Financing the 4 layers

Layer One: Importer - Distributor

Expected situation

Worst case scenario

First there is an investment to be made at the start-up.
Once started, TerraCottem has to be bought and running costs to have be taken into account.

Martial Sawadogo was convinced he could finance the running cost for the first 6 months, and worried about the extra cost for buying the goods.

We arranged a deal that he would take care of the initial investment and the running cost, and for the first year, we would take up the finance of the goods not sold. Each month he would pay us for the goods sold.

The running costs are very low, and this gives a bit of a strange scenario for “Worst Case”.

Because of the low cost of salary, in cash flow terms, the worst case scenario is the one in which you do not sell enough product to run positive.I still consider not selling anything as the worst case, as I expect once you are selling, the market will take off at one moment or the other.

In almost all cases, an investment of about 3,5 million CFA (About 5350 EUR) is needed.
B.E.E.P. cvba will back up the distributor for the amount of the first goods bought. This will be 100 buckets of 5 kg and 192 bottles of 750g. Which is about half this amount.

This risk will be rewarded by a part of cost which is less than the 68% foreseen in the business plan. (See Cost of Buy In)

Extra financial means needed for financing the take off of layer 3 and 4 are discussed under this heading, even if this comes on top of the distributor. We do not expect this to bring us any problems as it means the market is developing well.

See also: Business plan Distributor

Layer 2: professionals and high-end customers

We do not think any financing is needed for this layer.

Layer 3: Organising the tests with NGO and governemental organisations

This is the hardest part to finance.
I propose the following finance structure:

As I suppose the test will be done with regular farmers, under the supervision of some agriculture engineers or alike who will note all data which could be important to describe the test.

For the investment, there is little risk if the vegetables that are chosen are profitable. Seen the investment is “at cost” for the distributor, break-even is easy to reach.

I could imagine that the distibutor makes a deal with TerraCottem NV to also pay the side costs. After the test, the distributor will be able to sell much more of the product, and TerraCottem NV will gain in credibility.

This can be done if they are serious about the tests and remain within strict rules.

Rules need to be adhered to in order to avoid the possibility that these tests can be abused, meaning that the cost will rise without any result.

Layer 4: Reaching the farmers and poor families.

Partly we could repeat the system in layer 3, without the experimental costs, as we could now talk about “proven technology”.

To make this even easier for the NGO and farmer, and to shorten his pay-back period, we could think about an alternative mechanism which would cost a lower investment but would also postpone the profit of the distributor.

The distributor would sell the first investment in TerraCottem at the price of AgroCottem. In return he gets an agreement that the following years AgroCottem would be bought.

In reality this means he offers his first year profit to enlarge the market and lower the first year break-even. This would, at the same, time lower for a big part the investment barrier, and make it harder for any alternative to get into the market.

Calculations of cost can be found in the discussion of the businessplan of Martial Sawadogo.