PLANNING MICRO ENTERPRISE ACTIVITIES
by Phil Bartle, PhD
Good planning will increase potential for success of a micro business
A micro enterprise will not prosper unless its management (however modest) looks ahead to the future. New opportunities arise; changes take place in the environment which make it necessary to adapt. What is profitable today may not necessary be profitable tomorrow. So an entrepreneur needs to plan.
Business planning means thinking and working out what to do about something in the future, to start and to improve on your income generating capacity. Planning a micro enterprise, therefore, involves, among other things, forecasting costs, inputs, outputs, sales, profits and cash flows. Recall "How to make a Work Plan" for community mobilizers.
There are four reasons why a person engaged in a micro enterprise should make a plan:
Business planning is necessary because:
Planning a micro enterprise is like planning a journey. Ask yourself:
How to Make a Plan:
There are two kinds of plans useful for your micro enterprise:
When you make plans:
Steps in Making a Plan:
Steps for making a sales and costs plan for your micro enterprise:
Note: indirect costs include: rent, transport, licences, insurance, stationery, electricity and water, repairs and depreciation.
A Cash Flow Plan:
A cash flow plan is a forecast which shows how much cash to expect to come into the enterprise and how much cash to expect to go out of the enterprise each month. A cash flow plan helps an entrepreneur to make sure that the enterprise does not run out of cash at any time, (ie this is a projection of expected incomes and expenditures in a stipulated time period).
The micro enterprise should not run out of needed cash. The cash flow plan can be used to make sure that the enterprise always has enough cash to pay for costs. An enterprise can make a good profit in a year but still run out of cash during that year.
There are several reasons why a micro enterprise may run out of cash. For example:
When you plan your cash flow:
How To Make A Cash Flow Plan:
To make a cash flow plan, you forecast: How much cash will come in; and How much cash will go out.
Cash Flow Plan
Exercise: Prepare a Cash Flow Plan
South Side Women's Group Maize Mill project, with seven members, had cash on hand at the beginning of January totalling 20,000/=. The enterprise makes average sales of 150,000/= per month. It receives members' monthly contributions of 15,000/=. It spends 70,000/= every month to purchase 2,000 kg of maize. The monthly pay for workers is 20,000/=. The enterprise spends 12,000/= every month to pay for transport.
Note: In Uganda and Kenya, the currency is in shillings, and the currency sign, placed at the end of the amount, is: /=
Prepare a cash flow plan for South Side Women's Group Maize Mill project for six months and show:
Do this as an exercise, using the previous table as a model.
A Planning Workshop:
© Copyright 1967, 1987, 2007 Phil Bartle