Organic Business Guide/Definitions

Definitions

Associated crop Crops grown along with a main crop in the same field.

Break even point The moment when revenues start to exceed operational costs.

Bulking Collection of raw material from several individual farms.

Business plan Documented strategy to develop an idea into a viable business.

Cash flow Movement of cash into or out of a business over a specified period of time, determining the liquidity of a company.

Certification A third-party confirmation that a certain product or process complies with a set of requirements defined in regulations or standards.

Cooperative A marketing cooperative of producers engaged in bulking and selling of products, possibly including processing and exporting and provision of inputs.

Company A business of an individual entrepreneur or a shareholding; can include farmers or farmer organisations as shareholders.

Competitive advantage Attribute or combination of attributes that allows a business to outperform its competitors.

Contingency An additional amount or percentage added to any cash flow item in order to cover unforeseen costs.

Conversion The process of changing from conventional to organic production.

Cost price Actual total costs per unit of output of a product; excluding the profit margin.

Depreciation Spread of cost of an asset (equipment, building, vehicle etc.) over its useful life.

Development agency NGO or government organisation that supports development in low and middle income countries.

Entrepreneur An individual who possesses an enterprise and assumes significant responsibility for the inherent risks and for the outcome.

Exporter A company or a cooperative engaged in exporting products.

Facilitation Any activity used to make tasks easier for others. Facilitation of value chains refers to supporting coordination and communication among value chain operators.

Fair Trade Fair Trade is an organized market-based approach that aims to help producers in developing countries by paying them a higher price as well as enforcing social and environmental standards.

Gross margin Difference between revenues and production costs (excluding overhead costs or own labour costs).

Inputs Material used for agricultural production, such as seeds, fertilizers and pest management materials.

Marketing plan Documented strategy to promote and market the produce.

Operator A person or business directly involved in producing, buying, processing or selling of a product.

Organic agriculture An agricultural production system that relies on natural means like crop rotation, compost, biological pest control, and mechanical cultivation to maintain soil fertility and control pests, excluding the use of synthetic fertilizers and synthetic pesticides, plant growth regulators, livestock feed additives, and genetically modified organisms.

Organic business Commercial operations of a specific entity involved in the production, processing or trade of organic products.

Organic by default A farming system that does not use chemical inputs, but does not actively work on maintaining soil fertility (e.g. through application of organic manures, crop rotation).

Organic project An initiative to set-up an organic business; with a defined start and end of the intervention.

Pig cycles Cyclical fluctuations of supply and prices; high prices leading to an increase in production, leading to oversupply, leading to drop in prices, leading to a decrease in supply etc.

Premium A charge paid in addition to normal (market) prices, for higher quality, organic production or Fair Trade.

Rotation crop A crop grown in sequence with the main crop in the same field.

Smallholder A farm of small size which mainly relies on family labour.

Supply chain The system that moves a product from supplier to customers, emphasizing the perspective of sourcing.

Transaction certificate Certificate stating that a certain shipment and volume originates from certified organic production.

Value chain A chain of activities through which the product gains in value on its down stream journey from production to final consumption.