Facilitating micro-enterprise and cooperatives development

Formal wage employment opportunities may be scarce in rural areas. Often the only income-earning opportunities available are self-employment and the creation of micro-enterprises. The TREE methodology aims at developing entrepreneurial skills and the capacity of beneficiaries to start, operate and manage a business that is profitable and sustainable. Wherever possible, services to assist the development of new economic opportunities will be delivered by service providers including partner organizations.

Webpage 3 covered the assessment of economic opportunities, the selection of potential new businesses or activities and identified needs for training and post-training support. This webpage focuses on the support needed for individuals or groups of beneficiaries to establish new businesses.

Skills and knowledge that beneficiaries need to successfully develop and run a business include:
  • Business management skills training – Basic concepts of entrepreneurship
  • How to start a small business – Preparing a simple business plan based on market demand,
  • Managing a business to produce quality products and services to satisfy customers.
  • Business/enterprise successes and failures
  • Lessons learned from the first year of business implementation
  • Stages of small business
  • What's important at the initial stage?
  • Will your business make money?
  • Marketing and product development
  • Accounting and financial management
The ILO’s resources in the Start and Improve Your Business (SIYB) programme, and its worldwide network of master trainers is an important resource in providing support to beneficiaries in the skills and knowledge they need to successfully start a business. An SIYB template for a business plan is available at Doc 5.9 How to create a business plan. Another resource for working through the development of a business idea and creating a plan is in the Start.COOP tool. Designed for a group of people willing to meet their common needs through a collective enterprise, namely a cooperative 1, the tool helps them identify a business idea, develop and implement it. It has step by step processes for all elements. This resource can be used or adapted as needed to provide support to individuals or groups in planning a cooperative business.

Beneficiaries should complete a business plan as the basis for identifying further assistance required as ensuring a solid start to their business. A business plan should include:
  • Executive Summary (written last, it summarizes the whole plan)
  • Business Profile (description of the business, number of people working, where it is located, etc.)
  • Marketing Plan (what the business produces or service it provides, how the goods/services of the business will be promoted and sold, to whom, where etc.)
  • Revenue Forecast and growth (assessing cost of initial investment, cost of inputs (labour, equipment maintenance, raw materials, transport, storage) and realistic assessment of revenue (based on expected price and volume of sales)"
  • Operations Plan (how and where the product is made or service provided, the facilities and equipment needed, how product/service quality will be achieved and how safety standards will be met)
  • Risk Management (identifying any risks that might cause losses to the business and ways to reduce those risks)
  • Management Plan (describes how the business is structured including roles and responsibilities of staff (members in the case of cooperatives)
  • Financial Plan (sets out the revenue and growth goals for the business, including resources needed for start-up and maintenance, expected sales, operation costs and income and profitability targets)
Completed plans are then assessed for completeness and to identify areas where further assistance may be required. Plan assessment may be completed by TREE staff, by training providers, or by business service providers, as identified in development of the post-training support plan. Doc 5.8 Entrepreneurship readiness assessment

Areas where further assistance will likely be required are:

Access to credit/financial services

Starting and working capital are required for operating a micro-enterprise. Many beneficiaries, particularly those facing additional barriers (gender, persons with disabilities, youth) will have little access to such resources. The TREE programme will identify beneficiaries' need for assistance with financial services, identify potential sources of credit, and facilitate beneficiaries' access to appropriate service providers and institutions. This may be the responsibility of partner institutions or service providers who have been supported by TREE to expand their service capacity. Further information on potential sources of credit and services are in the following Doc 5.2 Potential sources of credit for micro-enterprises, Doc 5.3 Assessing the capacity of a microfinance institution, Doc 5.4 Credit guarantee funds

Access to production sites

While many micro-entrepreneurs work from their homes, for some enterprises and cooperatives a separate work location may be preferable. This might be near a market or a source of raw materials, or needed to house a piece of equipment that would not be suitable in a home or is shared by a number of those in a group or cooperative enterprise. The TREE programme can assist with locating a site and securing a contract for its use. This is also an opportunity to ensure basic occupational health and safety conditions and optimizing production methods.

Access to equipment and tools

The products or services for new enterprises identified during the development of TREE and the subsequent training may involve the use of tools or equipment that beneficiaries don’t have or can’t easily access. For persons with disabilities, tools or equipment may have been adapted to meet their needs. The TREE programme will plan how tools and equipment will be obtained by the beneficiaries. This might mean working with a supplier to ensure they can be purchased at a fair price and with follow up assistance with maintenance and spare parts, or the TREE programme may create a rental or lease-to-own arrangement. In all cases, formal agreements on terms of payment etc. should be established with the beneficiaries so they fully understand their rights and obligations.

Marketing support

In line with the marketing plan developed by beneficiaries as part of their business plan, post-training support may be required in a number of areas:
  • Developing market awareness and linking with the local business community
  • Marketing strategies including sales promotion and product improvement
  • Market linkages including identifying potential buyers and broadening reach through exhibitions or fairs, and connecting with value chains.
  • Marketing channels, including assessment of direct sales, through agents, etc.
  • Product improvement and diversification, as initial consumer response is assessed

Supporting group formation

TREE recognizes that for the beneficiary population, group membership can provide many benefits. Groups may consist of a number of people within a micro-enterprise or organized as a cooperative. Groups may also be formed from a number of self-employed individuals, or a mix of enterprises, coops and individuals working within the same sector or with other interests in common. A group can be an effective way to build self-reliance among its members, by increasing their bargaining power in the market with suppliers and buyers. Women, persons with disabilities or other disadvantaged groups may find support from others within a group. Cooperatives and microenterprises with employees or partners may benefit from the division of labour to increase productivity and quality of products and services and reduce costs of production. The TREE programme can assist beneficiaries to form groups to work together or as associations of self-employed people during and after training. One common focus for group formation is savings and credit, where a group may be better placed to access financial services than individuals. Resources on group operation and on savings and credit groups are found at Doc 5.6 Modalities of group operations, Doc 5.7 TOR for savings and credit groups

As with beneficiaries moving into wage employment, the TREE programme will follow up with beneficiaries who intend to start self-employment, micro-enterprises or cooperatives. Follow-up may be by the TREE programme or by a partner organization, one responsible for business support, micro-enterprise or the industry involved. Regular counselling and check-ins can help a new enterprise to succeed. Follow up visits should continue for at least six months following start-up. Visits will review:
  • Technical skills: to confirm operations and processes are being done correctly and the skills used effectively.
  • Basic business accounting such as maintaining records of inventory and transactions and calculating operating costs.
  • Occupational safety and health.
  • Where there are employees, employment conditions, wages, etc.
  • Opportunities to increase the formalization of the enterprise Doc 5.4 Credit guarantee funds
A form for recording the visit and identifying areas for action is provided, to be completed during the visit and with the participation of the beneficiary. One copy is kept for TREE records, the other stays with the beneficiary for their use. TREE may use the forms’ information to improve further training or to provide follow up training or support where required. Doc 5.5 Post-training monitoring and visit forms for microenterprises (start-up, production, marketing, finance)
The Think.COOP tool can be used as an orientation on the cooperative business model allowing participants to understand what a cooperative is as well as its specific benefits and challenges compared to other types of enterprises or economic organizations.