Safe Water & Aids Project
Income Generating Program
Achieving self reliance
Business Plan
May 2009
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Pre amble Executive summary 1.1 The History of SWAP 1.2 Results of SWAP 2.1 Outline of the income generating programme 2.2 Programme rationale 3.1 The income generating concept 3.2 Description of the facility 3.3 Target group 3.4 Facility description continued 3.5. Proposed location 4.1 Legal structure 4.2. Ownership 4.3. Management 5.1 Organizational Structure 5.2. Organization Chart 5.3. Staff Wages 5.4 Organizational culture 6.1. Marketing plan 6.2. Quality indicators 6.3. Target groups 6.4. Target group approach 7.1. Financial segment 7.2. Turnover and cost price calculations 7.3. Cash flow estimates 7.4. Exploitation estimates 7.5. Risk assessment 7.6. Investment estimates 8.1. Purchase of Land and construction 8.2. Purchase of equipment and furniture 9.1. Resource mobilization Appendix Architectural drawings |
2 3 4 5-6 7 7 8 8 8 9 10 11 11 11 12 12 13 13 14 14 15 15-16 17 17-18 19-21 22-23 23 24 24 24 25 27 |
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PREAMBLE
Safe
Water and Aids Project (SWAP) aspires to see a healthy, vibrant and
self-reliant community where everyone enjoys high quality life.
This is
achieved through; the facilitation of access to safe water, reduction of disease burden, increased income through water
treatment at the household level, infection prevention/control, and enhancing
access to micro-financial services among the SWAP-targeted communities. This
purpose is driven by SWAP’s core values of compassion, commitment,
transparency, accountability, discipline, respect, equity and most importantly,
teamwork.
Safe
Water and AIDS Project (SWAP) has been operating in Nyanza and
Research
has shown that SWAP’s model is making a health and economic impact. It has
changed the lives of HIV support groups, reduced stigma and enabled the groups
to sustain themselves. SWAP is contributing towards achieving the Millennium
Development Goals. Currently SWAP is relying on overseas donors. SWAP has tried
on a small scale to work towards sustainability through their sales and office
based services. However donor funding continues to be necessary at present for
the main operations.
The
purpose of this business plan is to inform our donors and well wishers of our
intention to become self-reliant as an organization. It details on how SWAP
will be able to achieve this and hopefully gather a support base that is
willing to assist SWAP financially.
The
Board of Directors fully supports the implementation of this plan to establish
a Hotel and conference facility, which will within 2 – 3 years generate income,
sustain SWAP’s program and make SWAP economically self reliant.
We would
like to thank our donors who have enabled us to achieve so much not only for
their financial support but also for the confidence that they have in SWAP. It
is my pleasure to present to you this business plan which will assist SWAP in
continuing to have an impact on the lives of so many while striving to achieve
financial sustainability.
Daniel
Schmelzer
Chairman
of the Board
Executive summary
Imagine a conference facility that is set in lush green gardens; with buildings designed to merge colonial and more traditional styles while never letting comfort, security and affordability slip the mind. With a rustic restaurant that serves excellent food with friendly yet non intrusive service, and an ambiance that befits the seasoned traveller and consultant alike. Would you book your guests visiting Kisumu there?
That was the question we have asked quite a
number of NGO, Governmental and
The
facilities that will be offered include:
· A conference hall with a seating capacity for approximately 50 participants with breakaway rooms and rustic shelters
· A restaurant with fine dining and a garden menu
· 10 long stay units for consultants and researchers
· 25 hotel rooms for short term visitors
· A business lounge and terraces for guests to meet and interact
· A swimming pool to also attract tourists visiting the region
· The SWAP model village which will also set the proper décor to serve its guests traditional meals while acquainting themselves with safe water options and solutions.
The
target group
Conference hall: Local and international organizations
Corporate product launches
Weddings and other private functions
Long stay units: International consultants/ research fellows
Expatriate staff awaiting a more permanent residence
Hotel: Conference participants, tourists, donor representatives
Senior government officials, UN staff and guests etc.
Rationale
behind this project
Granted SWAP’s plan is quite ambitious and so it should be! The target is to be able to sustain 75% - 100% of the organization’s budget by 2013. This means $150,000 -$200,000 should be generated through this project. That is only possible if the scale of the income generating project is large enough.
Estimated
costs
The total amount, including furnishing, fittings and equipment, is estimated to be $1,100,000, a large amount. However it should be seen in the light that 5 years of project funding would accumulate to a similar amount.
Why
invest in a project like this?
One dollar spent on project expenditure is
one dollar spent once. The spin of the same one dollar invested in this venture
will be enabling SWAP to generate its own funding and assure sustainability
throughout the years to come.
1.1 The History of Safe Water and Aids
Project
Safe Water and Aids Project (SWAP) is a registered
non-governmental organization which aims to prevent water related diseases and
other leading causes of childhood illness and death such as diarrhoea, malaria
and malnutrition. It further enables people in HIV support groups to improve
their health, as well as the general public, by promoting the use and selling
of safe water and health products. It furthermore assists HIV+ women and
support groups to enhance their income.
SWAP started in 2005 with the financial support of the Rotary in
Atlanta (USA) and has since received funding from various donors. It currently
covers 22 districts in both Nyanza and
Throughout the years SWAP has been conscious about social and
financial sustainability. The women’s groups have been empowered to sell safe
water products. Through various training sessions and the opportunity for
members to access micro-finance packages they are assisted even more to generate
income for the membership groups and the individual women themselves.
The approach of SWAP is rooted in community work which enhances
ownership of the problem and the solution to it. The organization has contributed
greatly in assisting the women to attain social and financial self-reliance.
SWAP is aware that true development assistance should not remain
dependent on donor funding alone. In order to remain on the forefront when it
comes to safe water and AIDS projects a stable source for funding needs to be
available. The board of SWAP has therefore decided to use its expertise gained
through running the current income generating activities to start an income
generating venture that will sustain its programs.
In this way SWAP becomes a role model to its clientele that
through persistence and hard work it is possible to become personally self-reliant
while becoming economically self-reliant as an organization.
1.2 SWAP’s
Results
SWAP has since
its inception been able to establish its headquarters in Kisumu, Nyanza and a provincial
office in
The Safe Water and Aids Project activities have a tremendous impact on individuals and self help groups and therewith the entire community.
The
following impact has been observed:
•
Reduced
stigma and discrimination since HIV support group members become useful members
of society
•
Improved
income of group members
•
Increased
access to microfinance services
•
Improved
access to health products
•
Improved
health of HIV self help group members and their families
•
Increased
access to water treatment and other health products in the communities
•
Improved
health of the community at large due to affordable access to safe water. A study
is currently in progress to measure the health impact
•
No
stigma attached to water programs, so easy access to homes and entry point for
HIV programs
The table below gives a clear picture of the growth of SWAP.
2.1
Outline of the SWAP Income Generating Programme Concept
Over the last years it has become more and more important for NGOs
to think about their sustainability. In the introduction it has already been
said that SWAP has been working towards assisting its target group to become
self-reliant and self-sustainable. SWAP however has also realized that in order
to be able to continue implementing its programs it has to think about its own
financial sustainability. SWAP has been “blessed” with many loyal donors but
feels that it should work towards attaining financial self-reliance. Besides
the fact that the organization wants to be able to sustain itself it also wants
to lead by example and generate income locally as opposed to relying on
overseas funding.
After several meetings and brainstorming sessions SWAP developed
the ambition to use its experience with income generating activities and to
scale these activities up. This led to the idea to start a hotel and conference
facility with accommodation and a restaurant to generate income for the
organization. In this way SWAP can sustain itself financially within three
years.
2.2 The Rationale Behind this Income Generating
Concept
- SWAP wants
to work towards financial independency and sustainability
- Kisumu is a
city with many new NGOs and businesses investing in the local economy. It
was chosen as a
- Kisumu has
very few venues where good food is served in a nice friendly
environment. The demand for this
type of service is high, particularly among middle class Kenyans and
expatriates.
- CDC (one of
our donors for the research), one of the biggest employers in town with
continuous visitors and researchers coming from abroad, does not have a
guesthouse. There is growing dissatisfaction with the existing hotels and
guesthouses in town, many of which lack good internet, friendly
environment, security, a kitchen where long term guests can cook, a
restaurant that produces food in a timely fashion , and a convenient location (close to the airport and CDC
offices).
- SWAP
receives many visitors from all over the world who could be accommodated
in the guesthouse.
- There are
limited training facilities in Kisumu, which often results in a scramble
between NGOs to get reservations.
- SWAP would be able to do its
trainings at its own facility instead of hiring training facilities.
- All the above will be linked
to the community model village, where guests can learn about water
treatment options and other SWAP interventions.
- The facility would create a
lot of employment for the SWAP groups who can be involved and trained to
do catering, laundry and cleaning services.
- SWAP is linked to a number
of reputable national and international donors who will be approached to
further support the implementation of the income generating activity to
help SWAP to become sustainable and reduce dependency on outside donor
funding.
3.1. The Income Generating
Concept
SWAP has the ambition to design, construct and operate a middle
class hotel and conference facility that provides an adequate and high standard
venue for its clients and guests.
3.2. The Facility
Set in a lush green garden (6 acres) a hotel and conference
facility will be built. The SWAP complex will provide clean and comfortable
accommodation for 25 short term overnights guests, ten self-contained long-stay
cottages, a restaurant, a business center and swimming pool. Due to the target
group the security arrangements will be up to international standards. The
facility will further include a model village in which the safe water products
can be show cased. This model village will further provide an excellent back
drop for theme nights for the guests who can enjoy traditional Kenyan food in a
safe and hygienic setting while experiencing a traditional village. In time the
grounds will also house the office, warehouse and distribution center for its
safe water and malaria products.
3.3. Target Groups
The SWAP facility will focus mainly on the middle class Kenyans
and expatriates for the accommodation and restaurant. The conference and
training center however will be located in such a way on the compound that it
is also accessible and comfortable for smaller NGOs and CBOs who need
conference facilities or training rooms. A very specific target group will be
visiting consultants from CDC, Walter Reed and other International NGOs. Besides
the afore mentioned target groups SWAP itself also receives quite a number of
visitors on a weekly basis. These visitors will form a natural part of the
target group.
Front view of the proposed hotel
3.4. Facility
The food served in the restaurant will be of international
standards but with a local touch. In this way products will be obtainable on
the local market and women from the SWAP projects can become suppliers of fresh
vegetables and fish, thereby increasing their income. Both the hotel rooms and
long stay units (built in a cottage style) will be fully furnished with 10 twin
rooms, 15 double rooms. The long stay units will all have a double bed which
can be replaced with 2 beds if the need arises. All hotel rooms will have a
bathroom with shower, sink, wc, a desk, recliner chairs, television, and
balcony and they will all have 24 hour access to internet. The long stay units
will have a separate bedroom and living room with a kitchenette which will
allow the guest to work, cook and live in their own “cottage”. The long stay
unit will have a shared common room with kitchen so guests can share their
dinners if they desire and watch TV together.
Long stay guests will stay for a minimum of one month and a
maximum of 6 months. The longer the stay the more attractive the package
becomes. The business center will serve the conference facility but also the
resident guests. The pool will serve as an attraction or hotel guests and the
long stay guests as well. In time, the pool area can be equipped with fitness
equipment and a massage and beauty salon.
3.5. Location
SWAP has identified a 9 acre plot of land. It is located 5 minutes
drive away from the airport and the central business district. CDC/KEMRI is a
ten minute drive from here and the local government offices can easily be
reached in 5 minutes. The bypass which will be constructed shortly from the
Kericho road to Bondo will pass next to the proposed gate making it even more
accessible and the fact that the land is not developed means that the facility
can be tailor made for its guests and clients. It is deemed very suitable for
the proposed venture.
The
The land is deemed to be free of any encumbrance which means that
there are no mortgages on the land and there is no dispute about this land
registered at any court of law or at the lands register.
4.1.
Legal Structure
Through its experience with the income generating programmes for its clientele, SWAP realizes that running a medium size hotel and conference facility requires a different skill and mentality than running a charitable organization. Certain risks are involved with every commercial entity. An income generating hotel and conference facility is no exception to this rule. After careful deliberation the following legal structure was designed.
4.2.
Ownership
The land will be purchased by SWAP and the title deed will reflect the name of SWAP.
All buildings that will be constructed on the land will also be owned by SWAP.
4.3.
Management
There are two options that are feasible when running an income generating project.
Both have their pros and cons. For transparency reasons both options have been listed however the board has recommended the second option to be most favourable.
Option 1: Management Outsourcing
This means that SWAP will either set up a limited liability company itself or use a hotel management company to run the project at a fee.
PRO: In this way if results are not favourable and in the unlikely event of bankruptcy the assets are safeguarded since the hotel entity is a mere tenant of the property and SWAP in that case does not loose the assets. A clear contract needs to be drafted to agree on the fee and the profits.
CON: Since the management firm runs all the risks it will not be able to agree to anything else than paying the rent and may be a percentage of the turnover. This means less income for SWAP.
PRO: In case SWAP starts its own management firm the above is no longer valid. Full control over the income generating programme is retained and the assets are secure.
CON: If SWAP opts to go for the option of its own management firm this firm becomes taxable as one entity. Expenditure of the other units within the organization can not be deducted and the profits of the hotel become taxable by 30%. With the construction under option 2, this can be legally avoided.
Option 2:
SWAP will set up an income generating department within its current organization.
PRO: Full control over management of the facility. All the expenditure of the entire SWAP organization can be deducted from the profits of the income generating programme which if carefully planned leads to an organization which breaks even or even incurs a small loss. In this way SWAP does not become liable to pay corporate taxes except VAT. This leads to legal revenue retention of 30%.
CON: In case of bankruptcy SWAP is liable to loose its assets. This however is mitigated by SWAP’s accounting systems which are according to the International Accounting Standards and its sound management systems. Since the project is financed through grants the land is mortgage free which means if set targets are not met the management can intervene in a timely manner so as to avoid financial liabilities.
5.1.
Organizational Structure
Section four mentions that SWAP is going to set up a new organizational unit within its current organization. In this way competent staff can be recruited and they can run their own organizational department. A profit making unit requires different skills and a different attitude. Whereas in a charitable organization mistakes are generally seen as learning opportunities, in a commercial setting mistakes cost money. This simple fact leads to the realization that a different management style is required for the different units. A separate income generating unit with its own management and staff will be able to deal with the realities of the commercial sector while the non-IGP staff will be able to focus on their area of expertise within the umbrella of the SWAP organization. It is important to note that one of the board members of SWAP is active in the hospitality industry. Her expertises will guide the board in monitoring the IGP.
5.2.
Organization Chart
A total number of 24 staff members will be required. This number excludes security guards. The security will be hired through a reputable company. The job description of all staff members is included in the appendices. On the following pages you will find a table which gives a salary indication for the different positions.
Note: FTE stands for full time employee | F&B stands for food and beverage
IGP stands for income generating programme
5.3.
Staff Wages
For a starting hotel the wages below give a reasonable estimate on what salaries are considered adequate in the hospitality industry for mid range hotels. The salary of the manager is on the higher side since s/he needs to be able to run the facility hands on and also needs to advise the Director on financial and operational matters. Since the hotel will be starting, staff will accept that money needs to be generated before salary increments can be rewarded. SWAP has been advised to allow for service charge. In year two of operations the salaries can be adjusted based on turnover which means that the fixed salaries will not change but a percentage of the sales will be added to the salaries. Normally this amount is 2% of the sales and a ceiling can be added to assure reasonable salaries based on turnover.
|
Job title |
Gross salary |
Gross Salary |
|
Total |
Total |
|
|
|
|
USD |
FTE's |
|
USD |
|
|
General manager |
80,000 |
1,000 |
1 |
80,000 |
1,000 |
|
|
Assistant manager |
25,000 |
313 |
2 |
50,000 |
625 |
|
|
Head chef |
35,000 |
438 |
1 |
35,000 |
438 |
|
|
Sous chef |
20,000 |
250 |
1 |
20,000 |
250 |
|
|
Hostess |
8,500 |
106 |
5 |
42,500 |
531 |
|
|
Receptionists |
9,500 |
119 |
3 |
28,500 |
356 |
|
|
Cooks |
9,500 |
119 |
4 |
38,000 |
475 |
|
|
Handyman |
9,500 |
119 |
2 |
19,000 |
238 |
|
|
Gardener |
6,500 |
81 |
2 |
13,000 |
163 |
|
|
Housekeeping |
7,500 |
94 |
3 |
22,500 |
281 |
|
|
|
|
|
|
|
|
|
|
Total staff cost Gross (before tax) |
|
|
|
348,500 |
4,356 |
|
5.4.
Organizational Culture
In the hospitality industry it is important
to create and nurture a culture in which employees realize that they form the
backbone of the company. The staff will be trained on service delivery, guest
relations and feeling responsible for the complete business. In order to
achieve this a culture of multi-tasking will be embraced. Multi-tasking leads
to awareness and understanding of one and others jobs but also leads to cutting
costs and ownership of the establishment by all staff.
6.1. Marketing Plan
It seems very tempting indeed to market the hotel and conference facility as a charitable organization. This means that emphasis is laid on the fact that the hotel is serving as an income generating program. Experience however dictates that organizations and individual hotel guests will book with a specific hotel because of the quality of the establishment. Only after the standards are set and consistent do guests become interested in what actually happens with the profit of a hotel. It is therefore of the utmost importance to get the level and quality of service at the required level before marketing the charitable side of the facility.
6.2.
Quality Indicators
A few operational areas can be identified within the facility. In order to be able to check and monitor their performance the listed indicators will be used.
|
Department |
Result
area |
Indicators |
|
Kitchen |
Cost effective and sumptuous food |
Fresh products available Hygienic standards are set Cost of sales below 30% (production costs) Logistics are well organized Guests returning and giving comments positively Well trained staff |
|
Restaurant |
Excellent efficient service |
Consistent friendly and professional service Clean and well groomed staff Clean and well set tables Regular stocking of bar Cost of sales below 30% |
|
Conference |
Efficient, knowledgeable time conscious service |
Consistent service where delays in serving Tea’s and lunches are non existent Clean, well thought out table set up Availability of functioning business center Staff available to assist in the planning of the function Staff available to assist with technical hitches (LCD) etc. Tranquillity guaranteed during the function |
|
Accommodation |
Comfortable tranquil rooms |
Clean rooms in 20 min Speed in turndown of rooms Rooms are well maintained Wireless internet available |
|
Marketing |
All of the above |
40% bed occupancy and conference hall occupancy rate first year Requests for contract rates of at least 5 international organizations |
6.3.
Target Group
In order to prepare a working marketing plan it is important to know who the potential clients or guests are. The following target group has been identified.
Conference
hall: Local
and international organizations
Corporate product launches
Weddings and other private functions
Long stay units: International consultants/research fellows
Expatriate staff awaiting a more permanent residence
Hotel: Conference participants, tourists, donor representatives
Senior government officials, UN staff and guests etc.
6.4
Target Group Approach
Standard marketing tools apply. This means that a website will be developed and brochures, rate sheets and advertisements will be placed in Kenyan national newspapers will be used to reach the general public. The table below will indicate how the specific target groups will be reached.
|
Target
Group |
Specific
Unit |
Approach |
|
International Organizations Corporate bodies Government US allied organizations SWAP’s own visiting researchers and donors |
Conference Accommodation Long stay units |
The Directors of the international organizations
will personally receive an invitation for the grand opening. The Directors will then be introduced to the
introduction offer which will be printed on a well laid out fact sheet. Regular newsletter updates on offers and new
services. |
|
Individual guest |
Accommodation Long stay units |
Word of mouth is the
most important way of selling the accommodation to individuals HR officers of organizations
will receive a factsheet on the rates of the long stay units. Office assistants
will receive brochures and leaflets about the hotel rooms. |
|
Individual guest (Continued) |
|
Tour operators will
be informed about this facility through DVD with pictures of all the
facilities. Posters will be put
up at public places and in shopping malls. |
|
Individual residents
of Kisumu |
Private functions Weddings and product
launches |
Electronic outlets
will be paid a fee to play the DVD of the facility in their shops. Specific outlets will
be targeted. Wedding planners will
be invited for the grand opening. Corporate clients
will receive brochures about the possibilities of the facility. |
The above list is not
exhausted but does give an idea of the different marketing approaches.
7.1. Financial Segment
The previous chapters
have described the plans of SWAP to generate its own income.
This chapter will give
an insight on the profitability of the plan.
7.2 Turnover and Cost Price Calculations.
The aim of SWAP is to generate $150,000 - $200,000 per year after
three years of operations. In the hospitality sector it is common place to use
the following calculation to ascertain the cost of sales and administration
costs and therewith the profitability.
The turnover is the amount that comes in through sales and other
income generating activities. Thirty percent of the turnover is reserved for
the cost of sales. This means the supplies needed for the production of the
product e.g. beverages and food items.
A further 40% should be calculated for recurring costs such as
staff costs, security costs, maintenance etc.
In order to generate the required income an annual turnover of
$641,026 needs to be generated.
Cost distribution table:
|
|
Cost distribution |
In USD |
In KES |
|
Turnover |
100% |
641,026 |
50,000,000 |
|
Cost of sales |
30% |
192,308 |
15,000,000 |
|
Admin cost |
40% |
256,410 |
20,000,000 |
|
Profit |
30% |
192,308 |
15,000,000 |
Income per unit
|
Unit |
Total per day |
Income (USD)per unit/
day |
USD Per month |
USD Per year |
|
|
Hotel rooms |
25 |
64 |
1600 |
49,000 |
588,000 |
|
Long stay |
10 |
12,50 |
125 |
3,802 |
45,625 |
|
Restaurant |
25 |
10 |
250 |
7,604 |
91,250 |
|
Conference |
30 |
10 |
300 |
9,125 |
109,500 |
|
|
|
|
|
|
|
|
Total |
|
|
2,275 |
69,531 |
834,375 |
The income per unit given in the table above gives a very rosy
picture. This is the maximum income which can be generated if all the rooms are
always full and each day a conference is held. The national average in bed occupancy is
currently 43%. The cash flow estimates on page 16 onwards give a full insight
in the profitability of the plan.
The
information in the table above is slightly outdated but still gives an accurate
picture. The bed occupancy has risen in Kenya
The SWAP hotel facility will focus mainly on business
travellers and the occupancy will therefore be slightly higher than the
national average. To be on the conservative side the calculated income will be
pegged on 40% of the maximum for the first year, 50 % for the second year and
75% for the third year of operation. Seventy-five percent will be the maximum
obtainable bed occupancy rate.
The table below indicates the performance of the income
generating program versus the budget which is required to fully run the
projects without donor funding.
Table: Required budget versus maximum obtainable income
The graph indicates a trend towards self reliance. It
appears that with some budget readjustments the goal to become donor independent
is feasible.
