14 Key Questions/Issues To Consider In Order To Choose(& Successfully
Startup) The Right Farm Business
By Tayo
Solagbade |
Some people
rarely bother to undertake any careful analysis of the requirements
for successfully starting up and operating a business they
nurse interest in. They consequently lose profits due to their
poor preparations. This article reviews fourteen (14) important
questions/issues you may need to consider so you can be better prepared
to choose(& successfully startup) the right farm business. |
Preamble
What I have said above
is daily being dramatised in the lives of many people who are joining
the craze of catfish farming for instance. Most simply hear that
people are making "money" from catfish farming. They then
decide to attend one of the many one day seminars offered by a myriad
of "experts'(some don't even bother going through this step!).
Subsequently,
depending on the very sketchy - mostly introductory level - information
given them, they startup their own entreprises, and discover to
their shock MANY issues arise which they were never warned about
by their "teacher". If they are lucky when they ask, s/he(i.e.
the "teacher") may offer support or assistance. If they
are NOT, they find themselevs left high and dry.
One aspect of catfish
production business out here that the scenario painted above readily
applies to, is that of finding a continually READY and RELIABLE
market outlet for the fingerlings and/or table size catfish you
produce. Note that I refer here to an "outlet" or
"outlets" that ensure(s) you can continually sell at competitive prices which guarantee you enough margins to
not only stay in business, but also gradually build capacity to
expand your operations.
I have seen people
who went ahead and produced 5,000 or more fingerlings within the
normal for 4 to 5 weeks required, only to struggle to find buyers
for weeks AFTERWARDS - while having to continue FEEDING the fingerlings(incurring
MORE expenses which translate to lower profit margins) long
overdue for sale. This would have happened possibly because they
relied on promises made by few friends and associates who claimed
they would buy, as they were in need of a ready source for fingerlings
to startup THEIR own farms or to "feed" existing ones
they owned or had access to.
Below, I now discuss fourteen
(14) important
questions/issues you may need to consider so you can be better prepared
to choose(& successfully startup) the right farm business.
--------------------------------
1. What type of farm business to run: will it be livestock or crop - or a mix of both? Are you suited for the type you want to embark on? Would you enjoy doing it daily, even when it becomes challenging?
You will need to be honest with yourself here; else you may find yourself regretting the decision to start the business when you have already pumped your hard earned money into it.
2. What farm size to operate: Will it be small, medium or large? What specific dimensions (e.g. 100m x 100m) will be suitable for your farm entreprise - especially with consideration for future growth and expansion?
3. What methods of production and/or operation will you adopt? This can be a function of the size of land or space available. You could choose to operate "intensive" or "extensive" for instance.
4. How much automation will you need to use - or should you use? For catfish farming, will a recirculating system be ideal, given your resources and budget? Or will an earthen pond system suffice? Maybe you could start from the latter and graduate to the former, after gaining some experience? Same logic applies to crop farming.
5. Will you use family labour or paid labour? Or will you use both - in different areas of your operation e.g. family members could function more in supervisory or administrative roles. Regardless of your choice of their area of operation, you must reflect wage rate for family labour whenever you use it, to avoid underestimating your expenses.
6. What will be your Credit/Capital Source? This issue is not as straight forward as most people tend to think. Your source will often impact the way you operate the entreprise, including what you do with most of the money you make. And sometimes, you may not be too happy with what you are compelled to do with that money at some point, by those who gave you the capital or credit.
7. What is your capital profile? This will show how much is required at each stage of production, and will often help you determine when to borrow and when not to.
8. What is your loan profile? The problem here is often that money given as loan is NOT released as and when the farmer requires it due to administrative or bureaucratic bottlenecks on the loan giver's side. The result is that when the farmer gets it late s/he uses it for consumption, and is consequently unable to repay.
There are therefore two dimensions to the loan issue, making it necessary to have (a) Production Loan (b) Consumption Loan.
If the farmer is to survive, and succeed in using the loan given to achieve the intended business objective, the loan giver MUST do needed adjustments to add a Consumption Loan to the Production Loan.
If this is not done, the farmer may end up spending his/her production loan. The Consumption Loan will typically be used by the farmer to take care of things like children's school fees, books purchases etc.
When you plan to apply for a loan, put the above into consideration as it applies to you, and make a case for the Consumption Loan if appropriate.
LEARN HOW TO BORROW SMARTLY!
But how do you even know if taking a loan with the interest rate to be charged by the loan provider will be worthwhile? Is there a way to calculate up front and determine reasonably accurately, whether the business you intend to apply the loan to CAN yield enough returns to match the interest rate you have to pay, leaving enough for you to profit on?
I have a special report titled "Borrowing Smartly: A Simple Calculation You CANNOT Do
Without!". Call me on 0803-302-1263 for details. Note that I also offer a little spreadsheet application that does this calculation or you, using parameters you enter into it.
9. What is the proper time to produce? This is quite important for agricultural entreprises. In fact, I would say it is the number ONE (1) issue you MUST consider! Without establishing a reliable marketing/sales outlet (s) for your intended produce, you stand a great risk of ending up with harvested or matured products without ANY buyers being available.
If you are too early or too late in starting production, you could lose out completely - depending the kind of venture you are engaged in. For instance, taking advantage of early rains could be crucial to getting a good maize harvest.
10. What is the proper time to market and WHERE? One of the keys to business success has been given as speculating correctly about when to market, and where. Most people in broiler production for instance, time their marketing towards the holidays (Christmas etc), because outside such festive periods, broilers tend to command less market value.
The farmer who is most tuned in to market trends, knows where to find buyers, and when/where the prices are lowest, highest etc.
Like I mentioned elsewhere, it has been stated that the educated farmer is one who knows the difference between January and June, as it pertains to making income from sales of his/her products.
11. How will you get the land you will use? This is important because how you get it will determine how you can use it, or what you can do with it. For instance, if you do NOT own the land, you may not be able to start a tree crop plantation, such as cocoa or rubber on it - for obvious reasons: the owner may have other plans, and may not like the idea of having his/her land tied down for decades in that manner.
12. How will you deal with entry of competition? Just like you are considering starting this farm business, someone else may just be thinking the same thing. One or more of such "others" may in future, after you have started yours, decide to do the same thing. What will you have in place to ensure you maintain a competitive edge over those who come in to get a piece of your market share?
13. What type of building, water system (e.g. dam, borehole, and well) etc will you use on the farm? This will influence the type of farm entreprise you can successfully run. For instance, when rearing delicate livestock like catfish fingerlings, the water quality/integrity must be constantly reliable. This makes use of a borehole, possibly with some intermediate treatment unit essential.
14. You will have to take/bear responsibility for your actions, and decision
making. No matter how many people you consult and get ideas from about producing or marketing/selling your farm produce, YOU alone will ultimately have to deal with the outcome of your farm decision making.
As the top man, the buck WILL ALWAYS rest on your table.
This is why you must do a lot of thinking about the above outlined issues well ahead of your farm business start up, so that you can better prepare yourself to take the decisions that will position your farm business to succeed in the long term. |
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