Securing land for the school

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The school stands to be in need of its own land to build up classes which can ease the poor conditioned structure that children are learning from at the moment Neighbours can look into this fact and find out possible ways of raising funds to purchase land and build our own school which can later or sooner serve a full primary school.In Kenya a full primary school needs up to eleven rooms.

Hi Richard,

Thanks for the info. I am happy that the kids can come to school even without uniform - you should try to keep this up, because it saves a lot of money.

As for your maize project, have a look at tis organisation http://www.kitchentablecharities.org/given.htm
Please have a look at the beneficiairies and their websites, you could probably learn quite a lot from what others do. Also you could contact them and ask what documents you have to submit to apply for a grant.

Maria

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Richard - good ideas, but my maths seem to be off - you say the profit per sack is 20 to 28 cents less than half of one US dollar? or 400- 600 schillings??? so your profit will be 20 times average 25 cents, or five dollars for a lot of work??? this I am not sure is the best money maker i can think of - but, perhaps we should wait for Shaun and Carol to come back and discuss it with them -Actually 6,000 schillings equals less than $3 USD on my computer money converter!
Regards,

Ginger

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Hi Ginger,

Good to have your thoughts. Your figures made me sit down and look again carefully at the ones Richard supplied. My converter gives a rate of approximately 77 KSh to the dollar ! I have worked out that the best possible return from the figures supplied by Richard is a profit of $91 (see below) and as you say it involves a lot of work transporting 1,800Kg (nearly a metric tonne) onto a truck, unloading ,storing and distributing the maize. It is dependent on everyone doing the physical work for nothing of course.
Richard mentions that he can possibly get the transport costs for less but I cannot imagine with the price of diesel that it will be less than 2,000KSh, which would add another 2,000KSh ($26) to the profit giving a maximum profit of $117.

1. Retail sale of 20 sacks of maize at 2,600 KSh = 52,000 Ksh ($675)

2. Less original cost of maize 20 x 1,800 KSh = 36,000 KSh ($467)
3. Less transport 20 x 200 KSh = 4,000 KSh ($52)
4. Less storage 1 month. = 5,000 KSh ($65)
TOTAL COSTS = 45,000 KSh ($584)

5. Net profit = 7,000 KSh ($91)

The above figures are the best that can be expected, so what about the worst?
Well first of all Richard mentions that it may be necessary to pay 2 months storage in which case the figures look poor as profit will only be $26:

1. Retail sale of 20 sacks of maize at 2,600 KSh = 52,000 Ksh ($675)

2. Less original cost of maize 20 x 1,800 KSh = 36,000 KSh ($467)
3. Less transport 20 x 200 KSh = 4,000 KSh ($52)
4. Less storage 2 months = 10,000 KSh ($130)
TOTAL COSTS = 50,000 KSh ($649)

5. Net profit = 2,000 KSh ($26)

Perhaps the worst situation is the one that Richard mentions which is COMPETITION RISKS. As the following figures show it would only take a $5 (385 KSh )drop in the retail price of each 90Kg sack to result in a loss;

1. Retail sale of 20 sacks of maize at 2,215 KSh = 44,300 Ksh ($575)

2. Less original cost of maize 20 x 1,800 KSh = 36,000 KSh ($467)
3. Less transport 20 x 200 KSh = 4,000 KSh ($52)
4. Less storage 1 month. = 5,000 KSh ($65)
TOTAL COSTS = 45,000 KSh ($584)

5. Net loss = 700 KSh ($9)

This would be my main concern as the main way of preventing this is to wait until the price goes up again but this would incur more of the high storage costs and possibly result in greater losses.
In these calculations I have ignored the higher cost of 2,200 KSh per bag buying from the farmer as I presume this is automatically cancelled out by selling each sack of maize by an extra 400KSh (1,800 plus 400Ksh to give a sale price of 2,200KSh).

Maria previously asked about the risks and there may be some that I have missed but I really feel the main one is not being able to control the market after buying the maize. I hope the main competition is not from big businessmen who can store large amounts of maize and sit back and control the price by waiting for the right moment to sell. If this is the case it may be a too risky business unless you form some sort of cooperative with other buyers to offset storage costs.

I would appreciate Richards thoughts on these figures, hopefully he can reassure us on some of these points.

Cheers Shaun

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Hi Shaun and Ginger,
I don't refuse your survey in the proposed maize business.I know afriend who lives right in the rural areas where maize farming is done and he is the one I have thought of working with .Since he has been doing the same business he should be aware of the risks and the profits.I will come back to you with a clear information shortly.
Sheers,
Richard.

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Wow - MY bad!!! I was using the Uganda schillings not Kenyan! BIG difference. How long will Richard and the others be working before they can sell? Are they doing the manual labor of chopping down and drying? The competition IS a scary fear, and only Richard can tell us what the market is and if he Will be competing with big business. Another thing to think about - if storage is so expensive, what are the costs to build their own storage before starting - and amortizing it over the cost of the loan????

--
Ginger :)

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Thanks Shaun for this overview. It shows exactly what I was saying, the profit is very marginal and vulnerable to prize fluctuations.
Also, Richard, did you consider the eventual prize/ market differences between your friend´s experience in the countrysight and the situation in Nairobi? If the max. profit for 20 sacks is about 90$, how many sacks would you like to sell, and how often? This would be important to know how this business would be sustainable over the time, and what the expected yearly income would be.

Do you have any other examples of small businesses people are doing (for example sewing, etc) in Nairobi - just to compare what profits would be over a longer period compared to investment and labour force (which is quite high with the maize business, it seems to me).

Keep the thinking going - I think we are making progress and the project looks already much more feasible than in the very beginning of our discussions.

cheers,
Maria

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It is good to notice that efforts are first being made on paper to see the profitability of the project, before actually deploying the funds.

Most businesses in the category of 'high volume - low profit' can benefit only the large operator. It is risky for any small operator to get into any business of low profit margin, since any small adverse fluctuation in any of the key variables can completely wipe out any such business.

Vijai

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Hi all,
It is interesting to hear contribution of ideas from all of you.I have talked to my friend who lives at the country side and he has been in the maize business for some time.He has told me the right time for maize business is now because there is more demand than harvesting time when farmers will be stocking alot of maize.Buying maize during the harvest season is cheap but we have to store for some few months,say three is when we can sell it when the demand shows up again and the profit margin goes up.Here I am told we can sell it almost at the double price making over 50% profit.
As for now,this guy has told me that he can supply me with maize which he gets from Uganda at a cheap price and he will deliver it to my door for Ksks 1600 a sack.This has waved off the transport cost and now remains the storage cost.The retail price is Kshs 2475.This brings us to a profit of 875 or thereabout.The only disadvantage is that his lorry is big and as the journey is long he cannot only transport 20 sacks,he needs to load from 40 sacks onwards for him to cater for his fuel cost.
As regards the sale duration. I have managed to find from the retail dealers that with a good strategic place we can sale the maize within five or six months .However with time when we get milling machine, we can sell off the 40 bags within 1 month as customer will get both the maize and the grinding service in the same premises.
Maria,as for your suggestion of sewing,I have once tried it but it didn,t work.This is because we will need several things such as tailors, materials and the premises for the work.Again many people are doing this work tailors in the shops and from indoors.It also involves travelling in the country side to find market.It was a hard exercise for me to mantian tailors as each tailor wants to start his or her own work since it is not expensive to buy a sewing machine.This means that we have to pay the tailors on monthly basis ,buy materials and pay for the premises.You realise that at the end wheather sales have been made or not the costs have to be paid for.It is also a seasonal business, not a necessity like the food business because people have to eat at all times.All in all, a good survety reveals that food business do better than hardwares.
If maize cannot work, then we can think of a Pharmacy shop which I hear fetches for good profits but other challenges also.
Think about this and see the way forward,
Best wishes,
Richard.

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Sorry for all the questions, Richard: so, to make up for the fuel costs, you can buy 40 bundles of maize, which I assume doubles your storage rate from 100 for 2 months for the 20 bales, to 200 for the 40 bales? and now we might think of extending it for 4 months storage, doubling it even again??? Will the hay be usable after 4 months storage? And won't that cut a big chunk of profit? What does it cost to build a barn or silo - or storage to save the money from renting??
Very interesting to hear about the tailoring business and how unsuccessful it was for you. We only use it in the villages to make school uniforms - in exchange for that, the tailors get to keep the machines to use for themselves during the year. It seems to have worked out so far - but I haven't heard specifically.

--
Ginger :)

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Hi virginia,
Since we have to sell the maize,I don't think it can be stored for all the four months all in storage.From one of the maize dealers,he has told me that the an average of three quarters has to be sold daily.This means that with 40 sacks, we can sell off this stock in less than two months.
As for the storage,the solution can be finding a cheap room of Kshs 3000 but this will not be strategic for many buyers to see the business.It will mean that we carry a sack each day to the roadside to sell it to the passersby and also finding market from schools where they buy many kilograms to feed their children
Building a barn or a silo will demand for land which will cost us much money
You can think about this idea and come back to me.Thanks alot for your good contribution.
Richard.

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Hi Richard and everyone,
Some really good points being raised by Ginger and Maria. I have put the figures that Richard supplied for the Uganda maize purchase into our list as follows:

1. Retail sale of 40 sacks of maize at 2,475 KSh = 99,000 Ksh ($1,285)

2. Less original cost of maize 40 x 1,800 KSh = 64,000 KSh ($831)
3. Less transport ? zero in this case.
4. Less storage 5 months. = 25,000 KSh ($324)
TOTAL COSTS = 89,000 KSh ($584)

5. NET PROFIT = 10,000 KSh ($129)

Even though it is from Uganda am I correct in presuming there are no transportation costs for this purchase Richard?

I have however allowed 5 months storage cost as you indicated that you may have to wait 3 months to achieve the higher sale price, and then a further 2 months to actually sell the 40 sacks.
Once again this cuts deep into the net profit with very little increase in profit for having to sell twice as much maize.

Hopefully you can correct these figures Richard otherwise it is not enough margin to be a viable business.

I can well understand the high storage costs as you must have security to store such a valuable commodity. Also the storage must be vermin proof to stop spoilage of your investment.

You will need 99,000 + 25,000 KSh = 124,000 Ksh for this purchase, and it occurs to me that this is getting closer to the 200,000 Ksh ($2,6000)that you could purchase a Maize Grinding Mill.

Am I correct in presuming that the local people would bring the maize to you for grinding and so the demand for the grinder will be all year round? If this is the case it would be a far less risky business and not vulnerable to market fluctuations in maize prices. Also you could run it alongside your school feeding program and solve two problems at the same time. Also the timing of acquiring the mill (with June maize harvest) may be better.

Perhaps there are problems with the maize grinder : some occur to me:
1. Can you house it securely or are the risks of this valuable machine being stolen too high?
2. Is it electric or manual (if electric what are the running costs?)
3. Does it have high maintenance costs and can you get spare parts if it breaks down?

I mention this as Maria suggested to contact the Kitchen Table charity and if you do it may be worth applying for a grant to buy the slightly more expensive but more sustainable mill option.Knowing how this charity operates I should think it would look more favourably on the long term maize grinder than the more risky maize selling option.

Cheers Shaun

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Richard - I am definitely in favor of Shaun and Carol's maize grinder from Kitchen Table charity. I haven't worked with them, but I suppose they would be more responsive to such a project as well. You will need to find a safe place - with a guard to keep such a valuable piece of equipment, and is that doable and how costly?

--
Ginger :)

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Hi everybody,

I did some research on posho mills (that's how Kenyan maize mills are called). You can read more here on page 56-58 http://books.google.fr/books?id=Xzr3teZOd3AC&pg=PA58&lpg=PA58&dq=posho+m...

And here another story http://katonmission.blogspot.com/2008/10/posho-mill.html

This seems to be a very common micro-business and several projects on the microfinance website KIVA are into it. Start-up costs are estimated at 500$, but in the article it also says one needs a license. Richard, could you get more information on this?

Richard, I also found a very nice website that explains you step by step how to chose your micro-business and how to make a plan. Maybe you and your team can have a look at it, and take the steps and questions as a guide.
http://www.scn.org/cmp/modules/mic-cho.htm
http://www.scn.org/cmp/modules/mic-pln.htm

Maria

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Hi all,
The maize grinder was my first proposal and it is the one on the list of my project tasks.We have only gone into the maize deal because Maria had told me that it is rather costly and there is no money to purchase it.With a grinding machine,we can still buy maize and sell it right there after making some profits from the grinding service.So at the start of the business people will have to come along with their maize as we remain offering the grinding service only.Since mathare residents cannot afford the packed maize mill, most of them go for grinding as it is cheaper than the packed one.
I have to find out from the those who are experienced in this business and assess all the operational costs and I will be back to you.I hope this will work better.
I would request to know about securing the grant from Kitchen table from Ginger who says she has worked with them.Perhaps she could be of help in processing it for us.
Thanks all,
Richard.

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Hi Richard,

Thanks for coming back so quickly. Just to be clear - I still think that 500$ is quite a lot of money that will be difficult to get, but since the maize selling is quite the same - better to invest into something more stable and reliable. It is always important to consider different possibilities before getting started with anything.
As for the Kitchen Table Charity - I have not worked with them yet, but as with all grant giving NGOs, you need to apply there with a very detailed project plan, and a justification why you will do this business and who will benefit from it. I do not know the exact application procedure, but one could ask them. But as always, it is not easy to get such a grant and nobody from us can really influence it - it depends on the strength of your proposal and the funds they have available.

But I am sure if we put enough effort into the application, it might work. But before, exact numbers, profits etc have to be clear - so still a way to go :)

best,
Maria

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