Communicating the viability of your business (3)
By Goke Ilesanmi
Last week, as regards market analysis, we said although telephone or posted questionnaires are possible, in most developing countries, it is better to conduct a market survey by going out into areas where the producers expect to find consumers and asking people for their views. We added that a different set of questions will be needed when assessing the size of the market for a particular type of food. We said at the same time, it is possible to gather information about the type of people that buy a particular type of food and where they buy it from. We explained that the information gathered from potential consumers, using appropriate questionnaires can be analysed by the entrepreneur to get a good idea of the quality characteristics of the product that consumers prefer, the total demand for the product and the total value of the market.
We also offered questions that can be asked regarding different segments of the market size and value.
On market share and competition, we said market surveys and calculation of market size and value are important in finding out whether the demand for a product really exists. We added that it is often difficult to estimate a realistic market share and the figure depends on a large number of variables. We stressed that in many cases, new entrepreneurs over-estimate the share that they could expect.
We advised that new entrepreneurs must therefore assess each of these factors when deciding what the competition is and how to deal with it. We said this can be conveniently done using a SWOT analysis, an acronym which its “S” stands for “Strengths”; “W” stands for “Weaknesses”; “O” stands for “Opportunities” and “T” stands for “Threats”.
Technical feasibility
Technical feasibility is another segment of a feasibility study. It contains other sub-segments such as production planning; weights of raw materials and ingredients; equipment required; packaging and staffing levels, etc. Once an entrepreneur has got information about potential consumers, their requirements and the likely share of the market for a new product, it is then necessary to assess whether production at this scale is technically feasible. The following questions are helpful in deciding the technical requirements of the business: Are enough quality raw materials available for year-round production? Is the cost of the raw materials satisfactory? Is the correct size or type of equipment available for the expected production level and at a reasonable cost? Can it be made by local workshops? Are maintenance and repair costs affordable? etc.
The answers to these questions can be found by first setting down a plan of the production process. This plan should indicate how the different stages in a process are linked together, identify any challenge in the process, the equipment required for each stage and where quality assurance procedures should be used. The data found from market surveys will be added to the process chart to indicate the scale of production that is required. The chart is also used for planning a number of different aspects of the production process, including: (1) the weights of raw materials and ingredients that should be scheduled each day; (2) the number of workers and their different jobs, etc.
Technical feasibility
Weight of raw materials and ingredients
There are two stages involved in planning the amounts of materials needed to produce the required weight of a product. First, it is necessary to calculate the amount of each ingredient that will be needed to formulate a batch of the product and secondly, it is necessary to calculate the amount of losses that can be expected during preparation of the fruits and vegetables. The processor should experiment with different mixes of ingredients (the ‘formulation’ or ‘recipe’) to produce a product that has the colour, flavour, appearance, etc. that consumers prefer from market research. Skill and flair are needed to achieve this, using the combination of ingredients having the lowest cost. It is important to weigh each ingredient carefully and make sure that all weights are recorded for each formulation that is tried.
Otherwise, the inevitable result is a successful trial product, but no information is recorded to enable it to be repeated. Once a formulation has been successfully developed, great care is needed to ensure that it is made in exactly the same way on every occasion. This requires staff training, especially for those staff involved in batch preparation, the implementation of quality assurance procedures and careful production control.
For instance, nearly all fruit or vegetable processing results in losses of material. These may arise from peeling or de-stoning, from unsatisfactory fruits and vegetables that are thrown away during sorting, from spillage during filling into packs or from food that sticks to equipment and is lost during washing. Different types of fruits and vegetables have been found in practice to have different levels of wastage. However, it is necessary for an entrepreneur to do trials to calculate the actual amount of wastage experienced with the particular varieties of fruit or vegetable and with the particular process being used.
Clearly, it is in the interest of the processor to reduce losses as much as possible.
Contracts with reliable suppliers help to ensure lower levels of poor quality raw materials and therefore reduce losses. Additionally, a well-managed processing operation, having good quality assurance procedures also reduces wastage, especially during later stages of a process when the product has a higher added value. It is necessary to calculate the amount of raw materials and ingredients needed to produce the required weight of product each day.
To be continued
PS: For those making inquiries about our Public Speaking, Business Presentation and Professional Writing Skills programme, please visit the website indicated on this page for details.
GOKE ILESANMI (FIIM, FIMC, CMC), CEO of Gokmar Communication Consulting, is an International Platinum Columnist, Professional Public Speaker, Career Mgt Coach and Certified Mgt Consultant. He is also a Book Reviewer, Biographer and Editorial Consultant.
Tel: 08055068773; 08187499425
Email: [email protected]
Website: www.gokeilesanmi.com.ng
