The success or failure of your
farm starts from the business plan you have laid down. It is important to have
a plan/ blue print to which stands as a guide. This will help you understand
all the necessary inputs the venture requires.
Below are models that should
holistically be viewed in your business plan
1. Determine your scale of production: in this regard it is the production
output that should be your target. It is very important you know beforehand
what your output would look like. This helps to bring into perspective the
amount needed for the venture as well as the man power needed to bring it to completion.
It is not just enough to assume that your agric business will be on a commercial
scale. Have a clear margin of your proposed income and profit written out from
the very beginning. Put into consideration the required workforce to bring the
plans of the scale of production into reality. Make the figures talk, write
them down.
2. Input
the cost implication (variable capital): In agricultural venture, not all
capital is fixed. Only the land is fixed. Never assume that the equipments are
capital neither are they assets, as they invariable take money out of you for
periodic maintenance. Funds will be needed in purchasing items such as
livestocks, seeds, fertilizers, organic manure, overheads, logistics and
procurement etc. The major source of income will be the output of the produce,
be it livestock or plants, cash crops or food crops and other added services in
the value chain. Treating these liabilities as assets will give you a wrong
cash flow pattern for the farm and this could be detrimental on the long run.
So many farms run like this have had cash flow problems.
3. Regular streams of income: It is important you understand
the economies of scale of the produce you intend cultivating or rearing. The
demand trend and its availability during its seasons and off season. This will
help you drive your market towards a targeted pattern. In the cultivation of
seasonal crops, a backup crop or animal production needs to be put in place, to
ensure the stream of income keeps flowing else the farmer may end up selling
his produce and would have to wait till the next season. This will only leave
long periods of redundancy. Structure the farm output in such a way that the
flow of income is regular no matter how little. This structured model will help
to carter for the small bills and overhead, don’t forget the machinery will
need maintenance, either they were used or not.
4.
Envisage risk: It’s
unprofessional and cynic to assume that everything will go well because you
have been handed a high flying business model. Oftentimes the beginning seems
sweet with huge prospects, then the realities of a skipped plan begin to
cripple in. At this point the farmer begins to wonder why the losses are coming
in and fails to realize that the risks were not factored into the plan. I have
come across quite a few in this category, especially in the aquaculture and
poultry industry. Every good venture has its own risk, no matter how small.
Plan for risks happening, factor in the possibility of losses, this will give
you a higher leverage than the other farmer who does not have this in the
scheme of things.
In preparing for the risks, you
will have a clear understanding as to how to tackle it and reduce the effect on
your business. It exposes your anticipated weakness and gives you a holistic
approach to reducing that venture weakness.
These risks can’t be eliminated,
but can be drastically reduced, so as not to have a high negative impact in the
profit figures both in the short and long run
5. Realistic Research: This cannot be ruled out as it
helps the farmer identify his market and streamline his produce where
necessary. It is not enough to identify the market, but also know the proposed
demand for the produce, as this will help put a check in price of produce. An
excess in the output will only force the price to drop, usually below the
initial capital. This is often the case when the produce along its value chain
cannot be properly preserved.
Assuming that the demand will
always be on the increase is a wrong notion, as this will only lead to glut and
crash in prices. I am not saying prices should always be on the high side, far
from it. I am saying this based on the cost on overheads and production
incurred when the goods are produced in excess in anticipation of supply.
In coming up with your agric
business blue print, it has to be holistic. I often advice clients to have me
hand them a complete overview of the agricultural venture they intend investing
in rather than just having a business plan, showing only the income and profit.
Neglecting risk and its mitigation is a short step away from failure.
It is important you get a
complete step approach all the way as a guide as this will bring about the
profitability in the business.
Please your feedback and questions
will be highly appreciated as my team and I are here to ensure your farm
succeeds.
