7.2.4 Business or sustainability plans as pre-requisite for fund allocation

Business plans are important to any ICT venture. Donors or Universal Access and Service Funds (UASF) should request a business plan before they support larger pilot projects. This business plan ideally meets certain minimum criteria and demonstrates sustainability of the project concept, as well as its development impact or outputs. This is particularly important when the allocation of funds does not involve a competitive tender.

A business plan (or sustainability plan) for a pilot project should always describe the project’s rationale, demand basis, costs, expected revenues and financial performance, which need to be met to qualify. The following is an illustrative list of business plan elements which a donor or UASF may require, as appropriate to the particular project:

• The project purpose and mission statement – a brief introduction to the project idea, the need or opportunity and how the project addresses the opportunity.
• Sponsorship & ownership - a clear outline of the ownership structure and participants in the project, and whether the project will be a franchised or independent business, a community co-operative, an arm of local government, etc.
• Market and beneficiary assessment - a demand assessment (based on demographics, interests, economics, needs and affordability). The assessment should include a market description that assesses the role of the project compared to the availability of other competitive services (e.g., for a public access project, identify other phone shops or Internet cafes), and the specific needs of the region, including the kind of information or services needed by the local community. Explain how they will benefit and how they will justify paying for the services. This should include an estimate of the expected usage (e.g., number of calls, Internet minutes of use, messages, pages printed, photocopies, forms delivered, or whatever mode of information and service is to be offered).
• Legal and regulatory framework, licences and authorizations – a summary of the status of the project proposal with respect to licenses and authorizations. Does the project, or the site owner(s) require a license or special authorization to proceed and have these been granted. If special authorization is required, describe the steps taken and the likely outcome, the conditions attached or the outstanding issues to be resolved.
• Marketing and sales plan – an explanation of how the market potential will be realized, people sensitized and made aware of the service(s) and, if appropriate, drawn to the site(s).
• Competition – an assessment of how the market and sales assumptions could be affected by other similar installations, networks or alternatives, and the impacts on the project target.
• Technical assessment - an assessment of the area’s access to communications infrastructure, the topography, the access technology and other systems (e.g., power) required. This assessment should recommend the most suitable technology for the characteristics of the site(s), and the initial and ongoing costs to connect and maintain the facility or facilities.
• Financial worksheet - this should contain start-up expenses and start-up costs, as well as projections of number of users, traffic usage, prices and revenues, expenses, financing costs, operational costs and salaries, etc.  Financial schedules, showing breakdown of costs and revenues for each major item, unit, department or service (e.g., telephone, fax, computer, Internet & email, training, photocopying, etc.) should be included. Amortization of costs, depreciation and replacement strategy should be shown.
• Financial bottom line analysis - this must show the profitability calculation or any variations from profitability explained, justified and projected into the future to show how the situation will improve.
• Funding requirements – a summary of funding requirements and of financial contributions, including in-kind contributions, from all sources. The scale of the investment and the scope of services proposed must be justified.
• Operational plan – an organizational chart with clear responsibilities, staffing plan, equipment and facility plans and assessment of possible problems and solutions.
• Training, capacity building and any other human resource development – the needs of the project and the assigned effort, plan, costs and partnership(s) to meet all stated goals for staff or users.
• Community inputs - if appropriate, an assessment of support from the local community to confirm that the requirements are understood by the community and the sponsor(s).
• Partnerships – after assessing all of the market, technical, operational, financial and human resource development needs and challenges, clearly outline the nature of partnerships required and secured for successful project implementation. Examples could include a selection of the following: a business with local operating experience; local merchants; telecom operator; Internet service provider; NGO and community organization specialising in training; university; international or national donors, government, etc.
• Risk and sensitivity analysis – how is the project’s performance and success affected by various market, sales, cost, pricing or operational scenarios, especially the worst cases.
  

In addition to the above, other requirements dealing with the impact of the project and the project’s development outputs also need to be considered. A practical guide of how to approach these requirements in an application for funding can be found in the table below:

Source: A rural ICT toolkit for Africa, Andrew Dymond, Sonja Oestmann, infoDev 2003

For smaller ICT projects such as small or micro-entrepreneurs applying for grants to open a telecentre or phone shop, the above requirements are obviously too onerous and complex. See Section 7.1.4 and its Practice Note Uganda’s application process for rural schools to have Internet access for guidance on simpler qualification requirements.