72.5% 50.0% 73% ** 73% 22%

Rate of Formalization (Only New Bus.) (d) 84.5% 76.2% 22% 27% (11%)


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SMEs trained

South America SME PromotionMain Figures

SMEs that operate with BPC

SMEs that obtain financingthrough BPC

Jobs created

* Until Dec 2010

Increase in revenue from SMEs MM.


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Supply Chain DevelopmentPrograms

Focused on training and

developing suppliers tostrategically support aspecific value chain

Usually large number ofcommodity type producersinvolved

1

Entrepreneurship

Convene efforts to attract

entrepreneurs with ideas orexisting businesses

Through competitions,large number ofentrepreneurs convened,trained and reduced inorder to provide support

3Local Economic

Development

Aimed at promoting

productive businessventures to improvelivelihoods in a specific area

A small number of existingagro-producers or supplierspromoted to becomerainmakers

2

EXAMPTechnoServes main lines to promoteentrepreneurship


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Generatebusinesses thatcan increaseresidual income

Establish accessto new products orservices

Influence thecommunity

Create businesstraining and know-how

Improve quality oflife through selfassurance

Convey knowledgeto the community

Obtain respectfrom others

Develop close tieswith businessenvironment

Promotecommunityintegration andgrowth (gender)

BusinessOpportunities

Products orServices

LocalCommunity

Focus

Economic

Capability

Relational

Wellbeing

TNSs Economic Inclusion Model

TechnoServe model is based on three critical aspects


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Thank youfor your attention

Documents

Techno Serve