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I have always had the opinion that small scale farming is the new big scale farming and smallholder farmers need to be given due attention.
One of the reasons I say so is because it’s the successful small scale farm enterprise of today that becomes the big scale farm enterprise tomorrow. I believe that small scale agriculture will truly change the face of Africa’s agriculture and food system.
However, one of the major needs of small farms is support, they need to be supported by the government, by their networks and they need to be supported by the communities in which they are located. They need this support if they are to be able to continue to ensure food security in Nigeria and Africa at large.
Therefore if there is any small scale farm near you I beseech you to do well and do business with them.
Today I want to talk about the 5 major reasons why small scale farms fail and if you do have a small scale farm, knowing this 5 pitfalls and avoiding them will go a long way in contributing to your success.
Five Reasons Why Small Farms Fail
1. Trying to grow big too fast:
Many small scale farmers fail because they try to grow big too fast and trying to grow big too fast comes with a lot of challenges that if you are not well prepared for it may overwhelm you and your business.
The desire to grow big fast is great but trying to do this just because you have the fund to expand may prove to be counterproductive. You see as a small scale start up farm there is a lot you need to learn even as you try to grow in capacity.
Your first production batch experience may be different from your second batch experience. There are cases whereby a farmer may have a good first quarter and a very bad second quarter. You need to learn the ropes of running a farming enterprise, you need to go through the process of building a tough skin when things go south and they will.
When you take a little time to learn and grow your technical knowhow, you will limit your chances of failing and increase your chances of succeeding when you decide to expand.
For example, let’s say, you plan to become a poultry farmer and then you decided to start with 50 birds just to see if the business is worth doing and fortunately, you had a good production batch experience and discovered that the business is worth doing.
And let’s say the scenario continues with you having had a successful trial, now have a plan to maximize your profitability by increasing your production capacity from 50 to 1000. But the fact here is that you may not really have increased your capacity to market and sell 1000 birds and that falls into the category of trying to grow big too fast.
You may end up spending more than you should or you may end up losing your investment if something like let’s say a disease outbreak takes over you farm.
The key take away here is for you to choose to expand not because you have the fund but because you know you can handle the growth in production capacity, the risk and the responsibility that comes with growth.
Choose to expand if you are certain that you can handle it and you won’t fold up if things go south.
2. Failing to grow a customer database:
Growing a customer database is all about marketing and trying to build a relationship with your target market. Many small scale farmers just begin with the assumption that the market will come to them once the produce is ready.
You need to spend 80% of your time building relationships and 20% managing your farm especially if you are a startup farmer. You don’t have to be big before you start acting like a big farm. If you don’t have systems in place to move your produce fast as soon as they are ripe for the sale, that will lead to a lot of bottlenecks in your business. And the only way to avoid these bottlenecks is to continuously grow and build the relationships you have in your customer database.
What you need to do is to go into the market place (online and offline) where your targets are and start building relationship, start asking questions, start capturing data and get to know what they want from the farm produce you plan to sell. If you are able to do this expanding your business becomes a lot easier.
3. Starting with an underfunded budget:
Many small farm business owners jump into farming with limited funds, what they don’t realize is that farming is a business and just like any other business and it will require fund to do it well.
You need to have some cash to start a farming business; you can’t bootstrap yourself into an agribusiness. What you can do is to start with what your current fund will be able to support and grow from there.
If you going to start a farm, depending on the agribusiness you plan to start and in what capacity, you will need between 75 thousand naira and 10 billion naira. The good news here is that there are ample opportunities for anyone to start an agribusiness no matter the level they are right now financially. It’s not about starting big rather it’s about just starting.
Starting an underfunded agribusiness is a recipe for stress and eventually failure and you don’t want that experience. We don’t want you to experience this. Also we know people who have started an underfunded agribusiness and failed as expected because they could not handle the stress that came with it.
At farmsocio.com, when we consult for our clients, we do advice them not to borrow to start because if things go south they can handle the pain of failing, dust their back and start all over again. They can’t do that if they have a failed agribusiness with borrowed money debt to pay.
What we do encourage is for them to start with what they have, grow in knowledge, grow in technical capability and when they are certain that they can handle expansion, if they need to, they can now borrow to grow and expand their business.
The key take away here is for you to know what the minimum amount that your business will require for you to start it? Start with that amount and grow from there. Don’t and I repeat, don’t ever borrow money to start a farming business especially if you have no technical knowledge in it. All this are recipe for failure.
4. Starting a second farming business too quick:
Many small farm business owners try to start a second farming business too soon. As a start up agribusiness owner, it doesn’t matter the millions you may have in your bank account to fund your agribusinesses, starting a second farming business too quick may lead to an early and unexpected failure.
Don’t try to start a poultry farm, piggery, snailery, crop production all at once. What you should do is pick one that is of interest to you, do it well and then add the next agribusiness of interest once you have been able to make the first one self sustainable. And doing this can take a number of years to do but it guarantees success better than starting all at once.
5. Failing to count the cost:
If you notice you will observe that I have mentioned multiple times here that most small scale farm business owners don’t realize that farming is a business therefore it needs to be treated as such.
Just like any other business, your farm will be making use of all factors of production to provide its products and services to its customers. It will require land, labour, capital, markets and you the entrepreneur and all this and more involves costs yet many small farm business owners do not count their cost.
If you don’t count the cost, you will never know if you are operating your business at a loss, profit or if you are breaking even.
You need to capture every data of where and how money is leaving and also know how much is coming in. You need to know how much has been invested in a day, week, month or quarter and how much has been generated in revenue in a day, week, month or quarter. Failing to count the cost will eventually lead to loss or the closing down of your agribusiness.
As an intending or experienced agribusiness owner, it is very important you consider the above points and use what you have learnt here to guide your decisions, investment and management practices.
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