The Graduate of the National School of Engineering (ENSI) of the University of Lome in Togo, who made his debut at Nioto, listed three deficiencies that explain the difficulties in recovering credits or investments.
First, the entrepreneurial skills of the instigator
Most young people follow very basic training provided by consultants who do not themselves have the required experience to coach on this type of project.
With a teacher who teaches what he has himself experienced, it is more likely that learners will be better equipped. Unfortunately, this is not always the case.
As result, these young people come out of these sessions thinking that they are now in control of everything and that they are able to write a feasible business plan, to create and run a business. They are automatically cladded of the title DG (General Manager) as soon as they have the CFE card of their Individual Company.
The weaknesses of the business plan
Most business plans of these young entrepreneurs are often written in a hurry and are generally neither realistic nor reasonably achievable. Their project then takes off with lead in the wing.
The business plan is primarily a basic tool for the promoter before being a steering document. This is the main document on the basis of which an investor is convinced to invest in the project considering its profitability and the terms of return on investment.
First weakness: at the heart of agricultural entrepreneurship projects (agribusiness: production, transformation, there are technical aspects whose control ensures and reassures the success of the project.
Unfortunately, these technical aspects are neglected by the promoters (when they are not themselves in the technical-industrial field), as well as the investors (States, Organizations, Funds, Banks, Microfinance, etc.), who do not call for the expertise required and available.
I give two examples:
- Installation of rice processing unit with a capacity of 5 tons / day
As I want to work with a team for 8 hours each day and 6 days a week if I opt for a unit of 625 kg of paddy rice per hour, I will not do the 5 tons in 8 hours, even with a fully automated unit.
Although 8 * 625 kg = 5000 kg = 5 tons, the real experienced specialist will tell me that during my first 3 years of use, I will reach at most 90 maxima, 95% of the production capacity of the product’s unit.
This reality of the mechanical or industrial tool, must be taken into account in the estimates of my business plan. An economist or a financier who writes the business plan for me, should call for an expert who has good mastery of the industrial production tool.
What this specialist will be able to say to the promoter or to the person who puts together the business plan, is that with an industrial tool, he has the capacity to be able to reach margins of 30% to 60% on the selling price. A product that has undergone industrial processing.
In the cost of production of the product, the cost of depreciation of the processing equipment is taken into account. The depreciation being annual, the hourly cost of the machine that works 8 hours a day is not the same as for the machine that works 16 hours or 24 hours a day. What can be done by putting the right device in place.
- Installation of a soy processing unit into oil and cake
My estimate of production must take into account how much fat I can have in a soybean seed and the yield of my production unit.
A press that leaves 8% residual fat in the cake and another press that leaves 10% residual fat makes a difference not only in the amount of oil that I can get from a ton of soy but also the quality of soybean meal I get at the end of my crush.
The seed preparation technique can also affect the performance of my unit. This will make a difference in turnover, credit repayment capabilities and project profitability.
Second weakness: the lack of a serious and realistic market study to properly switch to marketing products. People do not make sure there is a market, they do not know the configuration or the behavior or the changes before producing.
Monitoring and technical support of the project
When the proper technical setup of the project is ensured and when the funds are released, care must be taken to make a good acquisition of the equipment. A roller or rotor huller made from cast iron or steel will not give the same yield or the same quality of husked rice.
A hulling unit with a combined huller-polisher or a unit with a separate huller and polisher with paddy separator, will not be the same results.
When the promoter does not master these aspects and the investor can neither read nor follow the project he has financed in relation to these points, hello disillusions.
The simplest way to give oneself a chance to avoid disappointment is to resort to the required expertise whose cost is well below the cost of disillusionment.
Some private promoters who invest their own money, while neglecting or saving technical expertise or assistance and advice specific to their project, also find themselves with disillusionment or dwarf projects.
When you refuse to pay for an expertise, know that you have left to lose money, time, energy and even more your health because of the stress due to a project that does not grow despite the millions you have invested.
Always have a realistic roadmap correlated with a dashboard monitoring the implementation and evolution of the project, in accordance with the terms of its business plan.