INVESTMENT

Level of investment: the first question to be addressed in determining the profitability of a business proposal is the level of investment required for establishing and running the enterprise:

1. the start-up capital or initial capital investment needed for land, equipment, buildings and infrastructure;
   
2. the recurrent investment or working capital required for annual expenditures on production inputs, machinery costs, staff salaries, labour, etc.

As a rule enterprises which require heavy investment in land and machinery are likely to be better suited to large-scale commercial entrepreneurs than to small producers, since large-scale entrepreneurs usually have readier access to investment than small-scale producers or smallholders, can borrow at a lower cost of investment, and are better able to bear the financial risk of borrowing.

These features are counter-balanced by certain strengths of smallholders who, unlike commercial entrepreneurs, do not need to buy or rent land, can apply their own family labour to the enterprise, may have access to specialised sources of credit, and can lower transaction costs by forming producer groups. However, the opportunity cost to smallholders of using family land and labour for the horticultural enterprise rather than for some other use must not be overlooked: it forms an important part of the profit calculation.