This manual was made possible through support provided by ...

Published by: ANSAB

Cover Photos: Bhishma Subedi

Contributors: Bhishma Subedi, Ann Koontz, Surya Binayee, Jen Divis, Hemant Ojha

and Jack Croucher

September 2000

This manual was made possible through support provided by the Microenterprise BestPractices Project (“MBP”), U.S. Agency for International Development, under the termsof Award No. PCE-0406-C-00-6004. The opinions expressed herein are those of theauthor(s) and do not necessarily reflect the views of the U.S. Agency for InternationalDevelopment.

Enterprise

Development

for

Natural Products

Manual

Asia Network for Sustainable Bioresources (ANSAB)

G.P.O. Box 11035

Minbhawan, Kathmandu

Nepal

Ph: 9771.497.547

Fx: 9771.487.916

[email protected]

EnterpriseWorks Worldwide (EWW)

1828 L Street Suite 1000 NW

Washington, DC 20036

USA

Ph: 202.293.4600

Fx: 202.293.4598

[email protected]

Table of Contents

-Introduction-.........................................................1Natural Products ..........................................................2

The Importance of Natural Products ....................................3

Natural Product Enterprise Issues .......................................4

-Chapter One-Enterprise Opportunity Overview: Subsector and Value Chain Analysis......5

Requirements for Enterprise Success ....................................7

Subsector Analysis ........................................................8

Subsector Overview Worksheet ..........................................9

Functions, Participants, and Technology Chart- Aromatic Plants for

Essential Oils ............................................................ 10

Example Value Chain .................................................... 11

-Chapter Two-Sustainable Supply of Natural Products ...................................... 12

Case Example – How a Community Obtained Resource

Supply Information ...................................................... 15

Biologically Sustainable Harvesting ..................................... 16

Harvesting Impact on Population Dynamics............................. 17

Establishing Sampling Areas ............................................ 18

Developing a Raw Material Sourcing Plan .............................. 19

-Chapter Three-Regulatory Environment and Forest User Groups (FUGs)..................... 20

The Regulatory Environment ............................................ 22

Regulatory Environment & Natural Product Enterprises ............... 23

Organizations Involved in Regulatory Functions........................ 24

Community Forestry in Nepal ........................................... 25

Integrating Natural Product Management within a FUG

Operational Plan ......................................................... 26

Benefits of a Forest User Group ....................................... 27

FUGs and Natural Product Enterprises................................. 28

-Chapter Four-Technology, Management and Finance......................................... 29

Technology ............................................................. 32

Technology Continued - Production and Marketing Balance ........... 33

Management ............................................................. 34

Finance ............................................................. 35

Biological and Financial Sustainability .................................. 36

Can the Enterprise Make Money and be Sustainable? ............... 37

-Chapter Five-Marketing and Sales ........................................................... 38

The Marketing Concept ................................................. 40

Step 1 Market Research

Is the Natural Product Established or Non-Established?...... 42


Understand the Market .......................................... 43


Collect Information from Customers............................. 44

Step 4 Marketing Strategy

Market Segmentation and Target Marketing ................... 45

Step 5 Target Market

Position the Product .............................................. 46

Step 6 The Market Mix and Product Sales................ 47

-Chapter Six-Enterprise Development Plan................................................... 49

-Additional Resources-Available at the Business Services Center.................................... 51

1

About the manual

This manual providestools to explore and dnatural product entermanual promotes a stnatural product enterthat enhances a regiobiodiversity and promequity.

Who is this manu

• Entrepreneurs• Enterprise manag• Enterprise develo

Personnel in NGOgovernment

• Community groupin launching an en

• Private companies

What is in the

RequirementssuccessAssessment amanagementnatural produOverview of reenvironmentBusiness fundtechnology, mand financeMarkets and mSample contenbusiness plan

-Introduction-

Introduction

practicalevelop

prises. Therategy forprise designn’sotes social

al for?

erspments and the

s interestedterprise

How to use the manual

The manual gives a basic overviewof the issues involved insustainable natural productenterprise development. Chapters1-6 discuss the requiredingredients for a successfulenterprise. After reading themanual, the reader will:• Know the range of issues toconsider when developing anatural product enterprise• Understand strategies fordealing with enterprise issues thatallow natural product enterprisesto prosper and promotebiodiversity conservation andsocial equity

Each chapter includes thefollowing five components, whichprovide an introduction to thesubject:

1. A Story from the Field

2. The Lesson Learned

3. Strategies for Use

4. When to Use

5. Chapter Tools

Charts, checklists and exampleworksheets are throughout themanual. These tools help toinvestigate and manage theoperations of an enterprise. Moredetailed resources are housed inKathmandu at ANSAB’s BusinessService Center.

manual?

for enterprise

ndstrategies forctsgulatory

amentals:anagement

arketingts of a

Introduction 2

This manual concentrates onNatural Products (NPs) but manyenterprise principles are applicableto all types of non-timber forestproducts (NTFPs). NTFPs aredefined as natural outputs, otherthan timber, of the forests oradjoining pastures. NTFPs arealso known as minor forestproducts, nonwood forest products(NWFPs) and wild craftedproducts.

In addition to being an integralpart of the forest ecosystem,natural products fill nutritional,medicinal, and ritualistic roles inpeople’s livelihoods. Increasingly,natural products providesubsistence and cash income forlocal communities. Balancingenvironmental, social, and

economic considerations is a mustfor a sustainable enterprise.

Environment, social, and economicthemes appear repeatedlythroughout the manual. To betterunderstand the three themes,review the different classificationsin the chart below.

Different Ways to Classify Natural Products

Environment

Biological - same genes orspecies• Example: all types of rattan

Biodiversity – overall role inecosystem• Example: all pollinators

Social

Use -similar use• Example: all edible plants

Culture– all natural productsused in local rituals• Example: plants used in

Buddhist Ceremonies

Economic

Market - similar markets• Example: furniture markets

that demand rattan,bamboo, vines

Processing Method – similarprocessing• Example: all plants distilled

into essential oils

Examples of Natural Products inthe NTFP sector

• Bamboo• Rattan and Other Vines• Medicinal and Aromatic Plants

(MAPs)• Nuts, Fruits, Mushrooms• Tubers• Grasses and Leaves• Resins• Insects and Byproducts (Honey,

Silk)

Natural Products

3 Introduction

From the three groupings(environment, social andeconomic), the importance ofnatural products in daily lifebecomes clear. The supply ofnatural products is directly tied tothe overall health of an ecosystem.Therefore, a natural productenterprise will not be sustainableunless it balances environment,social and economic issues. Anenterprise activity that balances thethree issues can yield multiplebenefits.

Environmentally, thedevelopment of natural productenterprises can alleviate threats tobiodiversity by providingalternative income sources fromthe natural forest.

Socially, rural populations livingnear the forest use natural productsfor their livelihood. It is not onlythe absolute value of the naturalproduct, but also the proportion ofnatural products in the incomes ofrural people that is important.

Economically, market growth fornatural products in local andexport markets generates interestin policy initiatives that supportsustainable economic growth.

Common Characteristics of

Natural Product Enterprises

• Use renewable naturalresources

• Raw materials found in remotelocations; transport costs couldbecome an issue

• Raw materials are seasonal• Large number of

collectors/suppliers with smallquantity of raw materials

• Difficult to maintain consistentquality and quantity of products

• Competition from illegalactivities results in pricinginformation and distributiondistortions

The Importance of Natural Products

Environment

Social

Economic

Introduction

The manual covers six areas (seebox to the right). Concentrate onunderstanding all six areas andhow, holistically, they fit togetherto produce a sustainable naturalproduct enterprise. No single areais more important than anotherarea. Instead, it is the balance andblend of all the areas that yieldssuccess. In each section, considerthe strategies suggested and how touse them in enterprise activities.

This manual provides an overviewof what is required to start orimprove a natural productenterprise. The checklists andcharts throughout the manual areguides to examine specific subjectsand gather information needed tocomplete business plans andmanage the enterprise. Rememberto consider how the six areas fittogether and why each area isimportant for a sustainable naturalproduct enterprise. Eachspecific area is brokendown to make the overallenterprise development taskeasier.

1. EnterOver

2. SustaNatu

3. Reguand(FUG

4. TechManFinan

5. Mark

6. EnterDeve

Natural Product Enterprise Issues

Chapters

prise Opportunityview

inable Supply ofral Products

latory EnvironmentForest User Groupss)

nology,agement andce

eting and Sales

priselopment Plan

4

5 Chapter One

-Chapter One-

Enterprise Opportunity Overview:

Subsector and Value Chain Analysis

A Story from the Field

A community started a natural product enterprise that processedbamboo and rattan into handbags. They knew they needed asustainable supply of rattan and bamboo, should make good qualitybags, and find buyers for the bags. The people needed training indying and weaving. They also had a need for working capital. Whilethere were managers involved that knew the requirements for runninga successful enterprise, they were addressing enterprise issues andproblems as they occurred, rather than implementing a system. Themanagers planned trainings for the workers and went on marketinvestigation trips to find buyers. However, the individual activitieswere not well coordinated with an overall plan.

Finally, the enterprise managers met with a subsector specialist andcompleted a subsector overview sheet in a single afternoon. Thishelped the managers organize their knowledge and identify potentialpartners and competition by listing the actors in the sector. Themanagers completed a more detailed subsector study that focusedtheir enterprise management efforts on the most critical componentswhile keeping track of all the functions. Before the subsectoroverview, the managers reacted to problems as they arose instead ofplanning proactively. Using the subsector methodology, themanagers planned proactively, placing them in better control of theenterprise’s development.

Chapter One 6

The Lesson Learned

Knowledge is power. Organizedknowledge generates even morepower. Take time to understandall the components that make asuccessful enterprise and make aplan for coordinating thecomponents. The subsectoranalysis tool helps to form anorganized, holistic perspective ofan enterprise.

Strategies for Use

When considering a potentialenterprise, use the “Requirementsfor Enterprise Success” listed onpage 7 to pre-test the feasibility ofenterprise ideas. Put the potentialenterprise activities into twocategories: 1. not feasible or 2.possibly feasible. Complete the“Subsector Overview Worksheets”for the list of possibly feasibleenterprises and reevaluate thefindings against the requirementsfor enterprise success. Any naturalproduct enterprise consideredshould have favorable conditionsfor each “Requirement forEnterprise Success” item. If theenterprise does not have a goodstrategy to tackle one of the items,perhaps the targeted enterpriseactivity is not suited for theproposed community.

Of the products that meet therequirements for enterprisesuccess, complete detailedfeasibility studies using thesubsector methodology.

When to Use

Subsector analysis can assess thefeasibility of an enterprise beforeactivities start or help an existingenterprise better manage itself likein the story from the field.

Chapter Tools

The tools for this chapter startwith a checklist of“Requirements for EnterpriseSuccess”. This covers all themajor elements in the manual.In start-up and ongoingenterprise activities, it is usefulto refer back to this checklist.The subsector analysisinformation includes a“Subsector OverviewWorksheet” and “Functions,Participants, and TechnologyChart”. These tools help theentrepreneur view the majorplayers of a product’s sector.The Value Chain illustrates thestages of a product from rawmaterial through to sales.

7 Chapter One

Requirements for Enterprise Success

Raw material availability – A long-term biologically sustainable supply of thetargeted natural product in sufficient quantities is necessary for the enterpriseactivity to be financially viable. Chapter Two

Legal access to and control over the natural resources – Collectorsshould be able to manage natural products harvesting and incorporate theenterprise activity into their overall forest management plans. Enterprise activitiesmust comply with a range of legal requirements. Chapter Three

Equitable distribution of benefits - If community members do not feel thebenefits are being distributed fairly there will be less incentive to protect the naturalresources. The overall raw material source could become threatened as well as thecommercial activity and the ecosystem’s biodiversity. Chapter Three

Appropriate processing technology – Is the technology compatible with theprevailing infrastructure and human resource conditions at the chosen location?Conditions to be considered include: transport and storage facilities;equipment/machinery availability; power or fuel required for the processing activity;and technical skills available. Chapter Four

Good management — People with knowledge of, and experience withmanaging proposed activities should be available to run the enterprise or theyshould be closely involved in its operations. Chapter Four

Commercial sustainability (also known as economic or financial viability) -Commercial Sustainability is a simple concept. Sell the product at a price andvolume that covers all the costs associated with the natural product enterprise withenough money leftover as profit. Chapter Four

Access to capital – Start-up capital and ongoing working capital is needed forthe enterprise. Chapter Four

Available and accessible market for the products - Is there a market forthe available quantity and quality of product? Is there adequate demand at theexpected selling price? Who will buy the products? Chapter Five

Chapter One 8

Subsector analysis is a method fordiscovering all the functions(activities) and actors(participants) in a subsector, aswell as how they interact with eachother in:

• Natural product regulation andconservation

• Natural product collection• Product production• Product processing• Product marketing

Exploring options for enterpriseopportunities can be overwhelmingat first. However, groups discoverthey know more than they think,while discovering a need to learnmore about certain areas.Subsector methodology helpsorganize necessary information toexplore natural product enterpriseopportunities. The main objectivesof subsector analysis are to:

1. Link the product to anexpanding market

2. Make strategic functionalenterprise interventions

3. Create beneficial links amongkey subsector participants

Subsector analysis provides acomplete overview of theprocesses and activities involvedin an enterprise.

Completing all nine subsectorsteps requires a month or longer.However, some subsectorexercises can be done in severalhours to several days. These quickexercises can provide basicinformation on an enterpriseopportunity for a particular naturalproduct. One exercise is the“Functions, Participants, andTechnology” (p. 10) overviewworksheet for the potential naturalproduct. The following pagesprovide an essential oil example ofthe overview worksheet, matrixand value chain. The value chainillustrates how a natural product istransformed from a raw material toa retail product.

A full subsector study followsnine steps.

1. Select a subsector for study2. Become familiar with the

subsector3. Draw a preliminary

subsector map4. Specify the environment

affecting participants5. Refine the subsector map6. Quantify overlays of

particular interest7. Analyze dynamics8. Identify sources of leverage9. Explore opportunities for

leveraged intervention

Subsector Analysis

9 Chapter One

FIRSTSTEP: -- List all the functions or activities involved in the selected naturalproduct enterprise

Define the end market. For example, bamboo can be processed into handbags for aEuropean market; Jatamansi essential oil can be processed into cosmetics and perfumes forexport markets in India and Europe; and rattan can be processed into furniture and handicraftmarkets for both local and export markets. Visualize what happens to the natural productfrom the time it grows in the forest and is harvested until the time it reaches a user(downstream processor or manufacturer) or final consumer in some processed form. Theseare the functions and should be listed on the left-hand side of the chart. These steps are alsoreferred to as the value chain for the natural product. Why? Because as the natural productmoves through these function steps it increases in value.

SECOND STEP: -- List all the actors or participants involved in the naturalproduct activity

Think about who performs each function. Researchers, collectors, processors, governmentagencies, NGOs, packers, traders, transporters, market agents, manufacturers, wholesalers orretailers. List all the actors along the top of the chart.

THIRD STEP: -- List all technologies (interventions) required to do each function

Look at each function listed on the left-hand side of the chart. What is required to be able tocomplete each function, e.g. a certain type of equipment, working capital, some sort of skill orparticular knowledge, etc. List these items on the right hand side of the chart. This list helps toidentify potential intervention in the natural product value chain.

FOURTH STEP: -- Identify the functions for each participant

After completing steps 1-3, look at each function and identify which participants are doingwhat function and shade boxes appropriately. This step shows who is doing what, where thepotential competition is and who the potential allies are in the enterprise.

The functions, participants and technology worksheet of the subsector assessment help theentrepreneur to understand the dynamics that will affect the targeted enterprise activity.Having gained an initial understanding of the target product, it is time to look at each area inmore detail.

Subsector Overview WorksheetSteps to Complete Functions, Participants and Technology Chart

Chapter One 10

Functions, Participants, and Technology Chart

Aromatic Plants for Essential Oils

Jatamansi in Humla, Nepal

Participants

Functions

VillagelevelN

Pcollectors

Districtlevel

porters

Districtlevel

traders

Departm

entofForestry

Researchinstitutions

Nepalbrokers

Outside

districtN

epaltraders

Indianbrokers

Indiantraders

HPPC

L

Indiandistillers

Technologies/Skills

Sales of oil Market contactsDistilling Steam distillationIndia leveltrading

Working capital

Storage andtransport toIndia

Warehouse,horsecart, truck

Nepal leveltrading

Working capital

Transport toNepalgunj

Airplanes

Forest royaltiescollected

Policy,relationship withDept. of Forestry

District leveltrading/ storage

Working capital

Transport toSimikot

Human portersor animaltransport

Cleaning Manual shaking,sorting

Drying Rooftopsundrying

Harvesting HandtoolsManagedregeneration

Traditionalknowledge

Research Research skills

Policy Policy advocacy

11 Chapter One

Example Value Chain

Chapter Two 12

-Chapter Two-

Sustainable Supply of Natural Products


In one Asian country, extensive inventory levels for rattan were taken todetermine sustainable cutting levels. Rattan was a big export earner forthe country and employed over 150,000 people. Rattan cutting licenseswere issued based on supposed sustainable harvesting levels, yet theamount of rattan in the country continued to decline rapidly. Gatherershad to walk further and further to reach rattan stands. People blamedillegal harvesting, but this did not explain the lack of regeneration. Afterexamining the ecosystem dynamics, everyone realized that thepopulation of monkeys and birds had been greatly decreased oreliminated by hunting and habitat loss. Since rattan seeds germinatebest after being eaten and excreted by these animals, new rattanseedlings were not growing to replace harvested plants.

The rattan harvesting communities quickly realized that if they wanted asustainable supply of rattan they would have to help nature with rattanreplanting. The people could not bring the wildlife back in the shortterm, but they could collect and plant rattan seeds. Having asustainable supply of rattan meant the people had to take an active rolein the management of the resource base. First, they had to understandthe ecosystem dynamics. Second, they monitored the resource base togain unknown information and double check known information tomake sure it was still valid. Finally, they managed the supply proactivelyby establishing replanting programs, sampling areas and rotationalharvesting plans.

13 Chapter Two

The Lesson Learned

Determining sustainableharvesting levels for most naturalproducts is an evolving science.Implement a monitoring programthat will continually assess thehealth of the natural resource basesupplying the natural products.There is some informationavailable on individual species, butecosystem dynamics are still notwell known.

As a natural product becomescommercial, it is necessary tomanage the resources proactivelyby implementing monitoring,harvesting and sometimesreplanting plans. Include samplingareas in the biological monitoringplan to provide detailedinformation on the area’s specificconditions.

Strategies for Use

Incorporate sustainable harvestingissues into enterprise planning.Developing an enterprise around aproduct that is already traded isoften less risky than with a non-commercial product. Currentproducts are less risky because thecommunity is knowledgeable onthe condition and supply of theproduct. This communityknowledge can be used as a startfor more formal biological

monitoring activities. If theproduct is in short supply, thinktwice about starting an enterpriseunless resource regeneration plansare included. If the productappears to be in good supply thenuse a fraction (40-70%) of thesupply for enterprise calculations.

Why less than 100%?

It is impossible to capture 100%

of the already traded supply. If

the current harvest level proves

unsustainable, by only planning on

a fraction of the supply, the

financial position of the

enterprise will not suffer.

The following steps determinesustainable harvesting:

1) Identify and demarcate theresource base by ecosystem type(forest, pasture, farmland, rockface). Make a map that showswhere each type of ecosystem islocated with the estimated numberof hectares for each area. Existingmaps of the area may be availablefrom the government. Usecommunity knowledge to estimatethe location and current conditionof the area. For precisemeasurements, use a trainedmapmaker.

Chapter Two 14

2) Identify the resource supplyareas of the product(s). Estimatethe supply volume based oncurrent harvesting and trade/use.Identify current or potential threatsto the resource base. Conductgroup meetings and inquire whereand how the product has beencollected in the last three years.Rank threats. Gather data overseveral years, as there can besubstantial year to year variations.

3) Take a sample field inventoryto assess the growing stock andcondition of target products andthe ecosystem. Conductinterviews with collectors to learntheir perceptions of productavailability and quality changes.

4) Keep community membersinvolved in all data collection andstudy steps. Use the results of thefirst three steps to design andimplement biological monitoring.The monitoring plan shouldindicate the area being monitored;target species; ecosystem changes;and human activity impacting thespecies and ecosystem. Samplingareas and growth and yield studiesbecome integral parts of themonitoring plan.

5) Make a preliminary estimate ofa sustainable harvest regiment.Monitor this harvest rate and makeadjustments (as necessary) in the

biological monitoring plan.Remember that sustainableharvesting involves more than theamount harvested. Sustainabilityis determined by how and whenthe plant is harvested and all otherimpacts on the ecosystem.

When to Use

Ideally, sustainable harvestinglevels should be known before anenterprise starts, but scarcesecondary data makes thisunrealistic. Therefore, establish abiological monitoring plan fromthe start and include communitymembers in resource management.

The biological monitoring planshould determine biologicallysustainable harvesting levels;establish sampling areas; and trackharvesting impacts on populationdynamics.

Chapter Tools

The Case Example on thefollowing page outlines the fivesteps to obtaining resourcesupply information. The“Checklist to Assess HarvestingSustainability” is a guide tofinding information onsustainability. The “Checklistfor a Raw Material SourcingPlan” lists the necessarymaterial to be included in sucha plan.

15 Chapter Two

Activity Results Adjust for the Specific Area1) With an experienced

mapmaker, the communitydemarcated their resourcearea by ecosystem type(forest, pasture, farmland, rockface etc.)

The group’s total resource area is2,000 hectares composed of 500ha forest, 700 ha pasture, 300 hafarmland, and 500 ha rock face.

Adjust the ecosystem types toreflect the resource area. Forexample, primary and old growthforest, tree plantation areas, oropen brush land.

2) A group discussion was heldto determine where everybodyhas collected natural productsin the last three years.

Each group indicated the pastureand forest areas where theycollected. This land was markedon the map. Groups wereharvesting 10%of the pasture areaand 20%of the forest area. Thisprovided information on where tofocus biological monitoringactivities.

If outsiders have been collectingproducts, then mark these areas aswell. Try to quantify the informationand mark on the actual maps. Ifthe product has not been collectedbefore, skip to activity four.

3) Information was gathered onthe amount of productharvested in the past threeyears. This was done throughcollector interviews, collectingdata from the Department ofForests about forest royaltycollections, and obtaininginformation on kilos of naturalproduct cargo handled at thelocal airport.

Data collected for Jatamansiindicated that 150 tons wereharvested in 1995; 50 tons in 1996;and 180 tons in 1997. The earlysnows of 1996 forced collectors tostop Jatamansi harvesting.

While each source of information isbiased on its own, the combinationof three sources of informationgives an indication of themagnitude of natural productsharvested. Do not worry aboutobtaining an exact number.Instead focus on understanding thetrend in harvesting and magnitudeof harvest level.

4) At this point the group knowswhere the natural productsare being harvested and theamount of harvesting over thepast three years. Next theyneed to know the generalcondition of the harvestingareas and threats to theecosystem. Group discussionsobtained this information.

The group indicated thatharvesting areas were in declineand the major threats to theecosystems were:1) uncontrolled natural product

harvesting2) burning of pastures3) overgrazing by migratory

livestock

Finding more than three threats isfine. Threats can be from inside oroutside the community. Thejudgement on the condition of theresource base is perception-basedand will provide guidance for field-based biophysical data collection.

5) Preliminary informationassessed.

The group’s perception was thatthe resource base is declining, butoverharvesting of natural productsis only one threat. Harvestinglevels appear to be increasingannually, but the group is onlyharvesting from a smallpercentage of the resource base.To ensure optimal regeneration,the group will explore rotationalharvesting from a larger base andinvestigate harvesting methods.Interventions will be implementedto address other threats.

Note all threats, match themagainst the group’s activities andcompare to current field conditions.Use this information to determinesupply conditions for the targetproduct, and to develop sustainableresource use plans.

Notice how gathering informationon one product area providedpreliminary information to preservethe health of the overall resourcearea.

Case Example – How a Community Obtained

Resource Supply Information

Chapter Two 16

Biological diversity andsustainability occur at severallevels:

• Genes• Population• Community• Ecosystem

Harvesting can impact all of theselevels. Unfortunately, the degreeto which harvesting impacts thefour levels is not well studied.

Since the effects of harvesting aresuperimposed on the naturalpopulation dynamics, acomparison between natural andharvested populations will provideenough information to assesssustainability.

To determine biologicallysustainable harvesting levels startby collecting communityknowledge on particular species.It is important to know:

1) The current level of harvesting2) Where the product is harvested3) The amount traded4) The various harvesting methods5) The season, percentage and

parts of plant harvested

If the species is traditionallycollected, indigenous knowledgeprovides information on

sustainable harvesting levels. Lessinformation on sustainability existsfor products that are nottraditionally collected.

Establish sampling areas for bothtraditionally collected and non-traditionally collected products.Sampling areas provide biologicalinformation on the collectednatural products.

Checklist to AssessHarvesting Sustainability of a

Natural Product

Knowledge of the naturaldistribution of the species

Frequency of occurrence orabundance

Population structure(age/size/ class distribution)

Dynamics of the species(growth and reproductionrates)

Variation among habitats

Role within the ecosystem

Biologically Sustainable Harvesting

17 Chapter Two

Natural product harvesting canhave short and long term effects onthe plant, ecosystem and overallbiodiversity. Some considerharvesting to be ecologicallysustainable when there is little orno long-term harmful effect on thepopulations being harvested.However, harvesting impacts onone population can causeecologically unsustainableconditions for other species andthe ecosystem structure.

Sustainability must be viewedholistically. Immediate short-termeffects of harvesting may be seenin the growth rate or reproductioncapacity of the plant, whileecosystem changes may takelonger to materialize.

To distinguish short and long-termeffects of harvesting on populationdynamics, monitoring is done attwo stages:

1) Rapid assessment of theimmediate short-term impact ofharvesting on currentpopulation structure; and

2) long-term change in populationdynamics that can be monitoredfrom sampling areas.

Harvesting effects on populationdynamics vary by the classificationof plants (annual or perennial),plant part that is harvested andhow it is harvested. For a rapidassessment, monitoring focuses onthe life stage being harvested.

Rapid Assessment Examples of Harvesting Effects on Population Dynamics

Life Stage Harvested Effect of Harvesting Immediate ImpactAnnual herb before fruiting orseeding

Destruction of reproductiveadult

If harvested beforefruit/ seeds are produced anddisseminated then only thoseplants that escape harvestwill supply seeds for nextgeneration

Herbaceous perennial (rootsor rhizomes)

May result in destruction ofreproductive adult orunderground storage tissue

Reproductive capacityseverely affected

Woody perennial (leaves)Juvenile

If too many leaves areconstantly removed, it maynot reach reproductivematurity

Lack of seeds andpropagation

Woody perennial (leaves)reproductive adults

Increased mortality due todisease as a result ofdamage

Size distribution, growth,health, and reproductiveactivity may be altered

Harvesting Impact on Population Dynamics

Chapter Two 18

Sampling areas provideinformation on the distribution andabundance of natural products andthe impact of harvesting on theplant’s population dynamics.Sampling areas are also animportant part of biologicalmonitoring.

To determine the long-term impactof harvesting on populationdynamics, permanent plots must beestablished. Trials that measurethe effects of different harvestinglevels and methods are alsohelpful. For example, samplingareas in Humla yielded theinformation found in the tablebelow. Sampling areas must bemonitored for years, five at aminimum, to learn how harvestingeffects overall biodiversity.

Sampling areas help to:• establish rotational harvesting

schedules• identify optimal harvesting

times and methods• get community members

involved in hands on biologicalmonitoring

• devise more accuratecommunity resourcemanagement plans

Why establish sampling areas?

Sampling areas tell how much of

a natural product is available;

how harvesting impacts the

plant’s population dynamics; and

reveal ways to harvest that are

more sustainable (best time of

year, harvest method, etc.).

Recommended Optimal Harvesting Practices for Sustainable Natural Product Use

Plant Speciesand PartsHarvested

OptimalHarvestSeason

OptimalRotationalInterval

Optimalpercentage ofplants notharvested

Optimal Harvesting Method

Jatamansi(rhizomes)

Fall 5 years At least 20%plantsundisturbed

Whole plants pulled from bushyareas and dug out carefully withthe tool, kuto, from opengrasslands

Kutki(rhizomesand roots)

Fall 3-5 years At least 20%ofplants undisturbed

Plant is dug out with kuto or handpicked if rhizome is long

Sunpati(leaves)

Understudy

1year At least 30%ofleaves left on plant

Leaves handpicked or cut withscissors

Establishing Sampling Areas

19 Chapter Two

After identifying the raw materialsources, prepare a sourcing plan toestimate the raw material flow inrelation to the enterprise. Thesourcing plan should ensure areliable supply of raw materials.

Categorize the area in terms of:• ecosystem (forest, pastures)• raw material (e.g. species of the

Lokta plant have differentquality and habitats)

• legal control (private,community or governmentowned)

• quality• distance from the enterprise• accessibility

Prepare a map illustrating theorigins of raw materials. Assesspotential risks associated with eachlocation. The final estimate shouldbe able to account for potentialrisks, like delays in permits andtransportation. Consider that labormay not always be available forcollection and transportationactivities. Assess the seasonalmigration situation to minimizeany problems resulting from alabor shortage. Likewise, considerthe seasonal conditions of the rawmaterial base. For instance, in thecase of snowfall, there should bean adequate stock of the rawmaterial.

It is important to have goodrelations and communication withrespective suppliers. Motivationfor collecting and how enterprisescompensate collectors can vary.For example, collectors in theremote mountains of Bajhangprefer rice for payments, whereascollectors in other areas prefermoney. Adjust relations withcollectors to respond to theirspecific needs. Create a staffposition (agent) that deals withcollector – Forest User Group(FUG) relations. Finding goodpeople for this role is critical to theoverall management of the rawmaterial supply.

Appropriate extraction andtransportation permits will helpgenerate a timeline of legalobligations. The timeline willkeep the raw materials moving.

Developing a Raw Material Sourcing Plan

Checklist for a Raw MaterialSourcing Plan

Resource supply areasRaw material type andqualityQuantity by seasonStorage facilityLegal obligations/permitsTransportationarrangementsLabor supply managementAgreements with suppliersRisks and strategiesWorking capitalrequirements

Chapter Three 20

-Chapter Three-

Regulatory Environment and

Forest User Groups (FUGs)


A community in Nepal set up a medicinal herb trading enterprise.Preliminary assessments showed they had a good supply of severalherbs with strong market demand. A market study helped themdetermine a marketing strategy and locate some potential buyers.Traders were already coming to the community to buy the herbs so thepeople were accustomed to collecting and packing the herbs forshipment. The community was thrilled when they received their firstorder from a buyer in India at a higher price than what the tradersoffered. The buyer specified that he wanted the herbs within 21days.

Unfortunately the community was not able to deliver the order on timeand lost the sale. The enterprise had not looked into export permitsand ran into delays obtaining them. The buyer became frustrated andcanceled the order. The community members also found they had topay royalty payments to the government, which increased their costsmore than expected. The community and collectors had not yetlearned how to use Nepal’s community forest laws to their advantage.For example, the community could form a forest user group (FUG) thatcould collect and invest royalty payments instead of having to paythem to the government. Finally the manager of the enterprise startedmaking decisions that the community did not like. When they tried toreplace the manager, they found the company had not beenregistered as a limited partnership. This meant nobody else could benamed as directors. The company suffered because nobodyinvestigated the regulatory environment to discover the various legaloptions before starting the enterprise.

21 Chapter Three

The Lesson Learned

Knowing the regulatoryrequirements and options isessential to launching anenterprise. The enterprise andcommunity may lose out onattractive tax rates, royaltypayment arrangements, and otherbenefits if legal options are notunderstood. Lost opportunities canmean higher operating costs for theenterprise and less community-based control of the resources.Additionally, ignorance ofregulations can cause misseddeadlines, which will most likelyresult in client loss.

Strategies for Use

The Nepal NTFP Network andANSAB’s Business ServicesCenter have information onregulations that effect forestmanagement and natural productenterprises. First, check if thereare specific laws regarding thechosen natural product. Second,file all the necessary paperwork tobecome a properly registeredcompany. Keep in mind thatdifferent legal options havedifferent ownership possibilities,tax, and regulatory implications.In the early stages of theenterprise, choose a legal structurethat provides maximum flexibility.In the enterprise start-up budget,provide funds for legal advice and

hire a good lawyer to do all thelegal paperwork properly. Third,investigate whether formation of aforest user group (FUG) is in theinterest of the enterprise.Enterprises may have a clearadvantage in being associated withan active FUG.

When to Use

Investigate the regulatoryenvironment during the businessplan stage of an enterprise. FUGscan form anytime, but preferablybefore an enterprise begins.

Chapter Tools

The following pages provide anoverview on the regulatoryenvironment. The chart “HowDo the Following Factors Affectan Enterprise” highlights threemajor factors to consider in anenterprise. The value chain(from Chapter One) is matchedto the regulatory environmentin the chart “Processing andRegulations”. The list of“Organizations Involved inRegulatory Functions” providescontact points. The remainderof the chapter focuses on“Steps to Becoming a FUG”(including a “Checklist forNatural Product Management”in an Operational Plan) and thebenefits of being a FUG.

Chapter Three 22

The Regulatory Environment

The regulatory environment includes:

1. National and local policies, rules,and regulations; international laws

2. Socio-cultural norms and practices3. Organizations that support and regulate

enterprise activities

How Do the Following Factors Affect an Enterprise?

Formal

Regulations Informal

Resource access, forestrycodes, incorporationoptions, investmentcodes, pricing legislation,labor regulations, tariffs,interest rate ceilings,import and exportprocedures, taxes codes,etc.

Regulating

Organizations Supporting

Trade organizations,ministerial departments,export agencies, NGOs,credit and financialorganizations, localinstitutions andorganizations, FUGs, etc.

Community Norms

Socio-culturalFactors

Buyers

Traditional managementsystems, cultural values,norms of society, andbuyers’ expectations onquality, timely delivery,etc.

23 Chapter Three

Regulatory Environment & Natural Product

Enterprises

The regulatory environment affectsevery step of an enterprise’s valuechain. When choosing a naturalproduct enterprise, analyze whatregulation and supportopportunities and challenges exist

for the business activities.Monitoring the regulatoryenvironment is an ongoing part ofbusiness activities and necessaryfor the success of an enterprise.

Processing and Regulations

General steps of value chain How the regulatory environment can affect anenterprise

Harvesting andmanagement of natural

products

Land and resource tenure; access to naturalproducts; existing harvesting seasons and methods;resource management system.For example: District Forest Officer (DFO) providescollection license to collectors. A Forest User Group(FUG) can gain management responsibilities anduser rights for natural resources under communityforestry provisions. A FUG can exclude non-members from using and harvesting resources froma community forest.

Processing Enterprise registration, processing license, laborregulations, technology access, taxes, financialsupport.For example: Forest based industries are notallowed within 3 km (in hills) and 5 km (in Terai) offorests. Natural product processing enterprises canobtain an income tax holiday for up to 10 years.Financial support is available though the agriculturaldevelopment bank.

Trade and Marketing Release and export permits, export and importprocedures and duties, market information.For example: DFO provides Release Order for naturalproduct from a district. Nepal Chamber ofCommerce (NCC) or Federation of NepaleseChambers of Commerce and Industry (FNCCI) provideCertificate of Origin to the manufacturer or exporterof natural product.

Chapter Three 24

Organizations Involved in Regulatory Functions

Enterprise Function/ Activity Organizations

Company Registration Office of Company Registrar, Departmentof Industries, Department of Cottage andSmall Industries

Natural Product Collection License District Forest Officer (DFO) and Forest UserGroup (FUG)

Royalty Payment DFO, FUGChecking and Weighing DFO, Range Post or FUGRelease Order or Transit Permit DFOLocal Taxes District Development Committee,

MunicipalityChecking and Endorsement Forest Check-postExport Recommendation DFO (recommends the concern to the

Customs Office)Product Certification and ExportPermission for Selected Natural Products

Department of Plant Resources (DPR)(Permission to export processed naturalproducts that are prohibited from export incrude form.)

Certificate of Origin Federation of Nepalese Chambers ofCommerce and Industry (FNCCI), NepalChamber of Commerce (NCC)

Export Permission and Duty Customs Office of exporting countryImport Permission and Duty Customs Office of importing countryMarket Information Trade Promotion Center (TPC), FNCCI, NCC,

NGOsFinancial Support Agriculture Development Bank,

commercial banksProcessing Technology Department of Industries, Department of

Cottage and Small Industries, Privatecompanies, NGOs

Resource Management and Research DPR, DFO, FUG, NGOsTaxes Department of VAT, Department of Income

Taxes, Department of Customs

25 Chapter Three

The essence of community forestryin Nepal is a partnership betweenlocal communities and the staff ofthe Department of Forests (DOF)for the management of locallyaccessible forests. Communityforestry has been a standardprescription for the hills of Nepalto manage forests for fuel wood,animal fodder, building materials,and grazing. Community forestryfor high mountains, especially fornatural products, is a new practice.

Community forestry involves thetransfer of use rights andmanagement responsibilities forone or more patches of forest tothe local people who form a forestuser group (FUG). The term forestmanagement encompasses bothtechnical and social arrangementsinvolved in the management offorests, including planting,protection, harvesting, anddistribution of forest products.

How can a FUG organize

management responsibilities?

“An Operational Plan is a plan

prepared with the objectives of

developing and conserving forests

and using, selling and distributing

their products while maintaining

the environmental balance, and

approved under the Act” (Forest

Act, 1993:2).

Community Forestry in Nepal

Steps to Becoming a FUG andObtaining Use Rights

1. Users of a forest area areidentified and organized into aFUG (Forest User Group), aconstitution is drawn up andofficially registered at the DistrictForest Office (DFO). The FUG canthen function as a self-governing body with legalstatus.

2. The FUG and DFO delineate theforest area to be used anddemarcate its boundary. Thisdelineation usually requiressettlement of disputes withneighboring villagers.

3. The FUG and forestry staffcollect and analyze informationabout the forest, people andtheir interactions to devisemanagement prescriptions.These prescriptions are madewith the consensus of all theusers and then incorporatedinto an operational plan. Theoperational plan also serves asa contract between the FUGand the DFO.

4. The draft operational plan issubmitted to the DFO forapproval. After approval, thecommunity forest is formallyhanded over to the FUG. TheDFO gives a certificate of handover to the FUG.

Chapter Three 26

An Operational Plan (OP) is thelegal document signed by a FUGand the District Forest Office forthe management, utilization andconservation of forest resources.In the current scenario ofcommunity forestry practice inNepal, natural products aregenerally excluded in the planunless the FUG is supported by anNGO or project interested innatural products. Ask for a copyof an OP that includes naturalproducts. Then discuss with FUGsand forest rangers to plan adetailed inventory of forestresources. This should eventuallylead to a natural productmanagement plan determiningsustainable harvest rates andmethods.

To incorporate natural products,the operational plan should includethe current stock of natural productby species and area, with aprojected stock table for five to tenyears. The plan should alsoinclude the annual harvestablequantity under a definedharvesting regime (e.g. minimumsize of cutting, rotational interval,etc.) given the condition of forestsat the base year. This informationprojects the raw material

availability in the first few yearswhile contributing to long termproduction planning. In manycircumstances, harvesting methodsare not specified, and thesustainable natural productextraction rates create severedetrimental impacts on theecosystems that produce naturalproducts. Thus, it is important tospecify the specific methods ofcollection or harvesting.

Integrating Natural Product Management within a

FUG Operational Plan

Checklist for Natural ProductManagement

Area harvestedNatural product speciesand stock in each blockGrowth and yieldestimates of selectednatural productsRotational period andharvesting planSilviculturalmanagementHarvesting rules andregulationsHarvesting seasonHarvesting methodsMonitoring mechanismand control (harvest,regeneration, growth,etc.)

27 Chapter Three

The 1993 Forest Act states that the“District Forest Officer (DFO)may hand over part of a nationalforest to a user group in the formof a community forest, entitlingthe group to develop, conserve, useand manage the forest, and sell anddistribute the forest products byindependently fixing their prices,according to an operational plan.”

Forest ownership is not transferredto the user groups but remains withthe government under statecontrol. The legislation recognizesforest user groups as self-governing and autonomous entitiesand entrusts them with themanagement, control, utilizationand sale of community forestresources in a planned way.

Once the forest is handed over tothe FUG, there is no time limit forretaining use rights. The use rightsremain with the FUG for anindefinite period of time. TheDFO can cancel a FUG’sregistration if the FUG fails toimplement its operational plan;does not observe the overallprovisions of the act; or undertakesany actions that negatively affectthe environment significantly. Thecancellation of a FUG happens lessthan once in a thousand FUGcertification cases.

Benefits of a Forest User Group

Why form a Forest UserGroup?

Once handed over, the FUG hasthe right to

Exclude others from using theforest

Use forest products as securityfor obtaining loans from financialinstitutions

Amend the operational plan withthe DFO’s approval

Collect royalties on forestproducts

Harvest, trade, and processnatural products for cash income

In return for the use rightsthe FUGis required to

Submit an annual progressreport describing thecondition of the forest andfinancial statement to the DFOat the end of the fiscal year

Adhere to the operationalplan submitted to the DFO

Allocate 25%of the incomefrom the community forest toforest management anddevelopment (remaining 75%can be for any communitydevelopment activity)

1. Bylaplansforesand e

2. DFOcolleprodu

3. Leascommenter

4. FUGbased

5. FUGincomsalesdeve

6. Privaregisdevenatur

7. Tax hexten

8. In GhVATfrom

9. Accefinan

10.Priorper in

11.Publinaturtrade

FUGs and Natural Product Enterprises

Chapter Three 28

Opportunities

ws, policies and five-yearfavor local use of the

t for community incomemployments can give licenses for thection and trade of naturalcts

ehold forestry: scope forercial forestry and

prise developments can establish forest-

industriess can obtain 100% of thee from natural product

and use for locallopmentte entrepreneurs canter enterprises tolop/process, sell/exportal productsoliday for five years,dable up to ten yearsharelu and Udhyog, noand no taxes for earningsexported productsss to capital throughcial institutionsity sector of governmentdustrial policyc institutions facilitateal product enterprises and

Constraints

1. Ban on collection of somecommercial species of plants

2. Complex and restrictive set ofprocedures to obtain permits forcollection, trade and export

3. Lack of natural productmanagement guidelines ingovernment as well ascommunity-managed forests

4. Royalties for natural productsproduced on private land

5. Distance restrictions for forestindustries (3 km in the hills and5 km in the Terai from forests)make it difficult for FUGs toestablish forest-based industries

6. Fixed and arbitrary royaltyrates

7. Local taxes imposed by VillageDevelopment Committees andDistrict DevelopmentCommittee

Even given the constraints, naturalproduct enterprises offer FUGssome of the best opportunities toincrease their incomes whilesustainably managing theirresources.

29 Chapter Four

-Chapter Four-

Technology, Management, and Finance


A processing enterprise ran into technical, management andfinancing problems. At first their situation seemed ideal. Agovernment program agreed to give them a concession (belowmarket) loan for their oil processing enterprise with the condition thatthey purchase processing equipment from a specific manufacturer.The program also let the community choose their enterprise managerfrom the cooperative members. The members chose an enterprisemanager, who was liked and respected, but had no enterpriseexperience. The equipment manufacturer, while good atmanufacturing irrigation equipment, had never made oil pressequipment. The machines had poor extraction efficiency and brokedown in the first week of operations. In addition, the business plansaid the enterprise needed to process 500 kilos of cooking oil a day tobreak even. The equipment only had a capacity rating of 400 kilos aday. The payments on the enterprise’s loan were almost due and thegroup could not process any oil to sell. The manager was verydiscouraged. Being inexperienced, he did not know how to turn thesituation around.

The enterprise found outside expertise. First, delayed loanrepayments were negotiated (this is also known as rescheduling thedebt). An engineer was consulted to redesign and install equipmentthat would function well, and the enterprise manager hired aconsultant. The consultant held meetings to educate the enterpriseon necessary qualities in a manager. The first manager resigned andrequested the group hire a professional with experience.

Chapter Four 30

The Lesson Learned

Enterprise decisions on financing,technology, and managementshould be based on the needs ofthe business as determined in thebusiness plan. A good businessplan will specify technology needs(equipment capacity and efficiencyratings as well as compatibilitywith infrastructure); experienceand skill requirements for keyenterprise personnel; and provideprojected financial statements thatdetail fixed and working capitalrequirements and scenarios forrepaying loans.

Strategies for Use

Management: Look carefully atthe skills and experience requiredfor the key positions in theenterprise. Do not assume that allthe positions can be filled from thecommunity. While it is temptingto want the maximum job creationfor community members, fillingkey positions with people who arenot qualified will lead to personalfrustration and poor enterpriseperformance. Instead, be open tohiring people from outside whennecessary, either as managers oradvisors to local staff who are intraining for a position.

Technology: In most cases theproduct is already being producedby another enterprise. Thisimplies that there is a cost-efficienttechnology available within theregion. When exploringtechnology options look at what isalready being used and makeadjustments only when necessary.Pay attention to equipmentcapacity, efficiency rating andinfrastructure compatibility.Purchase equipment from amanufacturer that has a good trackrecord of producing the specifictype of equipment. Do not allowthe enterprise to be theexperimental ground for aninventor or manufacturer. Also, donot overlook simple technologysolutions. Fancy and sophisticatedis not necessarily better.

Technology options should passthree basic tests – 1) the productproduced should meet the demandsof the market; 2) the equipmentshould be manageable given localinfrastructure, resource base, andskills; 3) the equipment should becompatible with the break-evenproduction requirements of theenterprise.

Finance: Prepare projectedfinancial statements for theenterprise in the business plan. Beclear and exact on the:

31 Chapter Four

• amount of product producedand sold,

• operating costs, and• revenue projections.

Financial statements should projecta timeframe for the enterprise’sbreakeven point and quantify thereturn on investments and paybackperiod. Financial statementsprovide a foundation to monitorthe fiscal health of the enterprise.

Next, institute a good, but simple,bookkeeping system. Up-to-daterecords allow for continuousmonitoring of money earned andspent. The bookkeeping systemcompares real expenditures andrevenues to projected financialstatements. The financial systemshould also have prudent measuresto guard against the misuse offunds.

A careful eye on finances helps indetecting problems in the businesssooner. For example, if productioncosts are higher than projected,perhaps equipment efficiency islow and repairs or operatortraining is needed. If sales aregood, but cash flow is low,perhaps more attention needs to bepaid to accounts receivablemanagement.

When to Use

Technology, management, andfinance issues should beinvestigated during business planpreparations. Equipment shouldbe pre-tested prior to installation.Equipment debugging costs shouldbe budgeted with sufficient timefor worker training. Managementand finance are ongoing efforts ofthe business and require constantdiligence.

Chapter Tools

This chapter is divided intothree sections: Technology,Management and Finance.The technology section offersan “Infrastructure andTechnology Checklist” and a“Finding AppropriateTechnology” checklist toexplore and chose technologyoptions. The managementsection offers an “EnterpriseManagement Checklist” toensure quality management.The financial section has atable to help “CollectInformation for FinancialStatements”.

Chapter Four 32

The transformation of a potentiallymarketable product into a money-making enterprise depends onappropriate technology,management and financing.

Technology is a broad term thatcan include machines (e.g. steamdistillation units, oil presses);storage facilities (e.g. temperaturecontrolled for perishable goods);packing materials; modes oftransportation; and specializedknowledge (e.g. handicraft designor medicinal formulation). Eachenterprise technology requirementis supported by the appropriateamount of infrastructure, skilledlabor, and money (also known ascapital). Examples of naturalproduct technologies include:

• Plant propagation methods(including domestication andtissue culture)

• Harvesting tools• Grading standards• Post harvest dyers and storage

containers• Chemical treatments• Product formulation• Protective packaging• Processing equipment• Climate controlled warehouses

Despite differences in technology,basic guidelines apply to allenterprises.

Technology

Infrastructure andTechnology Checklist

How far is the enterprise from araw material gathering site? Isthe site on a main road or pathwhere it will be easilyaccessible?

Are there storage or otherbuildings available for lease orrent, or must new buildings beconstructed for the enterprise?

What fuel and power areavailable in the area and atwhat cost? Are theresustainable amounts of fuelavailable and/or are powersupplies reliable?

Is there a year-round supply ofclean water for processing andenterprise sanitation? Does theproposed site ensure enoughsunlight for drying?

Are there local machine shopsto repair equipment or wouldthe enterprise need to rely onlarger cities for repairs?

Is there access to reliablecommunication facilities thathave fax, phone, and email?

What are the transportationoptions, reliability and costs formoving goods to local anddistant markets?

33 Chapter Four

Technology choices must balancethe needs of the market on qualityand price while producing aprofitable product based on

sustainable resource use. To helpbalance the market, financial,social, and environmental factors,consider the following items.

Finding Appropriate Technology

How difficult is it to maintain an acceptable product quality? What are the qualitycontrol procedures in the enterprise? What equipment and procedures will be usedto produce the given product and are they acceptable to the buyer?

What will be the layout of the production facilities?

What is the cost and availability of raw and supporting materials, includingpackaging? Where are the suppliers of these inputs? How can consistent andregular supplies be ensured?

How many days per year will the enterprise operate, given the supply of labor andraw materials, product demand, the availability of water and electricity, anddowntime for plant maintenance and repairs?

What is the production capacity of the technology choice? What is the cost of thetechnology? Is it affordable to the entrepreneurs?

What is the break-even point? Can the enterprise generate required profits with thefixed investment cost associated with the technology choice?

Given the expected production costs, can the products be sold at competitiveprices?

Is there any room for increasing the production level if demand increases?

Are the required skills and capacities available or is training needed to run theenterprise?

What is the impact of the technology on the environment? What kinds of mitigationmeasures are required to counter impacts?

How does the technology affect the employment and distribution of benefits in thesociety?

Technology Continued

Production and Marketing Balance

Chapter Four 34

A successful enterprise requiresgood management. This aspect ofenterprise development is oftenoverlooked or not addressedsystematically. Too often,enterprises state that they are toobusy to focus on managementissues. If management issues arenot addressed, other aspects of theenterprise (raw material supply,marketing, financing) canoverwhelm operations and keepthe enterprise in continual crisis.

Management integrates all thefunctions of an enterprise. Taketime to install a good managementteam and structure to eliminatefuture problems. Specificmanagement issues associated withnatural product enterprises include:• Understanding how natural

product growth and yieldstudies impact the enterprise

• Factoring harvesting areas,quantity, seasons, methods androtations into procurementstrategies

• Monitoring species inventories,regeneration and growth todetermine future supply levels

• Complying with the operationalplan as agreed upon betweenthe FUG and forest department

• Supporting FUGs in adoptingsustainable harvesting systems,competency in raw materialsourcing, and inventorymanagement

Enterprise Management Checklist

How many and what types (skills,education, experience) of personnelare needed?Is local talent sufficient to run theenterprise or is an outside managerand technical staff required? How willextra staff be selected?Is training (processing, bookkeepingand accounting, marketing, companymanagement) needed? If so, wherecan staff be trained?What will be the enterprisemanagement structure and who inthe group will decide this andoversee management?Who will set-up the financial andadministrative systems and maintainthe books for the enterprise?Are there labor surpluses orshortages in the area? If there arelabor surpluses do these correspondwith the enterprise’s seasonal labordemands?Are decisions being made on abusiness basis? For example, a lowpriced or donated plot of land maynot be a good deal if it lacks accessto the required infrastructure. Alsoconsider climate; will the area beflooded when rainy? too hot in thesummer? too cold in the winter?How many days per year will theenterprise operate? Is this consistentwith raw material supplies, marketdemands, and local work habits?How will the employees becompensated for their work? Monthlysalary basis, output basis, bonuses?How will enterprise monitoring andsupervision be carried out? How willemployees be motivated for bestresults?

Management

35 Chapter Four

Enterprise finance refers toobtaining financing for theenterprise (capital), spending themoney wisely, and keeping trackof all the money that comes in andgoes out of the enterprise(revenues and expenses).

Financing is the money needed tostart or expand the enterprise.Financing is also known as fixedand working capital. Basicallyfixed capital is used once, usuallyfor pre-operating expenses andlarger expenses for fixed assetslike equipment, land and buildings.Working capital is used to pay forongoing expenses of the business,like raw materials, salaries, fueland other costs. Financing cancome from internal resources(savings, labor, materials), loans,equity investments, or donations.

A business plan that presents theexpected revenues and expenses ofthe enterprise with a plan forrepaying the money can be used toattract outside financing.Obtaining financing is hard workin itself, but the real work startsafter the money has been obtained.

An enterprise runs smoothlybecause of proper moneymanagement, accurate accounting,

and a healthy supply of workingcapital. While there are manyaspects to good financialmanagement, an understanding ofthe potential revenues andexpenses of the enterprise isessential. For day-to-dayaccounting, a bookkeeper can behired, but all managers shouldunderstand several key concepts(see box below).

Finance

Break even point – Theamount of product that has tobe sold to cover the costs ofmaking and selling the product.

Pay back period – The timeperiod in which an enterprisecan recover the initialinvestment.

Sensitivity analysis (the “whatif” game) – Figuring out whatwill happen to revenue andexpenses when prices orconditions change for theenterprise.

Working capitol management– Managing cash flow fromraw material procurement tosales in order to have enoughmoney to pay bills.

Chapter Four 36

Would a rice milling business startif there were little or no supply ofrice to be milled in the area?Would an oil press or mill facilitybe built if nobody in thesurrounding area grew or sold oilseeds? The answer to each ofthese questions is most likely no.Why would a processing enterprisebe established without a supply ofthe basic raw material to beprocessed?

Natural Products processing is nodifferent. Natural productenterprises should not startoperations without firm evidencethat the resource base will be ableto supply the enterprise on anongoing basis.

Sustainable harvesting andbiodiversity conservation are morethan environmental goals. Theyare essential to the long-termcommercial viability of a naturalproduct enterprise. Environmentas a factor of production is animportant financial considerationand essential to the security of anenterprise’s raw material supply.

Enterprise designs shouldincorporate environmentalconsiderations to ensure theecological and financialsustainability of the enterprise.The next section illustrates thebiological and financialrequirements for an enterprise.

Sustainable or Not?

A group of collectors decide they want to process Jatamansi (an aromatic plant) into anessential oil. Local knowledge indicates that 20,000 kg of the plant can be sustainablyharvested each year and this will be processed into 200 kg of oil. The group determinesthat the market for this essential oil is strong and accessible to them. There is a processingtechnology available that fits the infrastructure of their area. The fixed costs (FC) of theenterprise are $10,000 annually. Jatamansi oil will sell at $100 per kg; variable costs (VC) perkg of oil are $75. This means $25 per kg is available to cover fixed costs. The $25 is alsoknown as the contribution margin (CM). With these figures the breakeven level on a volumebasis can be computed.

Break-even volume = $10,000/$25 = 400 kg of oil

To breakeven the group needs to process 40,000 kg of the plant per year which would givethem 400 kg of oil. But, only 20,000 kg of plants are available, yielding 200 kg of oil.Unfortunately this enterprise is not biologically sustainable. The Jatamansi will be depletedand the enterprise will eventually go out of business. Short-term over-exploitation of thenatural resource is not biologically sustainable and it is not financially sustainable for theenterprise in the long-term.

Biological and Financial Sustainability

37 Chapte

Determining enterprisesustainability or non-sustainabilitytakes some work in collectingmarket, technical, financial, andbiological data. Determiningfinancial sustainability requiresevaluating projected revenuescompared to projected expenses,while considering the marketdynamics for the specific naturalproduct.

Estimates of expenses andrevenues provide the informationrequired for projected financial

statements. These statements willindicate whether the activity isfinancially sustainable.Enterprises that do not haveexperience in making financialstatements should seek help froman outside expert. Remember tobe careful and realistic inestimating expenses and revenues.

The chart below highlights theinformation needed for preliminarydata collection. The gatheredinformation can be used to produceprojected financial statements.

Can the Enterprise Make Money and be

Sustainable?

Collect Information fo

Estimate expected revenues

• What product(s) will the enterprise sell? Howmuch of the natural product will sell and atwhat cost?

• How much of the natural product can beproduced if sustainable harvesting ispracticed?

r Financial Statements

List all expenses

r Four

• Land/buildings—for production and storageof products and raw materials

• Machinery/equipment— Costs should takeinto account all transport costs and marginsto be paid to suppliers, insurance costs,packing and freight charges

• Raw material stocks—natural products andany other raw materials that may berequired for the processing activity

• Labor—skilled and unskilled productionlabor, management and services labor

• Transport and marketing costs—Cost oftransporting products to the buyer andmarketing costs (e.g. trade margins orincentives to be paid to sales agents)

• Interest payments, taxes

Chapter Five 38

-Chapter Five-

Marketing and Sales

The Lesson Learned

A market study and strategy areessential, but even the best strategywill not result in customers buyingproducts if the enterprise does notgo out and sell. Selling meansactively offering the product tobuyers and asking them to buy. Ifbuyers do not seem interested atfirst, try again. If they say no, do

not forget about them, check againat a later time. Sales can meanbeing told no more than yes. Inmany industries sales people figurethat 9 out of 10 customers will notbuy the product. They focus onfinding that tenth customer. Also,learn to be responsive tocustomers. Be accessible tocustomers; answer their inquiriesquickly; do not wait for them to


One natural product enterprise conducted a marketing study to gatherinformation on several different essential oils. The enterprise staffresearched the oil prices over the past few years; the amount beingtraded; and the primary buyers. They went to trade shows and foundout what competitors were doing. The enterprise staff felt it had verygood information on the markets for essential oils. They picked atarget market and had their oils tested which confirmed that the oilswere of very good quality.

Sadly, they sold very little oil. Inventory accumulated and workingcapital was in short supply. The company officers were discouragedand lamented that it was difficult to sell the oil and perhaps the marketwas not very good. The enterprise officers sat at the factory each daywaiting for buyers to contact them. They went out only occasionally tovisit potential customers. Inquiries for products would come in and theenterprise officers would sometimes take more than a week to answerthe fax. They continued to lament the poor sales. The market foressential oils was there. What was lacking? A sales strategy andaggressive selling.

39 Chapter Five

call, contact them; and mostimportantly deliver the product ontime, in the right quantity and ingood condition.

Strategies for Use

Use the guide questions in thischapter to learn about productmarkets and how to determine amarketing strategy.

Set specific sales targets andsales activity targets. For example,one enterprise wants to sell 100kilograms of oil within the nextthree months at a minimum priceof RS 7500. The enterprise shouldcontact at least 20 potential buyers.If the potential buyer does notrespond in 5 days, the enterprisewill contact him again. Allinquiries from buyers will beanswered within 1 business dayand all orders will be shipped ontime.

Expect to be told no. This isexpected when selling a product.If buyers are buying products fromother suppliers, continuecontacting them. Buyers arealways looking for a better dealand may turn into customers later.

Selling involves negotiations.Expect to negotiate with buyers.Determine what the enterprisepolicies will be for shipping,payment, quantity discounts, etc.

Also, determine which subjects arenegotiable and which are not.

When to Use

A marketing strategy should bedeveloped during the business planstage of the enterprisedevelopment. However, thestrategy should be reviewedcontinually to incorporatechanging market conditions.

Selling starts as soon as theproduct is available, but be carefulto balance product supply with thepotential order size of newcustomers. One mistake groupsmake is mismatching buyers andproduct supply. For example, abuyer will place a large order onlyto be told it cannot be filled. Thisis poor for customer relations. Bespecific with buyers on when andhow much of a product isavailable.

Chapter Tools

This chapter breaks marketinginto six steps. Toolsthroughout the steps include achecklist of “Subjects forMarket Research”, a chart tohelp “Collect Information fromCustomers”, and checklists to“Understand a Product’sMarket” and “Keep the BuyerHappy”.

This section is intenindividual or group wno marketing experimeant as an introducprovide a basic undeprimary marketing isissues may need to bfor specific situation

A market exists whehave a need for a proenterprises have theand ability to meet tmarketing concept reimportance of customenterprise. To use thconcept, an enterpris

1. Determine the necustomers (Step 1Research)

2. Analyze its compadvantages (StepStrategy)

3. Select specific m(Step 5 – Target M

4. Determine how toneeds (Step 6 – Mand Product Sale

The Marketing Concept

Chapter Five 40

ded for anith little or

ence. It istion torstanding ofsues. Othere examineds.

n consumersduct andwillingnesshat need. Thests on theers to the

e marketinge should

eds of its-3 - Market

etitive4 - Market

arkets to servearket)

satisfy thosearket Mix

s)

For any market data collected, ask:Does the data seem reasonable?For natural products there is a lackof published market data and whatis published may be inaccurate(especially if it is drawn fromcustoms and forest charges figures,since tax and fee evasion isassociated with natural products inmany countries).

Smuggling of natural products alsodistorts supply and demand figuresthat go into market data. Existingtraders make profits because theyhave access to market informationthat they are not likely to sharewith others in the industry. Still,even with the data deficienciesthere are ways to collect marketinformation.

When should an enterprise do a

marketing strategy?

Marketing studies and strategies

should be done before an

enterprise starts AND be

incorporated into the day-to-day

activities of the enterprise.

Market conditions are always

changing. Enterprises must keep

up with changing competition,

demand and prices.

41 Chapt

Marketing Concept FFollow thes

1. Market Research: Step 1- Is thNon-Established?

2. Market Research: Step 2 – Un

3. Market Research: Step 3 - Coll

4. Market Strategy: Step 4 – MarMarketing

5. Target Market: Step 5 – Positio

6. Market Mix: Step 6 - Market M

or Natural Productse Six Steps

e Natural Product Established or

derstand the Market

ect Information from Customers

ket Segmentation and Target

n the Product

ix and Product Sales

er Five

How is a producenterprise? Thiproducts availabWhat is sellingDetermine a proconsidering theexperience withthe resource basenterprise with thas difficulty mfinancing markewith two to threproducts.

After choosing adetermine if it isnon-establishednatural productnon-establishedIf traders for the

Examp

ProductJatamansi roots arenorthern Nepal. Indbought the roots frotwo decades.Wild spices from thharvested and soldcapital who procesWild spices from thPhilippines. Commcollected them andbuy them yet.Silk cocoons and yanorthern India. Thenever produced silksecond largest silk

Is the

STEP 1 – Market Research Natural Product Established or Non-

Established?

Chapter Five 42

t chosen for annk about thele in the area.

in local markets?duct bymarket; personalthe product; ande available. Anoo many productsanaging andt research. Starte potential

product,established or

. An establishedin one country mayin another country.natural product

already exist in an area, then theproduct is established. If no tradeexists locally then the product isnon-established. The chart belowprovides actual examples toillustrate the concept.

There are potential pros and consfor each type of product. Forestablished products, the existingparticipants may be wellpositioned making it difficult fornew enterprises to enter and becompetitive. More marketinginformation exists for establishedproducts, less for non-establishedproducts. However, non-established products may create anew niche in the market, makingthem unique.

les of Established and Non-Established Products

Description Is it Established or Non-Established?harvested fromian traders havem the communities for

This is an established product for Nepal becauseexisting traders and communities harvestJatamansi.

e hills of Sri Lanka areto traders from the

s and export them.

There is existing trade and a history of spiceexporting, so this is an established product forSri Lanka.

e forests of theunities have notno traders in the area

This is the same product as in Sri Lanka, but inthe Philippines, wild spices are a non-established product because they are notcollected and traded.

rn production incommunities havebefore, but India is the

producer in the world.

Even though this is a new product for thecommunity, it is still an established product,because there is an established silk industrywith many traders in the country.

43 Chapter Five

Understanding the market requiresgathering information on productquality, quantity, price trends andthe existing competition. Use thefollowing question guide to gatherthis information. The answers tothese questions can be obtained bytalking to appropriate members ofthe community, local retailers,

distributors, industryrepresentatives, or exporters forthe selected product. Also, marketinformation can be found fromfacilitating institutions such as theTrade Promotion Center, Chamberof Commerce, Trade Associations,Government Departments andNon-Governmental Organizations.

STEP 2 – Market ResearchUnderstand the Market

Subjects for Market Research

• Product Characteristics– What are the qualities, characteristics, andpackaging of the product? What is the range of product types and brandsalready on the market? What are the problems with current product qualityand packaging that this enterprise could potentially remedy? What are thetransportation costs associated with delivering the product to the customer?

• Price Trends - What are the current wholesale and retail prices for theproduct? What have the price trends been for the last three to five years? Areprices expected to go up or down in the future?

• Quantities Produced and Sold – Over the last three years has there been ashortage or oversupply of the product? Why? Is it due to seasonal supply, badweather, or a change in end user demand trends? How much was producedand sold over the last three years (an exact number is not needed, only anorder of magnitude)?

• Product Buyers – Who buys the product and where are they located(individuals, retailers, wholesalers, distributors, industrial users, exporters)?What conditions would cause purchasers to buy from a new supplier (lowerprice, better quality, more reliable supply, need for more supply, betterpackaging, etc.)?

• Competition – Who currently makes the product? Could large firms flood themarket with low-cost products and drive the price down? Who might bethreatened by the enterprise and who might be a natural ally?

• Policies and Regulation – What and how are trade, industrial and forestpolicies and regulations affecting the business?

• Risks - What are the risks in marketing the products (supply, price, marketshare, profitability, policy, etc.)?

Chapter Five 44

With a firm understanding of themarket, the next step is to accessactual customers. The chart belowillustrates methods of entering themarket (international or domestic)for both established and non-established products.

Do not rely on just one interviewwith each type of customer. Whenpossible, interview at least 30 – 50

consumers, 5 retailers, 4distributors, 3 industryrepresentatives, and/or 3 exporters.If possible, take product samplesto get specific feedback fromcustomers. Try changing theproduct price, delivery method andother characteristics to see if theseaspects affect the demand for theproduct.

Type of Product Type of Buyeror Seller

How to Get Information

Households

Survey households to find out how much of a productthey use. It is important to speak to the people who dothe buying, often women. Local government statisticscan then be used to determine the number of householdsin the area and income levels. Multiplying the averageusage per household by the number of households willgive an idea of the demand for the product.

LocalShopkeepers

Survey shops in the target market to find out whatproducts are sold, and current prices. Shopkeepersmight be willing to indicate how much they sell everyweek or month, which will give an idea of the localconsumption of the product.

Established Product

Manufacturers,Wholesalers,Distributors,Exporters

Survey industry representatives to find out productdemand and prices. Ask industry representatives if theywould be willing to purchase the product from a newsupplier and under what terms.

Local MarketFigure out who is most likely to buy the product. Interviewthem to gauge their potential interest in the new productand their product specification requirements.

Non-Established Product Manufacturers,Wholesalers,Distributors,Exporters

Research the industry dynamics beyond the country inwhich the product is sold. Figure out who is most likely tobuy the product locally and elsewhere in the world.Inquire with the Department or Ministry of Trade for leadson what companies might be interested in the product.Then write the parties and inquire about their potentialinterest in the new product and their productrequirements (e.g. price, demand, quality, packaging,supply seasons and quantity).

STEP 3 – Market ResearchCollect Information from Customers

45 Chapter Five

After understanding the market ofa particular product, determine amarketing strategy. A marketingstrategy includes identifyingcustomer groups (target market)and a strategy for beingcompetitive. Too many enterprisesmake a product, then look for aplace to sell it, only to find that ithas the wrong characteristics or

customers will not pay the askingprice. The questions below focuson discovering how a product ispresented to the target market. Itis important to know howcompetitors package and advertisetheir product. The costs ofadvertising, packaging, anddistribution must be considered inthe enterprise operations.

Understanding a Product’s Market

What is the target market, how large is it, and where is it located?Who are the competitors? What is their current market share and how fastdo they plan to expend?Why would consumers buy this product instead of a similar product from acompetitor or a different type of product entirely? Do the buyers require acertain type of packaging or other product characteristics?What share of the target market does the enterprise need to capture to beprofitable? The market for the proposed product should be large enoughthat the enterprise is only expected to capture a reasonable percentage ofthe target market. For example, if the enterprise is planning to process andsell an essential oil, and a total of 1,000 kilograms are currently beingbought by the target market, do not expect to capture a high percentage ofthis market, at least not during start-up operations.How will purchasers learn about the product? What are the costs andexpected effectiveness of various promotion methods in reaching theintended market?Will any special labeling (brand name or logo) be used to identify theproducts?What kind of marketing channels will be used to reach the customers?What is the cost of distribution?How much will the target market pay for the product?

STEP 4 –MarketStrategyMarket Segmentation and Target Marketing

Chapter Five 46

Owners of small-scale naturalproduct enterprises have limitedresources to spend on marketingactivities. Concentratingmarketing efforts on one or a fewkey market segments is the basisof target marketing.

The three major ways to segmentthe market are:

1) Geographical Segmentation:Develop a loyal group of buyers inthe local market center beforeexpanding to new areas.For example, an enterprise couldconcentrate on regional marketsbefore expanding to Europe or theU.S.

2) Product Segmentation:Promote existing best sellingproducts and expand profitableproduct lines before introducing alot of new products. For example,if dried medicinal herbs are sellingwell, explore expanding theproduct line before going into anew product such as incense.

3) Customer Segmentation:Identify and promote products togroups of people most appropriateand likely to buy the product. Forexample, sell bulk essential oils towholesalers and distributors, notretail shops.

Profile and analyze the segmentsby considering the following:

• Segment size and growth• Segment strengths and

attractiveness• Competition of other segments• Risk of new entrants into a

segment• Threat of product substitution• Sales goal of the enterprise

STEP 5 – Target MarketPosition the Product

47 Chapter Five

Selling the product (either at thewholesale or retail level) is thefinal, critical step. The two mainingredients to achieving productsales are a proper market analysisand an appropriate target market.The product must be defined and

price, distribution and promotionpolicies set. This is what isreferred to as the market mix.Look below at the general items toconsider and the market mix forJatamansi oil.

The Market Mix

General Items to Consider Jatamansi ExampleProduct: Effective product strategies fornatural product enterprises may includeproviding independent lab testing to insurequality (there are many adulterated productson the market); positioning the product asenvironmentally sustainable; and offering bulkpackaging for wholesale markets.

Product Example: The Jatamansi oilis high quality, independently tested(lab report provided) made from wildJatamansi harvested in a sustainablemanner. The oil is available in bulkform, packaged in aluminumcontainers of 1to 20 kg.

Price: This includes product pricing andpayment policies. For example, pricediscounts for higher volume orders;enterprise’s payment terms (immediate, net 10or 30 days, etc.); delivery terms and creditterms.

Price Example: Jatamansi oil isavailable at $125 per kg for ordersunder 10 kg; $110 per kg for ordersbetween 10 and 50 kg; and $100 perkg for orders over 50 kg. Deliverycharges are additional. Paymentterms are net 10 days of invoice.

Distribution: The enterprise must decide howto distribute their products, e.g. throughwholesalers, distributors, or retail outlets. Itmay be more cost effective to sell at a lowerprice to a wholesaler who will buy largequantities, than manage many small retaillevel orders even if they pay a higher price.

Distribution Example: Jatamansi oilwill be sold through perfumemanufacturers, wholesalers anddistributors who will buy in largerquantities (e.g. more than 10 kg perorder). A distributor arrangement forEurope and the U.S. will be pursued.

Promotion: How can an enterprise advertiseand persuade customers to buy? Thisincludes advertising, salesmanship, and otherpromotional activities such as trade showsand company introduction mailings to industrymembers. Weigh the costs of promotionversus the benefits it will bring.

Promotion Example: The Jatamansioil will be exhibited at regional tradeshows and two sales agents willmake monthly sales calls to majoressential oil buyers in India. Apromotional mailing will be sent tointernational buyers in Europe andthe U.S. with fax follow-up.

STEP 6 – Market Mix and Product Sales

Chapter Five 48

STEP 6- Market Mix and Product Sales

Marketing strategy and mix informwhere to sell the product and atwhat price. Good market researchinforms what does and does notmake a product appealing tocustomers. As sales begin, a poolof customers is established.Establishing sound businesspractices with initial customers is agood way of generating newbusiness. Current customers arean excellent source of word-of-mouth advertising. It is alsoimportant to keep buyers satisfied.Use the checklist on the right toassist business relations.

Keep the Buyer Happy

Respond to a buyer’srequests for informationpromptly. If possible, be easilyavailable by fax, phone or email.

Send out samples, pricequotes, and purchase terms(e.g. shipping procedures,payment, insurance) in a timelymanner.

Adhere to product quality,amounts, and delivery dates. Ifa buyer orders 10 kilos of oil fordelivery on the 15th of March,make sure to send the full orderon the specified delivery date.

Keep in contact with thebuyer. After delivering an order,follow up to see that the buyer ishappy with the product.

Offer a consistent, qualityproduct.

49

This manual provides aof the major elements oenterprise. When assemtogether these elementsbusiness plan. The entebusiness plan is essentiattracting financing, maoperations efficiently, aintegrating all enterpris

Enterp

Executive Summary• Summarizes all th

two pages

Background and Ov• Background on ra

the enterprise wil

Product and Producand Processing)• Product descriptio• Raw material coll• Enterprise site de

facilities, raw mat• Production proce

infrastructure, fue• Production capac

processing equip

Sustainable Resour• Sustainable harve• Mitigation of pollu• Plan for biologica• Compliance with

-Chapter Six-

rise Development Plan

Chapter Six

n overviewf anbledbecome arprise’s

al fornagingnde functions

so that profits can be made whileconserving the resource base.Below is an outline for a businessplan. Use this outline in enterprisedevelopment and planning. Toreview and study a completedbusiness plan, visit ANSAB’sBusiness Service Center inKathmandu.

Business Plan

e main elements of the business plan in one to

erall Goals of the Enterprisetionale for the enterprise, present situation, how

l change the situation

tion Description (Raw Material Procurement

n (specifications and quality control)ection and supplyscription (access to transportation, communicationerials, infrastructure)ss (technology, skills level, equipment,l, supplies)ity (raw materials needed and capacity ofment)

ce Managementsting guidelinestion from processing (if any)l monitoring and conservation enforcementforestry regulations

Chapter Six 50

Business Plan Continued

Marketing and Sales Targets• Summary of market research• Marketing strategy and target market• Sales targets and sales plan

Enterprise Organization and Management• Legal status, organizational and ownership structure• Interface with regulatory bodies• Management team (board of directors, manager(s), skilled

personnel)• Number of employees and duties, qualification for each position in

enterprise, and compensation structure• Employee training and technical assistance planned• Relationship with stakeholders (collectors, suppliers, tenure holders,

traders, regulatory institutions)• Interface with community and distribution of enterprise benefits

Financial Assumptions, Projections, and Management• Investment capital requirements (pre-operating, working, and fixed

capital)• Projected cash flow, income, and balance sheets (for at least five

years) with ratio and sensitivity analysis• Proposed financing plan with loan repayment schedule and payback

period, break-even point, and return on investment noted

Risk Analysis• Mention of major risks to the enterprise that are specific to the

industry and geographic location

Enterprise Activities and Timeline• List of major activities (with timeline) needed to launch enterprise and

operate in years one and two

51 Additional Resources

-Additional Resources-

In addition to the checklists andcharts found in this manual,additional resources can be foundat ANSAB’s Business Service

Center in Kathmandu. The boxbelow lists the resources related tothe manual chapters available atthe Business Service Center.

Available at the Business Services Center

Chapter One• Using the Subsector to Identify Opportunities for Small-Scale

Producers• How to Assess a Natural Product for an Enterprise• Question Guide for Example Assessment• What is a Value Chain and Subsector Analysis?• The Nine Steps of a Subsector Analysis• Blank Skill Matrix WorksheetChapter Two• Natural Products Question Guide for an Individual Entrepreneur• Natural Products Question Guide for an Organization• Natural Products Question Guide for Study Mission• Monitoring Framework• Tools for Resource Assessment and MonitoringChapter Four• Business Fundamentals: Technology, Management and Finance• The Quick and Dirty Financial Test• Financial Management Seminar/Training FrameworkChapter Five• What’s Keeping Us Out of Growing Markets?• Natural Product Enterprise Market Study Outline• Market Survey Questionnaire• Example Market Study OutlineChapter Six• Sample Business Plan

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