Basic business manual

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BASIC ENTREPRENEURSHIP
TRAINING MANUAL
Compiled by:
Nicholas Mundia
Caritas Mongu

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1.0 WHAT IS ENTREPRENEURSHIP?
1.1 What is an entrepreneur?
• An entrepreneur is someone who produces for the market. An entrepreneur is a determined and
creative leader, always looking for opportunities to improve and expand his business.
• An entrepreneur likes to take calculated risks, and assumes responsibility for both profits and losses.
An entrepreneur is passionate about growing his business and is constantly looking for new
opportunities.
• Entrepreneurs are also innovators. They always look for better and more efficient and profitable
ways to do things. Being innovative is an important quality for a farmer-entrepreneur, especially
when the business faces strong competition or operates in a rapidly changing environment.
1.2 FARMERS AS ENTREPRENEURS
Can small-scale farmers become entrepreneurs? Yes.
• Small-scale farmers all over the world have shown a remarkable ability to adapt. They look for better
ways to organise their farms.
• They try new crops and cultivars, better animals, and alternative technologies to increase
productivity, diversify production, and reduce risk – and to increase profits.
• They have become more market oriented and have learned to take calculated risks to open or
create new markets for their products. Many small-scale farmers have many of the qualities of an
entrepreneur.
For small-scale farmers to become entrepreneurs they need all of the following qualities and more.
• They need to be innovative and forward-looking.
• They need to manage their businesses as long-term ventures with a view to making them
sustainable.
• They need to be able to identify opportunities and seize them.
• The farmer-entrepreneur produces a clear picture in his mind of what is possible and the future he
wants.
• He knows that what is possible is determined by the market.
• The farmer-entrepreneur is always looking for new opportunities. He knows that new opportunities
are found in the market.
• The farmer-entrepreneur wants to make profits. He knows that profits are made in the market.
Some small-scale farmers do have these qualities, but they still focus on maintaining their traditional way of
life. Their production decisions are based on what they need -- not on what is possible.
1.3 Entrepreneurial qualities
The difference between farm business management and entrepreneurship.
1. Farm business management is about better planning, implementation, control and managing risk.
2. Entrepreneurship is about looking forward – identifying opportunities, creating a vision of how the
business will grow, innovating and taking risks.
• A farmer who thinks of the farm as a business that has potential to grow and develop is an
entrepreneur.
• Entrepreneurial farmers look at their farms and see ways to make them more profitable; they
develop ideas and then translate them into action.

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• They need self-motivation, determination and confidence with an ability to plan and organise the
farm business. These qualities enable entrepreneurial farmers to seek-out business opportunities and
initiate new business ideas and guide the farm business to accomplish the goals set.
1.4 KNOWLEDGE
Entrepreneurs need more than just their personality or personal traits. They need ideas, opportunities, and
resources. Knowledge allows farmers to make informed choices. It puts them in a better position to
compare the current practices being used with alternatives. Farmers obtain knowledge through experience
and observation- from listening to and learning from other farmers, observing how things are done and then
practicing it themselves. Extension workers are another source of knowledge. Information and its
communication is an important aspect of knowledge creation and accumulation.
1.5 ENTREPRENEURIAL CHARACTERISTICS
Confidence
• Risk taker
• Self confident
• Positive
• Influential
Flexibility
• Flexible
• Adaptive
• Change is an
opportunity
• Tolerates
uncertainty
Competition
• Competitive
• Takes initiative
• Goal-driven
The farmer-
entrepreneur
Core values
• Trustworthy
• Honest
Drive
• Highly
motivated
• High energy
• Determined
Problem-solving
• Problem solver
• Creative
• Innovative
• Imaginative
• Learns from failure
2.0 HOW TO GENERATE BUSINESS IDEAS
2.1 Definition: A business idea is a short and precise description of the basic operations of an intended
business. A good business idea starts with a good business idea. Before you can start a good business
you need to have a clear idea of the sort of business you want to run.

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2.2 What is Capital? Capital is a Greek word which means an idea, we have mistakenly been told that
capital is money, but the truth is capital is all about a business idea, because it is only an idea that
attracts money. Capital is birthing a business idea.
Every business you see today started with a business idea and the idea was put on paper as a plan; in
order to enable the idea to grow, one can identify a good business idea through positive creative
thinking. This can come from different sources such as ideas built upon local resources, local needs,
local activities, interests and hobbies.
A good business idea can also be developed from perceived business opportunities. A business
opportunity is a gap between what the community wants to purchase and what existing business
community is offering. The gap can be filled by an entrepreneur.
Your business idea should tell you the following:
• What product or service to sell,
• Who you will sell to,
• How you are going to sell your product or service,
• Which need your business will fulfil for the customers.
One can come up with several business ideas. These should be listed down and after careful thought
the list can be reduced till the most suitable idea is left.
The success of your business will be influenced to some extent by internal and external factors in the
business environment that will be applied by and through the particular industry of your business. The
success of your business, therefore, will largely depend on how you set your business gaols and analyse
the industry in which you operate.
2.3 The Business Goal
A goal is a set target that your business aims to achieve. The goal the business sets for itself must be
Specific, Measurable, Achievable (Attainable), Realistic and Time-bound (SMART). For example, a
business may decide on goals like:
• To increase the market share by 30% by 31st December, 2010.
• To increase rice production from 300 x 50 kg bags per year to 500 x 50 kg bags per year by
2012.
3.0 MARKET
3.1 What is A Market?
• A market is the set of actual and potential buyers of a product. These buyers share a particular need or want
that can be satisfied through exchange.
• The size of a market depends on the number of people who exhibit the need, have resources to engage in
exchange, and are willing to offer these resources in exchange for what they want.
3.2 Market is...
• The customer who NEEDS what you are selling.
• The CUSTOMER who is ABLE to buy what you are selling.
• The CUSTOMER who is WILLING to buy what you are selling.
4.0 HOW TO MARKET YOUR BUSINESS
4.1 Definitions: Marketing is defined as every effort made by an entrepreneur to find out who their
customers are, and what they need and want. It is how to satisfy customers while making a profit by
• Providing products or services they need

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• Setting prices they are willing to pay
• Getting your products or services to them
• Informing and attracting them to buy your products or services.
4.2 Marketing Mix
Marketing is an important part of starting and running a business. Your product or service may be
good, but if you do not market it in the right way no one will buy it. One way to market your product or
service is to have a proper combination of the five (5) Ps of marketing. These five Ps are referred to as the
marketing mix. The marketing mix consists of:
• Product
• Price
• Place
• Promotion
• Person
All the time you are running your business, you must learn more about your customers and competitors. It is
important that you listen to your customers` wishes, sell good products, provide good services and give the
customers good service.
4.3 Product or Service: What do you sell?
• Deciding which product and/or service to sell:
• Finding out which product or service will attract customers
• Finding out if similar products or services are sold. How are they made or delivered?
• Finding out what customers like or dislike about them. Can they afford it at the price you sell it?
• Identifying (quality) raw materials at a good price
• Exploring how many products or services can be delivered within a specified time
• Improving the quality of your product or service
• Making your product or service more attractive. How do you package it?
• Providing services to go with the products, and vice versa.
4.4 Price: Setting Your Price to Make a Profit
• Calculating the costs of producing and selling
• Setting your price
• Taking prices of competitor’s products into account (price segmentation)
• Special prices to attract customers to your business for quick sales
• Find out if customers’ purchases are based on price, quality or both
• Demand can change at different seasons of the year, in different locations or by type of customers.
Will you set different prices?
4.5 Place/Distribution: Finding the Best Way to Distribute
Your Product
• Who will sell your product?
• Will you use retailer, a subcontractor or other agent or will you sell directly?
• Getting your product to the market or customer
• Type of transportation, cost of transportation
• Cooperation with other business people to sell or distribute together
• Where to sell: house to house, market shops
• Methods of storage and the cost of storage
• Place (location) of business, condition of place (clean and dry)

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4.6 Promotion: Creating Ways to Persuade Customers to Buy
Your Product
• Display products in a nice way (for example, fresh leaves underneath the fruit you sell)
• Provide signs for prices
• Provide signs with product information (for example, ingredients; date of production for
processed food items
• Check the sales behaviour (addressing the potential customers in a friendly and efficient manner)
of yourself and your staff
• Ensure cleanliness and neat appearance of yourself and the people who sell your product or
service
• Decorate your place, product or service to entice a customer to visit your stand, shop or other
premises
• Find ways to introduce new products (free samples, demonstration on how to use the product)
• Find ways to advertise (with signs, music, and promotion activities through special sales).
4.7 Person: Relations, Attitudes and Reputation
• The relationship between the entrepreneur (producer, salesperson, marketing person) and her
clients, suppliers and other persons important to your business
• The attitude of the entrepreneur (friendly, hospitable, capable and efficient)
• The personal reputation of the entrepreneur in the location (area, village)
6.0 TYPES OF MARKETS
6.1 Farm Gate Marketing- this is marketing done by the farmer at the place where the product is produced
— from the “farm gate”. Consumers come to the farm to buy produce.
Advantages of farm gate marketing:
• No transport costs;
• Can be marketed by the farming family, thus costs are reduced;
• Better suited to the small-scale farmer.
Disadvantages of farm gate marketing:
• farming family must accept the local price for their produce which may be lower;
• farm may not be well located to market the product
• Once the local market’s demand is supplied, the farmer has to look to more distant markets.
6.2 Farm Stall or Road side Marketing- This channel is a further development on marketing from the farm, as
it goes some way towards taking the product to the consumer. A farm stall may be operated by a farming
family or farmer group marketing their own produce. An individual may operate a stall on behalf of local
farmers or farmer groups.
Advantages of farm stall marketing:
• Minimal transport costs
• Larger markets can be exploited.
• Farmers can take advantage of more favourable prices.
• Price fluctuations are generally small.
Disadvantages of farm stall marketing:
• The quality of the produce may need to be higher as the consumer in the market may be more
demanding.
• A constant supply of produce must be available to satisfy the needs of the market

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• Farmers must be flexible on pricing the produce.
6.3 Direct Sales to Larger Buyers
This can include sales to: - Institutional buyers (feeding large numbers e.g. Police, Army, Education,
Hospitals), Hotels and resorts, Restaurants Guest houses apartments, Supermarkets and stores
Advantages
• An assured outlet for the farm production
• Usually is a local sale so transport is not expensive
• Usually a consistent demand
Disadvantages
• One farmer may not be able to meet the demand throughout the year
• Usually a range of products is required and the buyer may prefer to deal with only one supplier
• A high standard of product is required
• Usually an informal contract which can be varied at short notice resulting in some production unsold
6.4 Door to-Door Marketing (Vending) - With door-to-door marketing, farming families market their produce
directly to consumers at their households.
Advantages of door-to-door marketing:
• can be sold and promoted by the farmers themselves;
• Marketing margins can be reduced; meaning a higher price for the product can be obtained.
Disadvantages of door-to-door marketing:
• transport is essential and may be difficult or expensive;
• Time required for marketing may be longer than if the farmer sold through other channels.
• Usually requires a supply of a range of products available on a regular basis to build up customer
interest
6.5 Sales to Local Dealers, Packers, and Exporters- There are usually dealers in any area willing to buy
produce directly from farmers. These may be merchants who sell to exporters or larger institutional buyers or
to urban markets. In some cases they may be acting as agents for a processor.
Advantages:-
• Produce can be delivered locally so transport is less
• Larger volumes can be sold
• Farmer does not have to spend time in marketing
• Production can be of only one or a few commodities
Disadvantages:-
• Price will be less than direct sales to consumers as the dealer’s profit margin and handling and
transport costs will be reflected in lower prices offered

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7.0 MARKET INFORMATION
“Why is market information important to business people?
A successful business is the one that seeks information in order to continue meeting the needs of its
customers.
7.1 Market survey
The market survey aims to gather information about the actual and potential markets for the trader’s
products. It aims to answer three main questions:
What is the demand for the products that the traders are interested in?
What are the buying conditions for these products?
What other products are in high demand or scarce supply?
5.0 BUSINESS
5.1 Definitions: A business is a commercial activity which operates with the intention of making profit, if not in
the short term, then in the medium to long term.
• Business is an activity operated for the purpose of earning a profit by providing a service or a
product.
• It involves a businessperson putting money into the business activity
• It is important to appreciate that for farmers to go into any business they need to have a product or
services which must have a market demand.
• Market demand in turn is determined by quality, pricing, packaging and promotion.
5.2 Seven important elements of business
Element 1: Business is the provision of products and/or services.
• What products are produced by the farmers in the province that we are offered for sale?
• Why are the farmers producing these products?
• What potential products and services can be developed for new businesses?
Element 2: Products and services are supplied for a profit.
• Are the farmers in the province making profit?
• How are profits determined?
• Are they engaged in their business of farming in the best possible way?
• Are they keeping record of expenses and incomes?
Element 3: Sales are dependent on the market.
• What is the market demand and situation today of the farmers' products and services in the
province
• Is there potential for new markets?

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Element 4: Sales are also dependent on quality.
• What is the existing quality of the farm products and/or services?
• Is there potential to add value to the products and/or services?
Element 5: Sales are also dependent on pricing.
• Are the prices farmers being paid competitive or controlled by others?
• What can farmers do to improve their pricing situation?
Element 6: Sales are also dependent on packaging.
• Is the packaging of produce/merchandise attractive and convenient to attract buyer interest?
• What are the possibilities of improving the packaging for the products and/or services?
Element 7: Sales are also dependent on promotion.
• Are the farmers promoting their products and how effective is the promotion?
What possible strategies can be developed to promote the sale of their products and/or services?
8.0 RECORD KEEPING
Record keeping involves the management and recording of the flow of money. This includes all money
coming into the enterprise (income) and all the money going out of the enterprise (expenditure).
Every entrepreneur needs to know the financial position of his or her business at any time. Business records
show:
• How much money the business has available to spend
• How much money it owes to suppliers for goods and services
• How much money customers owe to the business
• How much money is remaining in the business
The entrepreneur must also know:
• How much money he/she needs to run the business
• How much money he /she has to spend on raw materials, transport and other essential items
• Whether the business will have enough money each month to meet its obligations.
Good record keeping will help the entrepreneur to all financial questions and be able to plan the future
better by seeing clearly what successes and mistakes have happened in the past.
8.0 PRICING AND COSTING YOUR PRODUCTS & SERVICES
8.1 Pricing Decisions
The entrepreneur always decides the price of a product or service he or she is providing. Pricing must
always take into account the total cost of goods and services plus profit. When deciding on the price,
it is important to take into consideration the following factors:
1. Organisation’s objectives: is it to maximize profits or increase market share.
2. Market in which the organisation operates.
3. Demand: Is demand for the product and service available
4. Price elasticity: is a measure of how sensitive customers are to changes in price of products and
services
5. Market price: How much your competitors are charging for similar products
6. How much your customers are willing to pay for the product/service

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7. When the business is new on the market and would like to win customers, you may use penetration
prices.
(Penetration pricing is a marketing technique in which a company offers a new product at a price
significantly lower than its competitors. Once it has gained a large market share and customer base,
the company begins to increase the price of the product. Companies sometimes use this technique
when offering a new product to encourage customers to try the product)
8. Government pricing policies.
E.g. pricing for rice processing business as a farmer after determining the unit cost, add a certain
proportion of the cost which will include a reasonable profit to determine your selling price. This
proportion of the cost is called the mark-up. For example in rice processing business, selling rice
targeting the Lusaka market.
Total cost 10 kgs of rice is K 50,000 (unit cost)
Mark up of 50% is K 25,000 (mark-up)
Selling price K 75,000
The unit cost plus the mark-up, equals selling price.
When the mark-up is expressed as a proportion of the selling price it is called profit margin.
Pricing is a key marketing tool which if used properly can ensure the success of a business. When
pricing all the costs incurred by the business should be known.
8.2 Definition: Costing is a process of determining how much it costs to make a product or provide a
service. It forms the basis for pricing products or services profitably.
There are different costs, namely;
8.3 Direct costs- which are costs of items that become part of the product or service you provide. Can
further be classified into:
(i) Direct material costs which are costs of components of the final product e.g. seed, fertiliser,
chemicals or fruit for jams.
(ii) Direct labour costs are wages paid to workers e.g. labour for tiling land, weeding and
harvesting.
8.4 Indirect costs (overhead costs)-are costs not directly associated with the product or service but are
shared across a number of products e.g. wages paid to self and family members, electricity bills, water
bills and rentals.
How to calculate the cost of a product/service:
Step 1 Calculate the direct material costs per unit using the formula:
Direct material costs per month
Number of items produced e.g. bags of beans
Step 2 Calculate the direct labour cost per unit: Labour costs per month
Number of items produced
Step 3. Calculate the indirect costs per month: Indirect costs per month
Number of items produced
Step 4 Calculate the total unit cost: Direct material costs per unit + direct labour costs per unit +
indirect costs per unit =Unit Cost