Philippine Cold Chain Project (PCCP)

Business Planning for Producer Groups

I. Introduction

This Business Planning module forms parts of the training curriculum to equip PCCP Producers
Group with knowledge and skills for a profitable farming business. It includes module on farming
as a business, enterprise development, business planning, production module, and the
agroenterprise and action planning processes.

II. Business Planning for Producer Groups

A. Targeted Participants:

This training is intended for all PCCP assisted Producer Group members as a requisite in
selecting an Agroenterprise for horticulture, livestock, and fishery commodities.

B. Objectives:

This training aims for participants to:

1. Gain a clear understanding on the importance of a business plan;

2. Decide a feasible and profitable agroenterprise to work on;
3. Complete a Production Modue of a chosen enterprise, and;
4. Develop a realistic agroenterprise business and action plan

C. Training Methodology:

1. Lecture and discussion

2. Workshops

D. Length of Training:

This is a 1 ½ day training including lectures and workshops.

E. Course Content:

Module 1: Farming as a business enterprise

Farming can be viewed as an enterprise and recognized for the risk taking by farmers from
production activities up to point of marketing their produce profitably.

Food production is not just crop cultivation. It can also mean agro-processing as a link in the
supply chain as presented in the illustration below:
 Sellers Products Buyers

Product Packaging Handling Transport Consumer

Marketing Channels

Farming as a Business

Farming as a business is built on the principles of improving farm production to increase profits
and/or ensure sustainability of farm output. Treating farming as a business helps farmers to get
the best out of their farms and their resources.

Tips to consider in farming enterprise

• Farm goals are defined, such as …. Where is the business going?

• What needs to be done?
• When everyone involved with the farm (family members, extension workers,
development agencies, etc.) understands the goals, they will work better together
towards them.
• Valuable information is collected through record keeping, and used to make better
decisions affecting the farm.
• Communication about the business is improved.
• An organized farming business is more likely to attract financial resources from multiple
sources

Requirement for a successful enterprise

• Skills and knowledge necessary to grow crops or raise animals including fishery
• Production requirements such as land, fishpond, etc.
• Marketing skills
• Financial resources to develop operation.
• The necessary business management skills

Choosing an Enterprise

Form a product focused enterprise within the PG

Choose an enterprise from a project focused value chain to work on. Then, join up with a few
other participants who want to work on a similar enterprise (for PCCP, we call it a marketing
cluster). Together you will form an enterprise group and will work on developing a business plan
for that enterprise.
Deciding what enterprise to work on:
 • What to produce?
• How much to produce?
• How to produce it?
• What are the required financial resources

Undertake technical feasibility

You need to make sure that your land and soil or your fishpond is suitable for the chosen
enterprise, and that the climate, rainfall and temperature will make production possible. If not,
you should not choose the enterprise

An example of rating for a technical feasibility is given below:

Technical Production Factors Rating (Okay/ Not Okay)

For crops
Soil Okay
Climate Okay
Topography Okay
Water availability Okay
For Livestock
Climate Okay
Housing Facility Okay
Water availability Okay
For fishery
Climate Okay
Fingerlings availability okay

Workshop I. Technical Feasibility

Instruction: Ask participants to fill-up the form below in assessing the technical feasibility of their
chosen enterprise. Print out the template below and distribute one (1) copy each to the
participants.

Agroenterprise:______________________________________
Name of PG member:_________________________________
Addres:____________________________________________

Technical Production Factors Rating (Okay/ Not Okay)

For horticulture
Soil availability to till
Climate
Field Topography
Water availability
Crop Variety Seedlings availability
Labor Requirement
Knowledge and Management Skills
Potential Market
For Livestock
Climate
Housing Facility
Pig Pen Facility
Farm elevation (not flooded)
Ventilation( comfortable for pigs)
Water availability
Piglets availability (good genetics)
Knowledge and Management Skills
Labor Requirement
Potential Market
For fishery
Climate
Site
Water Quality (salinity, depth, etc.)
Cage/ Pen
Capital
Source of Stocks
Feeds availability
Technology and Management Skills
Labor Requirement
Potential Market

Assess physical resources and inputs availability

Check the physical resources and inputs needed by your enterprise, and whether or not you can
get them. If you are able to get all the resources you need, in the quantity you need them, then
you can choose the enterprise. If you are not able to get all the resources you need, then you
will have to choose another enterprise.

Assess Labor Requirements and Availability. The next challenge is to check what labor is
needed and whether or not you have enough. If you can get all the labor you need, then you
can go ahead with the enterprise. If not, then you will have to choose another enterprise.

Farm Business Profitability

Better farm management can reduce the losses and increase the production of small scale
farmers and PGs, increase in production, enhanced productivity, better farm management,
collective purchase, transportation, and marketing ensured profitability.
The understanding about the profitability of enterprise is important. This relates to the
identification of product, planning, procurement, management, and marketing, selling and
developing strong relationship with the market.

Module 2. Enterprise Development

The process of enterprise development includes marketing, value chain, and value addition.

Marketing
Agricultural marketing is about finding out what the consumer needs and then making a profit by
satisfying those needs. It includes all the activities and services involved in moving an
agricultural product from the farm to where it is sold to a consumer.

This is the value chain that links farmers with consumers. Many people provide services that
make the value chain work smoothly.

It is often thought that marketing begins only after the harvest. The activities commonly
associated with marketing include cleaning, drying, sorting, grading and storage, as well as
things like transport, processing, packaging, advertising, finding buyers and selling the product.

Generally, marketing is illustrated in the concept below:

Product. The characteristics of the products will influence the customers’ decision to buy. This
includes product quality and packaging
Price. Setting the price on a product means you also need to know the product cost.
Remember, your total profit from sales depends on how
much profit you make on each product or service and how
many of each products or services you are able to sell
Place. This refers to the location where a product can be
purchased. It also means to the point of exchange
between buyers and sellers or the market.
Promotion. Your business should know how to attract
customers. It means informing and attracting the
customers to buy your products or services. This can be
done through advertising, personal selling, sales
promotion, and word of mouth.

Value Chain

The term value chain refers to the fact that value is added to preliminary products through
combination with other resources. This includes activities such as preparation, identification,
design, production, marketing, distribution and support services up to the final consumer.

There are major drivers of change that trigger and promote value chain development in
agribusiness which include the following:

System efficiency. There are opportunities for reducing costs and increasing efficiencies on
the market if the value chain stakeholders such as PG members work together. Buyers want to
buy products of the highest possible quality at the lowest possible price; they want quick and
flexible responses to their orders and short delivery times.

Product Quality. Markets today are changing fast and competition is also increasing. If
enterprises want to stay in the market, they need to make sure that their products and services
meet continuously changing market requirements and demand conditions.
Differentiate products. Innovation and learning has to take place throughout the entire value
chain if PG members want to remain competitive on local, regional and international markets;
consumers are demanding new products that require supply chain partners to share information
and systems or provide unique specialized inputs (e.g., special variety, uniqueness, genetics)

Rewards and Benefits of Value Chain

The rewards of implementing a value chain approach are:

 Competitive edge over other enterprise
 Buyers are assured of product quality
 Improved access to markets
 Reduced time to respond to changing customer demand, as a result of better
communication with chain partners
 More rewarding business relationships

Value Addition

Adding value is one way farmers can earn more from their product. Below are few examples of
value additions

Drying and shelling. There are certain horticulture produce that have to be dry enough to be
stored properly. Many traders will refuse to buy product that contains moisture, or will offer a
lower price if it is more than this.

Cleaning and sorting. Traders often pay a higher price if the produce does not contain foreign
matter such as sand, straw, stones or empty grains. They will also pay more for produce that is
sorted according to variety, size, color, shape, amount of impurity, and ripeness.

If farmers want to enter a new market, clean and sorted goods will give the buyer a positive
signal.

Bulking. Many farmers have only one or two sacks of product to sell. But traders find it time-
consuming and expensive to negotiate with lots of farmers to buy a small amount of produce
from each. Thus, collective marketing can best help. For many farmers this is one of the
simplest and most effective ways of increasing the value of their goods.

Packaging. Most products need to be packaged if they are to be sold in a market. Packaging
prevents the product from being damaged, contaminated or stolen.

Storage. Prices are low immediately after harvest, so if possible, it is a good idea to store
products until the price has recovered. Sometimes it is necessary to store for a few weeks until
the price is right.

Farmers need to monitor market prices to decide when to sell the grain to get a good price.

Processing. It is possible to add value to many crops by processing them into other products.
For example, meat is worth more than live animals

Module 3. Business Plan

A business plan is a database of information related to the details of a business activity such as
production processes, raw material, finance, support services and market.

A business plan is like a road map which makes it possible to know if the business is on the
right track and monitor achievements against objectives. The business plan also helps to
evaluate the strengths and weaknesses of the proposed business as well as the opportunities
and threats it faces. This can be translated into a detailed strategy and action plan for every
member of the group.

A farm business plan is simply the plan you have in your head about what you will produce and
how you will make money at it – written down on paper. In addition to its role as an internal
guide for the farm, a business plan may also serve as a proposal for financing.
Writing down your ideas allows you to see how your plans fit together, to identify the gaps and
to fill in the details. Listing out your projected income and expenses gives you sense of your
business’ potential to be profitable. Seeing the numbers laid out may indeed prompt you to alter
your plans until you have worked out a realistic strategy for achieving your income goals.

Essential elements of a good business plan

Vision, Goals, Mission, and Objectives. This includes an explanation of why are you farming,
what drives you, and what you hope to achieve through a career in farming.
Description of services/products. This includes what products and services you offer, both now
and what you hope to do in the future.
Marketing plan. This involves some market research. Include in your plan where, how, to whom,
and at what prices you intend to sell.
Production plan. This includes your planting/harvest schedules, fertility methods, pest
management plan, irrigation, suppliers, rotation plan, number of hectares to be used, etc.
A production plan or operations plan is a description of how assets such as raw materials,
machine, money, management, and time are used to develop a product in the production line or
provide a service.
Profitability. It is important to determine if your farm enterprise will make money. Projecting your
income and expenses will help you estimate if your plan will make a profit.

Financial Plan. This is the heart of the business plan. Sound financial management is one of the
best ways for business to remain profitable. To effectively manage PG finances, prepare
realistic budgets by determining the actual amount of money needed to open the business
(start-up budget) and the amount needed to keep it open (operating budget).

In Financial Planning, consider the following points:

 How much money do PG have?
 How will you secure funding?
 How much financial resources will PG need for start-up?
 How much financial resources will PG need to stay in business?
 What is the PG projected sales and profits for the coming year?
 What will be the monthly cash flow during the first year?
 Start-Up Budget
  Operating Budget (Covering 3-6 Months)

Operational Plan. This is applicable to the PG Cluster Plan. The operating portion of the plan
deals specifically with the internal (organizational) PG structure, operations, and equipment /
tools needed to operate its business.PG should discuss how the business will be owned and
managed, personnel and physical resource needs.

Additional elements (as needed):

Executive summary. This is a summary of your business plan and why it will succeed.
Business description. This provides an overview of the business and its objectives. It describes
the name of farming business, contact information, location, history, values, land, products of
your farm business, and target customers.
Financial Statement. This includes how much money you need to borrow and what for, monthly
cash flow budget, cash flow statement, balance sheet, and income statement.
Contingency Plan. Describe the risks your farm faces, such as injury/illness of a farm operator.
Is there someone who could step in on a temporary basis if needed? What plans are needed for
other sorts of unexpected events?
Module 4. Production Module

In a market clustering approach that PCCP is geared of, a production module can be best
determined by the PG members.
The production module is a standard unit of measure in farm production that is agreed upon by
the cluster as their guide to create standardized units of production across cluster members and
ensure efficient, reliable production.
It is considered as the common language between all cluster members, partners and business
actors in that it provides a standard for all discussion about supply costs, and returns, and
financing.
With a production module prepared by each PG member, it would be easier for the PG Cluster
to consolidate the Production Module at the cluster level.
Production Module Example Target Month: June 2016
Module Description Crop Production Module
Volume of production Eggplant 100 kg
Volume of production Lobster 100 tons
Volume of production Swine 10 heads @ 90kg
average/head

Workshop 2. PG Production Module

Instruction: Ask participants to fill-up the Production Module below based on their chosen
enterprise. What is their target production during harvest? The output of this workshop will be
used in the succeeding workshop. Print out the template below and distribute one (1) copy each
to the participants.
Name of Enterprise:___________________________________________
Name of PG Member: _________________________________________
Name of PG_________________________________________________
Address:____________________________________________________

Production Module Target Month:

Module Description (volume Crop Production Module (kg, tons, etc)
of production, no. of heads)

Module 5. The Planning Process

There could be two types of business plans need to be developed. First, each producer or PG
member will draft and submit their Agroenterprise Business Plan. The second business plan will
be made at the cluster level or group of PGs who will be doing the same enterprise in a
particular area.

For this business planning, an individual Agroenterprise Business Plan is expected from each
PG member.

Workshop 3. Business Planning

Instruction: Guide participants to make their own business plan using the template below. Print
out this template and distribute one (1) copy each to the participants. At the end of this
exercise, they should be able to submit their Agroenterprise Plan.

My Agroenterprise Plan

Enterprise:__________________________________ Date:________________________

I. Background

Name of PG Address and Contact Number Period of the Plan

Agroenterprise Objective: To market to number of _______buyers,

namely______________________________________________________________________
______________________________________________________________________(name
of buyers) through the PG Market Cluster, a total quantity of __________________good
quality product_________________, in_______________(frequency of delivery), from
____________________(period of deliveries); and earn a net marketing income of
__________________.

II. Production Plan

For Horticulture Produce

Crop Type Area Output (tons/ hectare) Total Output (kg)
Ex. Tomato 2 hectares 400 kg/hectare 800 kg

For Livestock Production

Type of Animal Number of Heads Output (kg/ head) Total Output (kg)
Ex. Swine 5 heads 90 kg 450 kg

Fishery Production
Type of Fish/ Number of Output (kg/cropping) Total Output (kg)
aquaculture Fingerlings
Ex. Lobster 200 pcs 200 kg/ cropping 40,000 kg

III. Market Plan

Enterprise Target Market Buyer Market Price Sales Target Promotion
(Php/ unit) (volume and
value/ kg)

IV. Profitability
Compute the possible profit contribution from each enterprise, and deduct fixed costs to arrive
at whole profit.
Item Quantity Unit Price Value (Php)
Ex. swine 90 kg x 5 P100 P45,000.00
= 450 kg
 Total Income
Variable Cost (itemize variable cost in production e.g. seeds, herbicides, feeds,
equipment rental, equipment repair, chemicals, fertilizer, hired labor,
miscellaneous, and any other operating costs related to production)
Item Quantity Unit Cost Amount
Ex. Feeds 50 kg 50 2,500

Total variable costs

Enterprise Profit (Income less variable costs)

Cash Availability
Do I have enough cash available to implement my enterprise?

a. I have the following cash available for my enterprise:____________________________

b. I need the following amount of cash for my enterprise:__________________________

( ) Yes I have enough cash ( ) No, I do not have enough cash

c. The amount of extra cash I need is :__________________________
d. I need the extra cash in the following months:

Cash Flow and Cash Availability

Activity Apr May June Ju Aug Sept Oct Nov Dec Jan Feb Mar
l
Cash Inflow
Crop Sales
Cash Available
Cash Outflow
Ex buy seeds
Labor hired

Cash Needed
Net Cash Flow

e. I can get the money from the following sources:

Source Amount

VI. Contingencies
Please enumerate possible risks you may encounter in the chosen enterprise.

Risks How will I handle risk? (risk mitigating measures)

Workshop 4. Agroenterprise Action Planning

Instruction: After completing the Agroenterprise Business Plan, ask participants to draft their
Agroenterprise Action Plan. Print out the template below and distribute one (1) copy each to the
participants.

My Agroenterprise Action Plan

Name of PG member:_______________________________ Date:____________________
Enterprise:______________________________
Action Duration Start Date Responsibility
Physical Resources and inputs

Labor
Market

Risks

References:

Integrated Costal Resources Management Project (ICMRP)

Moving Together to the Market: The Clustering Approach to Agroenterprise Development for
Small Farmers, 2nd edition. Catholic Relief Services, 2014
Enterprise Development Training Manual for Farmer Enterprise Groups
http://www.slideshare.net/AllahDadKhan/farm-record-keeping-by-allah-dad-khan?qid=443b37f2-
c19c-47f3-8cc9-f750bf53d931&v=default&b=&from search=1
Promoting rural women's cooperative businesses in Thailand. A training kit. FAO Corporate
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Beyond farming: Entrepreneurship, Enterprise and Industry, Institute of Economic Growth Delhi
University Enclave, Delhi 110007