Cigar Box method: Difference between revisions

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''The '''Cigar Box Method''' is a toolkit which consists of a series of spreadsheets to help entrepreneurs, notably those in [[agrobusinessagribusiness]] in emerging markets, to calculate the costs of goods, margins, contribution, break-even volumesquantity and profitability. It can be used for a single product or a complete portfolio of products. There are 6six Cigar Box (CB) categories:

{{cleanup|date=May 2011}}

''The Cigar Box Method'' is a toolkit which consists of a series of spreadsheets to help entrepreneurs, notably those in [[agrobusiness]] in emerging markets, to calculate the costs of goods, margins, contribution, break-even volumes and profitability. It can be used for a single product or a complete portfolio of products. There are 6 Cigar Box (CB) categories:

* CB1: cost price analysis for one single product,

* CB2: contribution analysis for a range of products,

* CB3: daily monitoring of cost price for a range of products,

* CB4: investment analysis and financefinancial projections with yearly cash flow,

* CB5: cost price based value chain analysis,

* CB6: invoicingcustomer and salessatisfaction analysis.

== Origins ==

The Cigar Box Method has beenwas developed by Olivier van Lieshout and Orlando van Geuns, and is actively being used by agro-entrepreneurs worldwide. Recent examples are in Bosnia, Somalia, Romania, Armenia, Central Asia, Bangladesh, Senegal, Guinea, Benin, Kenya, Tanzania, Jamaica andAnushik ArgentinaTadevosyan. The method derivedderives its name from Dutch pioneers in the 17th century [[Dutch Golden CenturyAge]] who were discussing foreign business deals while sipping coffee and smoking a cigar. When they needed to make quick business calculations, they often used the bottom side of the cigar box to convince investors about the profitability of their business ideas in a quick, concise and convincing manner.<!-- Deleted image removed: [[File:Cigar Box method.JPG|thumb|Cigar Box Scribblings]] -->.

== History and current use ==

The Cigar Box Method has been developed by Olivier van Lieshout and Orlando van Geuns, and is actively being used by agro-entrepreneurs worldwide. Recent examples are in Bosnia, Somalia, Romania, Armenia, Central Asia, Bangladesh, Senegal, Guinea, Benin, Kenya, Tanzania, Jamaica and Argentina. The method derived its name from Dutch pioneers in the 17th Golden Century who were discussing foreign business deals while sipping coffee and smoking a cigar. When they needed to make quick business calculations, they often used the bottom side of the cigar box to convince investors about the profitability of their business ideas in a quick, concise and convincing manner.<!-- Deleted image removed: [[File:Cigar Box method.JPG|thumb|Cigar Box Scribblings]] -->.

The method was first used in 1999 as an analytical tool during a course on [[foreign direct investment]] (FDI) at the [[Wageningen University]]. It analyzed the suitability, including a risk analysis and potential benefits, of specific agricultural production processes for foreign investors. Between 1999 and 20082012 over 150180 students were trained in the use of the Cigar Box Method. It has since developed into a fully fledged business analysis tool with multiple purposes and used by various targets groups: as analytical tool for foreign investors and bankers, as business planning tool for fruit and vegetable processing factories and business development service providers. An adapted version for women entrepreneurs in Africa has been developed recently. The method is described in the ''Agribusiness Handbook for Fruit and Vegetable Processing'' published by the [[Food and AgriculturalAgriculture Organization]] (FAO).<ref>[http://www.fao.org/docrep/012/al177e/al177e.pdf Fruit and Vegetable Processing] FAO 2009. Retrieved 11 December 2022</ref> The Cigar Box is being used frequentlydaily by [[Bakery Initiatives Group]] as a navigator to bakery profit.<ref>{{Cite web|url=https://bakeryinitiatives.com/|title=Bakery Initiatives Group - Global Bakery Consultants - Call us!|website=Bakery Initiatives Group|access-date=11 December 2022}}</ref> Since 1999, over 500 people from all over the world have trained in the use of the Cigar Box Method during courses carried out by [http[Wageningen Centre for Development Innovation]] (WCDI).<ref>{{cite web | url=https://www.faowur.orgnl/docrepen/012Research-Results/al177eResearch-Institutes/al177ecentre-for-development-innovation.pdf]htm | title=Wageningen Centre for Development Innovation | date=12 May 2022 }}</ref>

== HistoryProfit and Current Useparameters ==

The Cigar Box Method consists of profit calculation uses only five parameters:

*P = Price (per unit),

The method was first used in 1999 as an analytical tool during a course on [[foreign direct investment]] (FDI) at the [[Wageningen University]]. It analyzed the suitability, including a risk analysis and potential benefits, of specific agricultural production processes for foreign investors. Between 1999 and 2008 over 150 students were trained in the use of the Cigar Box Method. It has since developed into a fully fledged business analysis tool with multiple purposes and used by various targets groups: as analytical tool for foreign investors and bankers, as business planning tool for fruit and vegetable processing factories and business development service providers. An adapted version for women entrepreneurs in Africa has been developed recently. The method is described in the Agribusiness Handbook for Fruit and Vegetable Processing published by the [[Food and Agricultural Organization]] (FAO). The Cigar Box is used frequently by [[Bakery Initiatives]] as a navigator to bakery profit. <ref>[http://www.fao.org/docrep/012/al177e/al177e.pdf]</ref>

*VC = Variable cost (per unit),

*FC = Fixed cost (per period)

*q = Quantity (in units per period)

t*T = Tax (as % of profit).

More specifically, in (food) processing business, there are three types of [[Variablevariable Costcost]]: VC1 = Raw Materials and Ingredients, VC2 = costs of processing inputs into outputs, VC3 = costs of packaging materials, VC4 = cost of delivery. The [[Fixedfixed Costcost]] (FC) are also divided into three types: FC1 = depreciation of fixed assets, FC2 = interests paid, FC3 = overheads (salaries, transport, maintenance, marketing, ...)., UsingFC4 the= 5cost parametersof sales, marketing and theiradvertising. sub-componentsUsing these 5 parameters in simple formulas, a trained person can do a Cigar Box MethodProfit analysis in half an hour,. even whenWhen data are missing, -assumptions assumingmust educatedbe guessesmade regardingusing missingeducated dataguesses.

== Profit Parameters ==

== Profit Parameterscalculation methods ==

The Cigar Box Method consists of only five parameters:

There are three different methods to calculate profit. All use the same parameters and lead to the same result.

===Bookkeeping method===

P = Price (per unit),

Sales - Total cost

VC = Variable cost (per unit),

FC = Fixed cost P*q - (perVC*q unit+ FC),

q = Quantity,

t = Tax (as % of profit).

===Trader's method===

More specifically, in (food)processing business, there are three types of [[Variable Cost]]: VC1 = Raw Materials and Ingredients, VC2 = costs of processing inputs into outputs, VC3 = costs of packaging materials. The [[Fixed Cost]] (FC) are also divided into three types: FC1 = depreciation of fixed assets, FC2 = interests paid, FC3 = overheads (salaries, transport, maintenance, marketing, ...). Using the 5 parameters and their sub-components in simple formulas, a trained person can do a Cigar Box Method analysis in half an hour, even when data are missing - assuming educated guesses regarding missing data.

Profit per unit * units sold

(P - VC - FC/q) * q

===Cigar ExcelBox method===

Contribution - Fixed cost

(P - VC) * q - FC

== Excel ==

The Cigar Box Method is an Excel-based model, and can be used even by Excel-beginners. Only one spreadsheet is needed per product. The Cigar Box Method purposely does not make use of specific software, to enable its easy spread worldwide. The Cigar Box Method is free for anyoneof who is interested in itcharge and is currently available in English, French, Russian and Spanish.<ref>[{{Cite web |url=http://www.globalfacts.nl/cigarbox_products.html] |title=Global Facts &#124; Agribusiness in emerging markets |access-date=2010-06-15 |archive-date=2009-10-11 |archive-url=https://web.archive.org/web/20091011050121/http://www.globalfacts.nl/cigarbox_products.html |url-status=dead|df=dmy-all}}</ref>

== References ==

{{Reflist}}

<!--- See http://en.wikipedia.org/wiki/Wikipedia:Footnotes on how to create references using <ref></ref> tags which will then appear here automatically -->

{{Reflist}}http://en.wikipedia.org/wiki/Wageningen_University

== External links ==

* [http://www.globalfacts.nl Global Facts : Download the free Cigar Box Method]

* [https://www.wur.nl/en/Research-Results/Research-Institutes/centre-for-development-innovation.htm Wageningen Centre for Development Innovation]

* [http://www.wageningenuniversity.nl/UK Wageningen University]

* [http://www.bakeryinitiatives.com Bakery Initiatives : we bake profit!]

* [https://bakeryinitiatives.com/5p-profit-program/planning/bakery-feasibility-study/ Bakery Initiatives]

[[Category:Agricultural economics]]