Did you know that there so quite too many reasons why your agribusinesses might fail? (whether old or new). We will be discussing them soon, so please keep reading.
Wait a minute, just before we dive into them, have you really ever imagined the countless business opportunities we have in agriculture today?
Gone are those days where nations only depended on crude oil. Today, Agriculture has become the world’s most vital industry due to the insatiable need to feed a vast population of people around the world.
Well, inasmuch as there are thousands of people already in the agro-industry, you can also succeed in the agribusiness as long as you explore good information and keep penetrating with an uncommon selling point.
Here we go, in this resource, we will look at the possible reasons why your agribusinesses might fail.
This became a topic of interest after getting questions and complaints on the reason a lot of farmers remain in a particular circle of low income apparently every year.
One of the many questions were;
“Why do African farmers work so hard, yet appear as the poorest citizens amongst their fellow countrymen?”
Unfortunately, this challenge has lingered for too long and a lot of new entrants are continually repeating same mistakes done by those who failed in the time past.
The Good News is that having carefully observed and researched so many agribusinesses (what they did and what they are doing), received complaints from young farmers, Aqua4Nations was able to compile the following common, but costly mistakes being made by farmers.
Why Your Agribusiness Might Fail – 7 Avoidable Reasons
1. Bad Location
The first on the list is your farm location. Site selection is a crucial factor every farmer must consider before starting an agribusiness.
Having said this, the things to consider before selecting an appropriate site include the following:
- Proximity to markets
- Proximity to water sources
- Access roads to the farm
- pH levels
- Soil fertility (to mention a few).
Your inability to choose a suitable site is your ability to start failing in your agribusiness. Yes, Location matters a lot.
2. Poor or no Knowledge
You should know that your agribusiness might fail if you have little or no knowledge on how the agribusiness is done. How do you even start at first without having adequate knowledge? Yes, that sounds weird! But farmers do that a lot.
Starting up an agribusiness really do require much training. This is the truth and shouldn’t be overlooked.
What do we mean here?
Did you know that up till now some crop farmers assume that agriculture is just about planting seeds, making ridges, and waiting upon harvest to start storing millions into their gold rooms? *winks
At the other side, some livestock farmers are not any better than the crop farmers above.
Why? they assume livestock farming is just about having young animals and then feeding them until the mature for sales. *Oh no, too bad
They only focus on the profit, instead of investing time to learn more on their business before start-ups.
The advice here is to never conclude you know it all. Learn from experts before launching that agribusiness of yours. Even after starting it, keep learning!
Getting the right knowledge enables one to know the vital inputs required to excel in his/her agribusiness. However, this may come at a cost to you, but its worth it. Why? Because it is wise to pay to learn and make profits off your agribusiness than pay for damages and losses due to lack of knowledge
3. Improper Planning
Just before launching that agribusiness of yours, you must do a feasibility study, calculating the costs and identifying the risks involved.
A lot of agribusinesses fail today because the owners neglected proper planning before launch.
Planning is a vital tool in every agribusiness as it is about predicting the end from the beginning, deciding in advance what ought to be done, how it ought to be done and when it ought to be done in order to attain maximum efficiency.
Your planning must involve;
- Sources of funds
- Expansion plan
- Financial breakdown of inputs
- Management board
- Supply chain
- Distribution channels
- Marketing strategy [etc]
Apparently, everything in agribusiness must be planned for checkmate.
For instance – as a Farmer, you need to plan when to buy your inputs so that you can harvest at a favourable time of the year when you can market at high prices.
As a farmer, you can make a lot of profit from marketing in festive or peak periods because demand is usually high at those times.
4. Poor Customer Relationship
Your customer is king, any day at anytime. You can’t do anything to change this, and you shouldn’t.
If there are no customers (consumers), then there are no farmers. Would you start up an agribusiness when there are no buyers? No! Therefore, you must build a cordial relationship with yoir customers if not, you may continue to lose more customers if you do not try to maintain a good relationship with them.
Customer maintainability = Customer Retainability + Customer referrals
Whatever it is that you do, try to always ensure that your customers are happy with you and satisfied with your products.
Note, this does not in any way entail that you should suffer loss or burn out to please them.
It is also wise to lay aside some customers that are not fit to be in your circle. For the sake of your business survival, please do that without regrets!
The truth remains that good customers will always encourage and give you all the support you deserve to scale up your business and yield more gains.
5. Use of Business Funds for Personal Gains
This is a very big issue and one of the major reasons so many small-scale farmers and/or startups fail.
As soon as they begin to get revenue coming in from sales, they start their spendthrift immediately.
Funny enough, however unprofessional, some farmers even go as far as eating their farm products during and after harvest.
What do we mean here?
During the harvesting of crops that could be consumed on the spot, some farmers or even workers turn the harvest into a breakfast, lunch and dinner (depending on the time of harvest). This is wrong!
Such act is however unprofessional and can result into agribusiness failure.
In summary, Discipline must be inculcated to overcome this problem.
In addition, agribusiness owners must have the habit of being frugal in expenditures.
Finally, maintain and retain a good financial report of all earnings and expenditures of your business –this will offer you a clear picture of your inputs and outputs.
6. Poor Farm Management
Again, your agribusiness might fail when there is a poor farm management.
As living things, plants and animals should be catered for the same way you carter for yourself and family.
A quick digest, Always;
- Maintain a good farm hygiene
- Ensure you put on clean clothes to prevent the spread of disease
- Separate sick animals from the healthy ones and then treat the sick ones appropriately
- Apply fertilizers and manure to supply plant nutrients
- Irrigate the plants when necessary
- Weed your farm as of when due to prevent competition with plants.
You should be reminded that Farming is quite a serious business. It’s not a part-time job unless you do not expect something huge.
To conclude this, acquire peoples management’s kill so as to be able to manage workers efficiently.
7. Selling on Credit
You are just close to failing in your agribusiness if you market your commodities on credit. No serious farmer tries this, not even now.
Nurturing a producer-consumer business relationship with buyers not willing to pay promptly is a worse idea, if not bad.
A continuous selling on credit would result in bankruptcy (it wouldn’t even take long before this happens).
Always sell your commodities with cash at hand, you should have a no money, no delivery policy.
However, in a situation whereby you have customers that prefer to purchase on credit, always make sure that they pay within three days or even before your next delivery.
In between, you must also be certain that such debtors can be trusted enough to pay back.
Its recommendable to totally avoid selling on credit.
To conclude, always try to maintain and retain those customers that will pay on the spot so as to prevent your money from getting stuck in the hands of people who are unknowingly eager to fold your business with debt.
Aside from the 7 reasons mentioned above, there are similarly other pitfalls of agribusinesses that can result in agribusiness failure.
Please feel free to share your bad experiences as a beginner (if you have one). Your contribution would go a long way to buttress the topic.
You can also share this post to your circle of farmers or/and intending farmers if you found value in this resource.
And yes, do not forget to drop a comment *It has a way of showing that you really followed up.
So what else do you think could lead to agribusiness failure?
Lets meet at the comment section.