ministry of agriculture livestock and fisheries farm business training ma… · c. input records...

STATE DEPARTMENT OF LIVESTOCK

MINISTRY OF AGRICULTURELIVESTOCK AND FISHERIES

On farm Business training Manual

Smallholder Dairy Commercialization Programme (SDCP)

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Feeds & feeding management manualOn farm Business training Manual

Table of ContentsTABLE OF CONTENTS iiiPREFACE ivACKNOWLEDGEMENT ivTraining areas for farmers v

Lesson 1: Introduction to entrepreneurship 4Lesson 2: Identification of business opportunities 6Lesson 3: Starting a business 8Lesson 4: Farm management 10Lesson 5: Financial management 13Lesson 6: Marketing 17Lesson 7: Regulatory requirements 18Lesson 8: Cross cutting issues affecting business 20

REFERENCES 21

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Preface

This manual was developed with the support of the Government of the Republic of Kenya and International Fund for Agricultural Development (IFAD) funded Smallholder Dairy Commercialization Programme.

The team who prepared the manual comprised the following:• GraceKimaru–AgribusinessSpecialist,MinistryofLivestockDevelopment• EvansonMwangi–KenyaDairyBoard• PiusCheserek–KenyaDairyBoard• WinfredOlubai–GroupDevelopmentOfficer,SmallholderDairyCommercializationProgramme• LornaMbatia–DairyEnterpriseDevelopmentOfficer,SmallholderDairyCommercializationProgramme

Acknowledgement

This manual is a tool to guide trainers who are facilitators in enterprise development. The content has been developed based on training needs identified under the Smallholder Dairy Commercialization Programme (SDCP) which is jointly funded by the Government of the Republic of Kenya and the

International Fund for Agricultural Development (IFAD). The Programme implementation period is 12th July 2006 and 30th September 2015. While the approach was to address the Programme’s design and beneficiaries’needs,thelessonscanbeappliedwidely.

The purpose of this training manual is to guide trainers who facilitate in the training of commercially oriented smallholder dairy farmers dealing primarily in milk and dairy products for their livelihood. This guide is intended to provide basic training for business operators to whom farming as a business and the commercialization approach to smallholder dairy operations is relatively new. It is a simple guide that should be easy to use for facilitatorswhoaremainlyextensionofficersinthefieldofanimalproduction.

Thetopicscoveredincludeidentificationofbusinessopportunities,startingabusiness,farmmanagement,financialmanagement,marketing,regulatoryrequirementsandcrosscuttingissuesaffectingbusinesses.

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Training areas for farmersI. Identification of business opportunities in dairy farming

• Selectionofviableopportunities–e.g.basedonmarketopportunities• Analysisofbusinessopportunities–grossmarginanalysis,situationanalysis• Prioritization(haveatoolforprioritization-scoringmatrixe.g.onbasisofmarket, labour,costofproduction)• Entrepreneurshipskills

II. Starting a business• Sourcingforinformation–marketinformation,extension,businessdevelopmentserviceproviders–

acquisition of technical skills required for the selected enterprises• Networking,collaboration,buildingpartnerships,-toidentifylegalandpolicyissues,licensing

requirements,valuechainconcept–roleofvariousplayers,Groupdynamics• Planning–businessplanning,farmplanning,budgeting• Skillsforstartingabusiness

III. Record keepingIV. Farm managementV. Financialmanagement–simpleaccountingVI. Marketing–negotiation,contractsVII.Regulatoryrequirements–standards,licencesVIII. Cross cutting issues affecting business

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Lesson 1: Introduction to entrepreneurshipThe broad objective is to inculcate entrepreneurship skills

ObjectivesBy the end of the training participants will be able to:1. Define common terms in entrepreneurship2. List characteristics of an entrepreneur3. State 3 reasons why people start business4. List 5 factors that make businesses fail or succeed

Content• Definitionofterms:business,entrepreneurship,entrepreneur,businessman• Characteristicsofanentrepreneur• Reasonsforstartingbusiness• Factorsthatmakebusinessesfail/succeed

Methodology:Lecture,groupdiscussionDuration: 2 hoursEvaluation/assessment:Questionsandanswers,grouppresentations

Facilitator’s notesDefinition of terms:

Business (1) The work of buying or selling products or services for money (2) An organization that buys or sells products or services for money (Macmillan)

Entrepreneur-Apersonwhostartsanewbusiness,takingtheinitiativeandtheriskassociated withthenewventure,andwhodoessobycreatingsomethingneworbyusing resources in unusual ways to provide value to his or her customers (Holt).

Risk– Thepossibility/chanceofanegativeorundesirableeventoccurringe.g.failure, loss,drought,famine,hailstorm,accident,injury,illness,death,theft,fire

Characteristics of an entrepreneur• Innovation–entrepreneurscreatenewthings/businesses and are open to trying new ideas and ways of doing things• Risktaking–entrepreneurstakecalculatedrisk• Self-drive–entrepreneursareselfmotivatedanddonotrequiresupervisionforthemtowork• Needforachievement• Needforfeedback• Diligence• Networking

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Reasons for starting businessPeople engage in business for various reasons. Among the reasons for starting business are:

• Needforindependence–desiretobeownboss.• Selfactualization.Owningandoperatingasuccessfulbusinessgivestheentrepreneurasense

of achievement.• Positivepull factors.Thesearedesirable/positive factors that attractpeople toengage in

businessforexample,theinfluenceofmentors,profession/skills,availabilityofresourcesandopportunities e.g. ready market for milk in a new residential estate.

• Negativepush factors.Thesearenegativeeventswhichaffectpeoplebutwhichcreateaneedforthemtostartabusinessforexample, lossofa job,deathofspouse,divorceanddisplacement.

Factors that make businesses succeed/ failThesuccessorfailureofabusinessisinfluencedbyfactorswhichcouldbepersonalor attributable to the environment both internal and external.

• Personalattributes–goodmanager/leader,selfdiscipline,diligence,persistence• Environmentalfactors

- internale.g.management,skills,employees- external(Political,Economic,Social,Technology,PhysicalEnvironment,Legal) e.g.ecological,location,policies

Discussion: Are entrepreneurs born or made?

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Lesson 2: Identification of business opportunitiesObjectivesAt the end of the training the trainee will be able to:

• Listatleast5on-farmbusinessopportunities• Select3viablebusinesses• Analyzetheselectedopportunitiesusingbusinessanalysistools• Ranktheopportunitiesandpickatleastoneforimplementation

Content• Generationofbusinessideas• Selectionofbusinessopportunities/screeningofbusinessideas• Analysisofbusinessopportunities

MethodologyLecture,discussion,groupwork,demonstrationDuration: 4 hoursEvaluation/assessment:Grouppresentations,questionandanswer

Facilitator’s notesGeneration of business ideasBusiness ideas can be generated through:1. Spotting a market niche: There could be gaps in a market for example where a product that is required but it has to sourced from far or it is missing altogether2. Listening to what people say: These could be local conversations or through mass media 3. Observation of the environment and trends4. Attribute listing5. Gainingfromwastee.g.recycling,saleofmanure,preparationofanimalfeedfromcrop

residues,productionofbiogas,etc

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Screening business ideasThere are many business ideas that can be generated. However not all of them can be implemented and become profitable businesses. There is therefore need to test the ideas so that those which are suitable are identified.

Factors to consider in selection of business opportunities

(1) Businessconsiderations(marketopportunities,availabilityofrawmaterials, skilledlabourmarketavailability,technology,governmentpolicy)(2) Personalconsiderations(e.g.disability,fulltimeemployment,availability, skills,personalSWOT)

Analysis of business opportunities(1) Gross margin analysis(2) Situationanalysis-strengths,weaknesses,opportunities,threats(SWOT)(3) Margin and mark up(4) Prioritization: A ranking matrix is a useful tool in a selecting a business based on the entrepreneur’s priorities

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Lesson 3: Starting a businessThe goal of this module is to enable the participant start a business

ObjectivesBy the end of this lesson participants will be able to:1. List at list 5 requirements for starting a business2. List at least 5 sources of business information3. Differentiatebetweennetworking,collaboration,partnership4. Develop a plan for their business

Content• Elementaryskillsforstartingthebusiness• Sourcingforinformation

-Importanceofinformation-Typesofinformation-Sourcesofinformation-Informationdissemination

• Networking,collaboration,buildingpartnerships- Definitionofnetworking,collaboration,partnership- Possiblenetworks,collaborators,partners- Advantagesanddisadvantages

• Planning- Importanceofplanning- Elementsofgoodplanning- Farmplanning- Budgeting- Introductiontobusinessplanning

Methodology:Lecture,groupdiscussion,demonstrationDuration: 4 hoursEvaluation/assessment:Questionsandanswers,presentation

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Facilitator’s notes:• Elementaryskillsforstartingthebusiness• Formsofbusiness–soleproprietorship,partnership,company,cooperative• Skillsrequired–managerialskills,technicalskills• Sourcingforinformation

- Importanceofinformation- Typesofinformationrequired–rawmaterials,production,legal,market- Sourcesofinformation–extensionofficers,internet,newspapers,magazines,radio,TV

• Networking,collaboration,buildingpartnerships- Definitionofnetworking,collaboration,partnership- Possiblenetworks,collaborators,partners- Advantagesanddisadvantagesofnetworking,collaboration,partnership

• Planning- Importanceofplanning–resourcemobilization,meetingcustomerrequirements,risk

management- Elementsofgoodplanning–setobjectives,establishprocedures,analyzepolicies,

identifygoverningrules,laydownstrategyforachievingobjectives,budgeting–resourceallocation,schedulingofactivities,forecasting

- Farmplanning–farmlayoutcoveringvariousenterprises- Budgeting–preparationoffarmbudgeting- Introductiontobusinessplanning

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Lesson 4: Farm managementObjectivesThe participants will be able to:1. Identify 5 factors of production2. State at least 5 records kept in a farm and their importance3. List 5 functions of a good farm manager

Content• Factorsofproduction• Qualitiesofagoodfarmmanager• Functionsofafarmmanager• Recordkeeping

- Typesofrecords- Importanceofrecords

Methodology:Demonstration,lecture,discussionDuration: 2 hoursEvaluation/assessment:groupdiscussion,questionsandanswers

Facilitator’s notes:• Factorsofproduction-land,labour,capital,time,technology• Qualitiesofagoodfarmmanager–leadershipskills,communicationskills,planning,

negotiator,arbitrator,interpersonalskills,• Functionsofafarmmanager–planning,organizing-structures,directing,coordinating,

controlling,resourcesallocation,decisionmaking

Record keepingOur minds cannot store all the important information which we may need to refer to later. We may also not remember all the important facts as and when required even if we have a good memory. It is therefore necessary to document information for reference by the farmer and other parties who work with him.

Importance of records1. Control of resources2. Information for decision making3. Monitoring performance4. Communication. When we are dealing with other parties they may require information and

evidence from records kept e.g. when seeking business development assistance or when we approach financial institutions for a loan.

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i. Financial records-journal,cashbook,pettycashvoucher,ledgers,receipts,invoices

Income and expenditure records

Date Description Receipts (Kshs)(Cash In)

Payments (Kshs)(Cash out)

Balance

ii. Physical records

a. Farmplanshowinghomestead,partitionsforvariousenterprises,unutilized land,pathways,variousfarmstructuresandenterprises,otherdevelopments

b. Milk production records

Date Morning Evening Total Calf consumption

Home consumption

Sales Price Value

c. Inputrecordssuchasfeedsanddrugs,showingthequantity,value,usage,date of purchased

Input purchase record

Date Input description Quantity Value (Kshs)

Types of recordsThere are various types of records that can be kept depending on the activities and level of operations. Below are some of the records kept in a farm business.

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d. Breeding and calving records

Cow identification: ……………...................…………………. Date of last calving: …………...................…………………… Lactation no: …………………….......................………………...

Dates on heatService datesAI/BullBreedPregnancy test: Date and resultDate to dryDate to calve

e. Animal health records

e. Animal health records

Date Illness/events Treatment Cost Remarks

Vaccination record

Vaccine type

Date vaccinatedDate dueDate vaccinatedDate due

Activity Start date Completion date Resources used Cost Remarks

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Lesson 5: Financial managementObjectives:By the end of the training participants will be able to:1. Identify 4 ways of mobilizing resources2. State 5 reasons why it is important to manage finances3. Name 5 essential financial records4. Identify 5 sources of financial services5. Identify 5 key factors to consider when taking credit

Content• Definitionofterms:• Resourcemobilization• Financialrecords• Typesoffinancialservices• Riskmanagement• Sourcesoffinancialservices

Methodology:Lecture,casestudyDuration: 4 hoursEvaluation/assessment:Questionsandanswers,groupdiscussion,presentations

Facilitator’s notes:Keywords:finance,resources,capital,profit,loss,liability,credit,insurance,risk,networth

• Asset–possessionsthathavevalue• Capital–possessionssuchasmoney,equipment,facilitiesthatareusedtogenerateincome• Loss–thedifferencebetweentheexpenditurewheretheexpensesaregreaterthanthe

income• Profit–thebalanceaftersubtractingexpensesfromincomewheretheincomeisgreater

than the expenses

Financial servicesTypes of financial services: • Savings–howtosave,wheretosave• Credit–sources,costoffinance,debtmanagement-factorstoconsiderwhentakingcredit

(termsandconditions,expectedcashflows,abilitytorepay,)• Insurance–types,insuranceserviceproviders Sourcesoffinancialservices–banks,SACCOs,insurancecompanies,developmentpartners,

MFIs,DFIs,communitybasedorganizations,churchbasedorganizations,groups,associations

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Resource mobilizationTypesofresources-land,labour,time,finance,water

Strategies in resource mobilizationFundraising(e.g.throughproposalwritingtodonororganizations),merry-go-round,saving,tablebanking,villagesavingsandloanassociations,borrowing,charity,raffles,saleofassets

Proposal writingProposal writing is therefore important in resource mobilization. A project proposal is also a useful management and decision making tool besides being commonly used to solicit funds.

Purpose of a project proposal1. A project proposal communicates the development idea to other parties e.g. development partners who

may be involved in the implementation process.2. A well written proposal can be used to solicit funds.3. Carefulprojectpreparationensuresefficientandeconomicaluseofresources.4. Projectselectionisbasedoncost-benefitanalysisasthevaluesofexpectedbenefitsandexpenditureto

be incurred are considered before the decision is made.5. Careful project preparation ensures analysis of potential problems which could emerge.

The proposal should contain answers to the following:1. What is the proposed project?2. Why should the project be carried out?3. How will it be accomplished?4. When will it be done?5. How much will it cost?6. How will it be financed?7. Who will carry out various activities in the project?

Some donors have specific formats for proposals presented to them. Some are in the form of application forms that have sections for specific information about the proposed project. Such forms ensure that all the pertinent information is included. Below are some important elements of a proposal

Elements of a project proposal1. Title page

2. Project summary:Thisprovidesadescriptionoftheprojectidea,majorcomponents,expectedoutputstobegeneratedandprojectlocation.Itcomprisesabriefstatementofessentialelementsoftheproject,rationale,projectpriorities,objectives,scope,descriptionofbeneficiaries,investmentperiod,projectorganization,financialandeconomiceffects.

3. Introduction:Thisincludesrelevantinformationabouttheprojectsuchasthehistoryoftheprojectidea/concept,partiesinvolvedinpreparationoftheproposal,periodofpreparationandacknowledgementofparties that make a contribution during the preparatory phase.

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4. Background information• Descriptionofthecurrentsituatione.g.povertylevelsandothereconomicfactorsthatarerelatedto

the proposed project.• Briefonthesector,opportunitiesandconstraintsfaced.• Developmentandsocialobjectivese.g.povertyreduction,increasedpercapitaincome.These

objectivesshouldbelinkedtotheareadevelopmentplans,nationaldevelopmentgoalse.g.Vision2030,contributiontomillenniumdevelopmentgoals,andnationalstrategyforsectordevelopmente.g.agriculture sector development strategy.

• Incomedistributionandpovertyincidence–togiveaframeworkforjustificationforselectingaparticular region or line of action.

• Institutionsinvolvedindevelopmentandfinancingoftheproject.

5. Project rationale: This constitutes a persuasive argument for selecting the project. It includes a discussionofthedevelopmentopportunitiesandconstraints;technical,socialandeconomicreasonsforselecting the interventions as opposed to others; reasons for the project scope; discussion of potential risk and measures to mitigate against them.

6. Project area• Physicalfeatures:geographicallocation,rainfall,waterresources,soils,environmentalissuessuchas

deforestation and land degradation if they affect the area• Economicbase:economicactivities,resourcessuchasland,livestock,inputsupply,productmarketing.• Socialaspects:populationanddemographicpatterns,ownershipandcontrolofresources,gender

participation.• Infrastructure:water,roads,electricity.• Institutionsintheareae.g.developmentagencies,serviceproviderse.g.organizationsproviding

financial services.

7. Objectives:Statementofbroadobjectives,specificobjectivesandspecificquantifiableoutputs/targetsof the project.

8. How the project will be accomplished: Methods and technology; resources required; skills required.

9. Activity schedule.

10. Project costs and benefits: Estimated capital requirements; operating requirements; annual revenues; cashflows;employmentgeneration;andotherbenefits.

11. Financing: Amount to be invested; resources to be contributed from within; funds required from other sources; how the financing gap will be bridged; if a loan is to be used then the proposed repayment scheduleshouldbeindicated;expectedpaybackperiod.Forecastsofcashflows,incomeandexpenditurestatements should be annexed to the proposal

12. Organization and management: This section gives information about who will carry out the project. This includes the persons responsible for various tasks and the skills that will be required

13. Outstanding issues: These are issues that need to be resolved and which could impact on the successful implementation of the project.

14. Annexes:Projectedaccounts,schedules,copiesofregistrationcertificateforgroup,copyofbusinesscertificate,KenyaDairyBoardcertification,tables,maps,photographs,resultsofsurveys,marketassessments or any other relevant documentation in support of the proposal.

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Risk managementBusiness owners face many uncertainties that can affect their businesses. Risks are events that can occur leaving negative effects. Awareness of such possibilities and preparation for them can help to minimize the negative effects should the event occur. Risks can be managed through various means such as insurance,securityanddiversification.

Insurance is a promise of compensation for specific potential losses in exchange for periodic payments referred to as premiums. The purpose of insurance is to protect the financial well being of an individual or organization if the event which couldresultinlossoccurs.Abusinessownercantakeinsuranceforhimself,hisfamily and his business.

Besides insurance the business owner can manage risks by putting in place security measures, employing competent employees, having record keepingand monitoring systems and making timely decisions regarding the business. Diversification also helps to mitigate the risk of losses affecting a particular sector of the economy.

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Lesson 6: MarketingObjectivesBy the end of the training participants will be able to:1. Define what marketing is2. Differentiate between marketing and selling3. Describe at least 4 components of marketing4. Identify at least 3 market outlets for their produce5. Describe at least 3 marketing channels for dairy products

Content• Definitionofterms:market,marketing,selling,advertising,branding,publicity,service,

product,customer,nichemarket,competition,competitor,marketoutlet,marketingchannel• Componentsofmarketing–4Ps,2Cs,demandandsupply• Marketoutletsandchannels-intermediaries

Methodology:Lecture,groupwork,discussions,casestudyDuration: 2 hoursEvaluation/assessment:Questionsandanswer,presentations,

Facilitator’s notes:Key words: Marketing,market,product,customer,competition,competitor,marketingchannel,nichemarket,selling,advertising,branding,publicity,service

Components of marketing • The4Psofmarketing:product,price,promotion,place• The2Csinmarketing:customer,competition• Demandandsupply

Market outlets and channels - intermediaries• Identificationofmarketoutlets–neighbours,brokers/traders,institutions,hotels,retail

shops,milkbars,agro-vetstores,otherfarms,cooperativesocieties,• Generalrequirementsofproductmarketing–technology,relevantlicencesfromthe

regulator and local authorities• Obtainingmarketinformation–marketresearch,publications,radio,televisionprogrammes,

marketingassociations,processors,consumerorganizations,tradefairs

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Lesson 7: Regulatory requirementsObjectivesBy the end of the training participant will be able to:1. List at least 5 regulatory authorities governing their business2. State the legal requirements of at least 3 regulations3. State at least 5 reasons why regulations are important4. State 5 implications of not following regulations

Content- Definitionofterms:law,statute,licence,permit,fine,penalty, regulator,offence,crime,inspector- Regulationsgoverningdairybusinesses- Regulatoryauthorities- Importanceofregulations- Implicationsofnotfollowingregulations

Methodology:Lecture,groupwork,discussions,casestudyDuration: 2 hoursEvaluation/assessment:Questionsandanswer,presentations

Facilitator’s notesDefinition of terms: • Law–rule/setofrulesusedtogovern/oversee• Statute–alawpassedbyagovernmentandformallywrittendown• Licence–anofficialdocumentthatshowsthatapersonisauthorizedtoconductthe

business specified• Permit–officialdocumentgivingauthoritytodosomething• Fine–moneypaidbysomeonewhohasbrokenthelaw• Penalty–punishmentforbreakingrules• Regulator–officialbodyorpersonchargedwiththeresponsibilityofenforcingrules• Offence–violationofarulewhichleadstopunishment• Crime–activitythatisagainstthelaw/illegal• Inspector–officialwhosedutyistocheckifrulesarecompliedwith

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Regulatory authoritiesRegulatory authorities in the dairy industry include but are not limited to the following:- KenyaDairyBoard- KenyaBureauofStandards- DepartmentofPublicHealth- NationalEnvironmentManagementAuthority- CountyGovernments

Importance of regulationsRegulations are important for many reasons. Among the reasons are:1. Ensuring health and safety of consumers2. Setting standards which are important for trade

Implications of not following regulations- Withdrawaloflicence- Penaltiessuchasfine,jailterm- Closureofthebusiness- Lossofcustomers- Compromisingthehealthandsafetyofcustomer

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Lesson 8: Cross cutting issues affecting businessThe goal of the training is to create awareness on cross-cutting issues that can impact thebusiness and the interaction between the business and the environment (PESTLE).

Objectives- Listatleast5issuesthatwouldaffectthebusiness- Explainhowatleast5oftheissuesaffectthebusiness- Identify3waysthebusinesswouldaffecttheenvironment(PESTLE)

Content• Environment• Genderissues• HIV/AIDS• Drugsandsubstanceabuse• Humanrights• Governance

Methodology:Lecture,discussion,video,roleplayDuration: 2 hoursEvaluation/assessment:Questionandanswer,grouppresentation

Facilitator’s notes:• IntroductionofPolitical,Economic,Social,Technology,Legal,Environment(PESTLE)• Environment–climatechange,carboncredit,pollution,wastedisposal,biogas,energysaving

devices,waterharvesting,howtheyaffectfarmingactivitiesandhowtheeffectscanbemitigated

• Genderissues–gendermainstreaming• HIV/AIDS–awarenesscreationoneffects• Disability–empowermentandinclusionofpeoplewithdisabilities• Drugsandsubstanceabuse–causes,effects,howtoavoid,wheretoseekhelp• Corruption–definition,effectsofcorruption,prevention• Humanrights–definition,safeguardinghumanrightsinthesociety• Governance–definition,howtoensurethatthereisgoodgovernance

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ReferencesDavid H. Holt (2009) Entrepreneurship: NewVentureCreation,PHILearningPrivateLimited,NewDelhi-110001

Hisrich,R.D.,PetersM.P.,ShepherdD.A.(2007)Entrepreneurship,TataMcGraw-HillPublishingCompanyLimited,NewDelhi

Macmillan English Dictionary for Advanced Learners International Students Edition (2002)MicrofinanceOpportunities(2009)KnowingYourRisksandHowtoManageThem,AStudyGuide,FirstEditionSwedishCooperativeCentreandViAgroforestry

NduluJ.,MutuaC.(2007)FinancialLiteracyforWealthCreation,First Edition Swedish Cooperative Centre and Vi Agroforestry

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Notes

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Notes

Smallholder Dairy Commercialization Programme (SDCP)Programme Coordination Unit

P.O. Box 12261-20100 Nakuru, Kenya.Tel: +254-51-2210851

E-mail: [email protected], [email protected] :www.sdcp.or.ke

Ministry of AgricultureLivestock and sheries

ministry of agriculture livestock and fisheries farm business training ma… · c. input records...

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