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Income and Expenditures of Business Chambers. Structures Character istics Opportunities. Workshop on 18 & 19.06.2004 in Dambulla CCICP, CCIUP, CPWCIC, MDCCI, NCHSL, PAEA. Income sources of chambers. Income. Membership fees. Services. Subsidies. Others. Membership fees. Income.

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income and expenditures of business chambers

Income and Expendituresof Business Chambers

Structures

Characteristics

Opportunities

Workshop on 18 & 19.06.2004 in DambullaCCICP, CCIUP, CPWCIC, MDCCI, NCHSL, PAEA

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income sources of chambers
Income sources of chambers

Income

Membershipfees

Services

Subsidies

Others

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membership fees
Membership fees

Income

Membershipfees

Services

Subsidies

Others

Big

Enterprises

Medium

Enterprises

Small

Enterprises

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service
Service

Income

Membershipfees

Services

Subsidies

Others

OfficeServices

StrategicServices

Information

Training

Counselling

Support

Authorized

Services

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subsidies
Subsidies

Income

Membershipfees

Services

Subsidies

Others

Govern-ment

National

Donors

InternationalDonors

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others
Others

Income

Membershipfees

Services

Subsidies

Others

Interest

Rent

Others

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expenditure structure 1
Expenditure structure 1

Expendi-ture 1

Lobby

Services

Auto-Organization

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expenditure structure 2
Expenditure structure 2

Expendi-ture 2

Staff

All others

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income sources of chambers1

Income

Income sources of chambers

Membershipfees

Services

Subsidies

Others

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income membership fees

Membershipfees

Big

Enterprises

Medium

Enterprises

Small

Enterprises

IncomeMembership fees

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income service

Services

OfficeServices

StrategicServices

Authorized

Services

IncomeService

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income subsidies

Subsidies

Govern-ment

National

Donors

InternationalDonors

IncomeSubsidies

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expenditure structure 11

Expendi-ture 1

Lobby

Services

Auto-Organization

Expenditure structure 1

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expenditures f r lobby and service
Expenditures für Lobby and Service

Lobby

Services

100%

100%

PAEA

CPWCIC

CCICP

80%

80%

Business Club

CCIUP

NCHSL

MDCCI

MDCCI

NCHSL

Service Organisation

CCIUP

20%

20%

CCICP

PAEA

CPWCIC

0%

0%

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expenditure structure 21
Expenditure structure 2

Expendi-ture 2

No staff .... No service !

Staff

All others

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the chamber as business club or service enterprise
The Chamber as Business Club or Service Enterprise

Staff

Others

100%

100%

Service Enterprise

70%

70%

CCICP

PAEA

NCHSL

MDCCI

CPWCIC

CCIUP

CCIUP

CPWCIC

MDCCI

NCHSL

PAEA

CCICP

30%

30%

Business Club

0%

0%

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membership fees1
Membership Fees

The total income from the memberships fees depend on

Number ofmembers

Membership fee system

Paymentrate

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11 number of members

11 Number of members

Do you want to increase the number of members?

If yes, how?

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logic of the development of chambers of entrepreneurs
Logic of the Development of Chambers of Entrepreneurs

Lobbyin front of Government and other groups of the society

Law of great number:the more members, the more influence

Chamber

ServicesInformation / ConsultationTraining / Support

More means to finance more and better services

More members pay more membership fees

Higher attractiveness for Entrepreneurs

More Entrepreneurs apply for membership

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12 membership fee system

12 Membership Fee System

Considerations about the Membership Fee System of Business Associationsand Chambers

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criteria for a membership fee system
Criteria for a Membership Fee System
  • It must be "fair"
  • It must generate sufficient financial meansto finance a big shareof the costs of the lobby and service work of the business association

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what is fair
What is "fair" ?
  • Membership fee system A :1 member 1 vote 1 membership fee amount
  • Everyone pays the same amount !The system is comparable with a "Poll Tax"

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Under which conditions is this membership fee system efficient and fair?
  • All members are more or less equal
    • same size of the enterprises
    • same number of employees
    • same turnover and profit
  • In this case an identical amount as membership fee is fair, efficient and easy to manage

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But what if the member enterprises differ very much ?
    • different size
    • different number of employees
    • different turnover and income
  • In this case the same membership feeis "unfair" and not efficient

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example
Example
  • The membership fee is for all members 2.000 Rs per year
    • a bigger enterprise with 200 employees pays consequently 10 Rs per employee
    • a small enterprise with 5 employees pays consequently 400 Rs per employee
  • The burden through the membership fee is for the small company 40 times higher than for the bigger company !!!

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This membership fee system has the effectof a barrier in order to keep out unwanted entrepreneurs, especially SMEs,from the business association
  • It is efficient for "Business Clubs" where selected "right" entrepreneurs want to remain among themselves

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what is fair1
What is "fair" ?
  • Membership fee system B:The membership fee amount reflects the economical differences between the members

Bigger companies pay a bigger share

Smaller companies pay a smaller share

  • The financial burden through the membership fee is more or less equal for all members

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the main questions
The main questions …
  • Which criterion to use ?
  • How to define adequate categories ?(groups of member enterprises

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the problem
The problem …
  • The more complex the membership fee system is
    • criteria : reliable access to data and control
    • categories : many
    • exemptions : many

the more difficult it is to manage

and the more it invites the members to manipulate their data

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criteria linked with the economic power of the member

… but entrepreneursdo not like to publishfinancial data

… therefore normally notrecommendable!

Criteria linked with the economic power of the member
  • Direct criteria
    • Turnover
    • Profit
    • Income tax payment

… in addition : during an economic crisis the income

of the chamber can decrease dramatically …

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criteria linked with the economic power of the member1

Usuallynot business

secrets

… therefore normally recommendable!

Criteria linked with the economic power of the member
  • Indirect criteria
    • Number of employees
    • In case of a sector association :- Quantity of production or- Quantity of sold products

The relatively stable employment of the enterprises guarantees a more secure income of the chamber

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categories of members
Categories of members
  • A membership fee system without categories
    • x Rs per Rs turnover / profit or x ‰ from the turnover /profit
    • x Rs per employee
  • Advantage :
    • Very exact and fair
  • Disadvantage :
    • Causes much administrative work because of permanent changes of the data to be queried

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categories of members1
Categories of members
  • A membership fee system with categories
    • x Rs for turnover / profit up to a Rsy Rs for turnover / profit between b Rs and c Rs
    • x Rs for up to a employeesy Rs for between b and c employees
  • Recommendation :
    • maximally 10 classes
  • Advantage :
    • Causes limited administrative work because the data do not vary that much

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differentiation between sectors
Differentiation between sectors
  • Perhaps it is necessary to differentiate between companies per sector
    • industry, agriculture, service
    • commerce
    • bank
  • They produce with the same number of employees considerable different economic results

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registration fee
Registration fee
  • When is a registration fee reasonable
    • Members invest in costly infrastructure for their own benefit
    • A new member, who wants to use it, shall later adequately participate in its financing
  • Examples :
    • Social and sport clubs, i.e. tennis, golf, etc.

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registration fee1
Registration fee
  • What is the purpose of a registration fee of a business chamber or association
    • Except eventually an office building it does not have and need a costly infrastructure, because its tasks are lobby and service
    • It does not need a registration fee !!!
  • Registration fee charging chambers
    • Create an additional barrier around themselves
    • In order to keep entrepreneurs out !!!

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registration fee2
Registration fee
  • Consequently, a registration fee for new members is highly contra-productive for the development of a chamber !!!

Note: In Europe, America and Africa chambers and associations do not know registration fees. Only on a small island in Asia …

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some tricky points one entrepreneur more companies
Some tricky points …one entrepreneur, more companies
  • In some countries entrepreneurs like to run a couple of smaller companies than one bigger one due to tax, organisational or marketing reasons.
  • As economically thinking persons they enter into the chamber only with one of these enterprises, preferably with the smallest one, using the lobby and service work for all of them.
  • Not good for the chamber! What to do?

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some tricky points one entrepreneur more companies1
Some tricky points …one entrepreneur, more companies
  • The best : They enter with all individual companies into the chamber
    • more members, more fees
  • The 2nd best : They enter with all individual companies and get x% discount for the 2nd, y % for the 3rd, etc., company
    • more members, still more fees

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some tricky points one entrepreneur more companies2
Some tricky points …one entrepreneur, more companies
  • The 3rd best : They enter with one company, but for the calculation of the membership fee the sum of employees of all companies is used
    • not more members, but more fees
  • The 4th best : They enter with their biggest company, not with the smallest
    • not more members, little bit more fees

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some tricky points what is an employee
Some tricky points …What is an "employee" ?
  • Especially in SMEs, but sometimes also in bigger companies, the question about the number of employees is sometimes unclear and difficult to answer :Who is counted as "employee"?
  • The answer can have a considerable effect on the chamber's membership fee income
    • (Observation: therefore, statistics often give a wrong image about the employment situation)

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some tricky points what is an employee2
Some tricky points …What is an "employee" ?
  • Therefore, it might be better to ask for the persons, working in the companyinclusive
    • the entrepreneur
    • the family
    • monthly and daily paid employees and workers
    • apprentices, trainees, others
    • subcontracted persons working only for the company

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All this means:
    • Chambers need a database with information about their members!
    • Which chamber does have such a member database?
    • If not, are the chambers interested in the development of a member database ?

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13 membership fee payment rate

13 Membership Fee Payment Rate

Members are hesitant to pay their membership fee.

How to increase the payment rate?

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2 subsidies

2 Subsidies

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Subsidies

Govern-ment

National

Donors

InternationalDonors

A subsidy is a volunteer payment from a donor

to a chamber

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workgroup
Workgroup
  • Which characteristics do subsidies have?
  • What does the donor expect from the chamber by paying a subsidy voluntarily?
  • Which advantages and disadvantages do subsidies have for the chamber?
  • Which are the differences between the subsidies from a government, a national and an international donor?

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subsidies1
Subsidies ...
  • Easy money ...
  • Limited for a certain time
  • Decreasing

Own income

Subsidy

time

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subsidies2
Subsidies ...

Subsidies

For the chamberdevelopment

For the donorinterests

The chamber asconsulting company

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subsidies3
Subsidies ...
  • What means „dependency“ ???
    • Financial dependency ...
    • Political dependency ...

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3 services

3 Services

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services what for
Services – what for?
  • To help the member in the
    • foundation
    • development
    • modernization
    • expansion

of his / her enterprise

  • To support him / her in day-to-day activities

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services and money
Services and money

For which services should the chamber charge a fee ?

In general: for all !

Rule: Service and performance against payment

Exception: Counselling, inquiries !!!

The barrier to ask & discuss questions, doubts etc.should be as low as possible !!!

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types of office services
Objective

To ease the day-to-day office work and communication of the entrepreneurs, who do not have the equipment and / or qualified staff for these tasks

Fax

E-mail

Internet use

Photocopies

Correspondence

Translations

….

Types of office services

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what is needed for office services
What is needed for office services ?
  • Cost calculation
  • Price calculation = different prices for members and non-members
  • Qualified staff
  • Clear staff responsibilities(eventually with profit participation)
  • Active marketing

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office services
Advantages

Minimal equipment requirements

Can be introduced quickly

Users (members, non-members) must visit the chamber

Entrepreneurs become more aware of the chamber

Concrete service, easy to start and organise

Disadvantages

Relatively high administrative effort as compared to the volume of income

Office Services

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types of authorized services
Character

Public functions are delegated to chambers

Objective

To facilitate certain bureaucratic tasks the entrepreneurs

Certificate of Origin

Export documents

Etc.

Types of authorized services

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33 training

33 Training

How to make money with training?

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up grading training
Content

new technologies and specific knowledge

Target group

adults (entrepreneurs, employees)

Objective

to solve actual problems

to prepare for future developments

Duration

between 1 hour and 6 months

Needs

room, instructor (freelance)

Costs / earnings

low fixed, mainly current costs

earnings > costs

Up-grading Training

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up grading training1
Up-grading Training
  • Organization
    • Enterprises, professional training institutions (public and private), chambers and associations
  • Characteristics
    • short-term investment (weeks)
    • instant return
    • with profit making chances for enterprises
    • great flexibility (demand and supply)
  • Task of BDS providers and business chambers / associations

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the chamber up grading training a the supply defines the program

Up-grading trainer / instructor

Counsellor

Chamber

MemberEnterprises

The chamber up-grading training: a) The supply defines the program
  • The up-grading trainer offers the product / course to the chamber
  • He / she defines the program (content, methodology)
  • The chamber buys the defined product / course from the trainer
  • Counsellor’s task: organisation and management

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the chamber up grading training a the supply defines the program1
The chamber up-grading training: a) The supply defines the program
  • Success criteria for the chamber:
    • Number of participants
    • Financial surplus
    • Evaluation: The participants are content

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the ideology
The ideology
  • “We BDS providers for entrepreneurs
    • up-grading training institutions and instructors
  • analysed the enterprises and detected problems and failures in certain areas ..…,
  • we know what is good and necessary for the enterprises
  • and our product / course helps the entrepreneur to solve the problems
  • “Top down” Approach

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the chamber up grading training b the demand defines the program

Up-grading trainer / instructor

Counsellor

Chamber

MemberEnterprises

The chamber up-grading training: b) The demand defines the program
  • The Nucleus Entrepreneurs
    • define their problems and needs
    • decide about an activity to solve the problem (i.e. training course)
  • Counsellor‘s tasks:
    • to find in the market a qualified up-grading trainer
    • to check whether the trainer is able / willing to offer a product in reference to the defined demand (content, methodology)

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the chamber up grading training b the demand defines the program1

Up-grading trainer / instructor

Counsellor

Chamber

MemberEnterprises

The chamber up-grading training: b) The demand defines the program
  • The up-grading trainerdevelops a product / course in reference to the defined problems / demand
  • Counsellor‘s tasks:organisation and management

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the chamber up grading training b the demand defines the program2
The chamber up-grading training: b) The demand defines the program
  • Success criterion for chamber and Nucleus
    • Almost all Nucleus entrepreneurs participate
    • Financial surplus
    • Evaluation: - The participants are content- Concrete impact on the development of the enterprises- The Nucleus asks for further training

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the ideology1
The Ideology
  • “We, the entrepreneurs
  • discussed and identified our problems and failures in the following areas .....
  • decided on the required training to address these problems
  • know what is good and necessary for us”
  • Subjective “bottom-up” analysis

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34 events

34 Events

How to make money with events?

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35 services for members by third parties

35 Services for Members by Third Parties

… eventually with kick back for the chamber

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the idea
The idea
  • Use of the “group” & purchase power of the total of the chamber in order to get products and services for decreased prices for the members
    • Entrepreneurs apply for membership in order to get the products & services for a lower price
    • Entrepreneurs can finance their membership fee with their saved money
    • Eventually kick back from the producer

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examples
Examples
  • Insurances
  • Hotels & restaurants
  • Suppliers of certain goods
  • ….

Save money through your chamber membership !!!

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credit scheme for nucleus entrepreneurs

Credit Scheme for Nucleus Entrepreneurs

Discussion between

Sanasa Development Bank

&

ESSP

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slide87
The Sanasa Development Bank is interested in the Nucleus Approach and considers to start a special

Nucleus Entrepreneurs Credit Scheme

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the interest of the participating parties
The interest of the participating parties
  • Nucleus entrepreneurs
    • Easy and fast access to credits for payable costs
  • Chambers
    • Attractive services in order to get more membership fee paying members so that it – improves its financial status; – increases its lobby power
    • Services which help the members to improve their enterprises
    • Income

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the interest of the participating parties1
The interest of the participating parties
  • SDB
    • Access to new clients
    • Lower administration costs
    • High repayment rate of the loans
    • Profit
    • Fulfil its mission to contribute to the development of the economy
  • ESSP
    • Development of the economy through improving SMEs and chambers

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conditions for a credit
Conditions for a credit
  • The entrepreneur is a member of the chamber
  • Has paid his / her membership fee for the running calendar year
  • The entrepreneur is a member of the Nucleus for a minimum of six months
  • The Nucleus is considered “active” by the chamber

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conditions for a credit1
Conditions for a credit
  • The entrepreneur participated during the last six months in a minimum of 50% of all activities of the Nucleus
  • The entrepreneur participated during the last three years in a business administration course / enterprise development training

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product characteristics
Product characteristics
  • Interest rate: Actually 9% (?)(better than for a normal individual entrepreneur)
  • Repayment period:
    • Working capital 1 years
    • Building and land 5 years
    • Equipment 3 years
    • Services 3 years
  • ... Other conditions ...

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procedures
Procedures
  • The chamber confirms the fulfilment of the conditions in written form.
  • The SDB disseminates the Nucleus Approach actively between their SME clients and motivates them to join them.
  • The chamber uses the credit scheme as a marketing instrument.

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procedures1
Procedures
  • The chamber counsellor counsels and supports the Nucleus SMEs in the elaboration of credit applications and eventually in the negotiation with the SDB
  • But: The counsellor is biased in favour of the chamber members(he / she is paid by the chamber with the membership fees of the members and has the obligation to defend the interests of the SMEs)

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procedures2
Procedures
  • In order to contribute to the costs of the chamber and to motivate / stimulate it to engage in a qualified form in the credit process the chamber gets from the SDB a certain fixed amount of Rs after the credit has been paid back successfully and without any problems.

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procedures3
Procedures

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Interested ???

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slide98
Enterprise Service Systems Promotion (ESSP)
  • elaborated by Amina Yoosuf Aruna Gunawardena Rainer Müller-Glodde

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