If are also wondering to know the reasons many agribusinesses fail at the startup stage, then read this article till the end.
Have you ever sat down to imagine the numerous business opportunities that agriculture presents?
Well, just like you, I can neither capture the whole picture in a single post.
I will think about writing on business opportunities in the agro-industry, but let’s look at what we have here; The reasons many agribusinesses fail, especially at the startup stage.
Agriculture is fast becoming the world most important industry, this is because of the growing need to feed a vast population of people spread across the globe.
Even though people keep flooding the agro-industry, you too can become successful by penetrating with a unique selling point and good information.
In this article, I have shared why many agribusinesses fail at the startup stage.
This topic is coming at this time because I have been asked questions such as why so many farmers remain at the same level every year?
Why is it that African farmers work very hard, yet they appear to be the poorest citizens among their fellow countrymen?
This problem has lingered for too long and many new entrants are still making the same mistakes made by those who have failed in the past.
Having observed so many agribusinesses which have great potential fail at startup, and received complaints from young farmers, I was able to compile the following common farming mistakes.
Table of Contents
10 Solid Reasons Many Agribusinesses Fail
1. Lack of Knowledge
This is, in fact, one of the major reasons many agribusinesses fail.
A lot of people think venturing into agribusinesses do not require much training.
Some crop farmers think agriculture is all about making ridges, planting seeds and then wait until harvest to start raking millions into their bank.
At this, I laugh out loud.
Most livestock farmers, on the other hand, are not any different from the crop farmers above.
They think livestock farming is all about getting young animals and feeding them until maturity so that they can sell them out to start making money too.
A lot of poultry farmers think this way yet they don’t know the fundamentals of keeping poultry commercially.
Their focus is usually on the profit, instead of taking out time to learn about their business before venturing into it.
Never presume you know it all. Learn from experts before venturing.
Don’t go online to collect vague figures that may mislead you.
If you need figures, then get from professionals in that field who are practising.
Acquiring the right knowledge helps you know the necessary inputs you need to be successful in your agribusiness.
Sometimes, this may come at a cost to you.
If you can afford to pay a professional farmer for an opportunity to learn on his farm, that will be wonderful.
You may also want to apply for an internship.
I bet you will learn more while interning, but you will be willing to make sacrifices if necessary – especially if you’re not being paid while interning.
It all depends on your agreement with the management anyway.
The knowledge is all that matters to you. Just get it.
2. Bad Location
Site selection is an important factor to consider before starting your agribusiness.
The things to consider while making the decision for choosing an appropriate location include; proximity to water sources, proximity to markets, access roads to the farm, soil fertility, pH levels, etc.
Check out this awesome post I wrote about Maize farming procedure and you will see the best site requirement for a bountiful harvest.
Location matters a lot to agribusinesses and failure to select a good site is the first step to failure in agriculture.
3. Improper Planning
Before starting any agribusiness, you must sit down and calculate the costs involved.
Many agribusinesses fail at startup because the owners did not plan properly before starting out.
Planning is all about deciding in advance what to do, how to do it and when to do it so that maximum efficiency can be attained.
Items involved in the planning are; financial breakdown of inputs, expansion plan, sources of fund, transportation, marketing strategy, management board etc. in addition, supply chain and distribution channels must also be planned.
Almost everything in agribusiness is planned.
Farmers plan when to by their inputs so that they can harvest at a favourable time of the year when they can sell at high prices.
They make a lot of profit from selling in peak periods or festive periods because demand is high at those times.
4. Poor Customer Relationship
The customer is king, anytime, any day.
Never forget that.
You will continue to lose more customers if you do not maintain a good relationship with them.
Not only that, but you will also miss business opportunities that should come to you through referrals.
Always do all you can to ensure that your customers are happy with you and your products.
Although, that does not mean you should burn out or suffer a loss just to please them.
Some customers are just not fit to be in your circle. Those are bad eggs that must be laid off without apologies.
Good customers will continue to encourage and give you all the support you need to scale up your business and make more money.
5. Premature Scaling
At the first taste of success, most agribusiness startups tend to scale up their business operation immediately.
While this is not bad at all, it is an unwise idea to be followed immediately.
Before scaling your business, ensure you have increased your customer base to a point where your current capacity cannot handle the demand.
Having a large customer base will prevent you from incurring losses in form of post-harvest wastes.
Post-harvest wastes may accumulate when your production capacity is more than the demand for your product.
Do you know you can increase your business profit by learning how to eliminate post-harvest wastes?
6. Lack of Core Values
What are you known for?
Many startups do not have core values they can capitalize on.
They are very dynamic, and such businesses cannot be trusted because they will always cause pain.
Practice good values such as integrity, good morals, timely delivery, and the likes of it.
You should be known for something.
Capitalize on good business ethics. Your core values should be written in your business handbook and handed down to every employee.
Be strict with this because it makes or mar businesses.
7. Wrong Partner/Team
TEAM is used as an acronym to mean “Together Everyone Achieves More.”
I have heard people say that “two heads are better than one.”
Nowadays, people don’t just say “two heads” rather, they say “two good heads.”
The head you are adding to your team must be qualified.
Nobody wants a bad head as a partner.
You’d be frustrated.
In a situation where one head is bad, it would have been better for the good head to work alone than pairing it with the bad head.
The same principle applies to select a partner or a team.
Ensure you pick someone who shares the same values as you.
Pick people who are passionate about what you do.
People who are hard-working and self-motivated to work.
Select people who are disruptive thinkers and executors.
Really, it is difficult to find such people because all these values are not written on their foreheads of everyone to see.
You can only know them by engaging in conversations with people or observing people execute a task.
Ensure you pray before selecting a partner or team and when you find a good team, keep them.
8. Use of Business Funds for Personal Gains
A lot of small-scale farmers and startups fall victim of this.
Once they start seeing revenue coming in from sales, they begin their spendthrift almost immediately.
Another practice from most farmers that result to their failure is the eating of their farm products during harvest.
While harvesting crops that can be eaten on the spot, some farmers (or workers) turn their harvest into breakfast, lunch and sometimes, dinner.
This habit is non-professional and could make your business crash at any time.
Discipline must be inculcated to curb this challenge.
The business owner must learn to be frugal in spending.
In addition, maintain a good financial report of all expenses and revenue of the business.
It will give you a clear picture of what is coming in, and what is going out.
9. Selling on Credit
Another strong reason many agribusinesses fail is that of leniency of the farm owner or management.
Starting a business relationship with any buyer who is not willing to pay promptly is a bad idea.
You may run into bankruptcy in a very short time if you are not careful.
Ensure that all buyers pay on delivery.
If you have customers who prefer to by on credit, ensure they pay within three days or before your next delivery to them.
Be sure that these debtors can be trusted to pay back.
To be on a safe side, totally avoid credit sales especially as a startup.
Try to maintain those customers who will pay on the spot so that your money doesn’t get stuck in the hands of people who are out to destroy businesses with debt.
Cash flow is essential for the survival of any business and credit sales is a good way to tie money down, leading to more expenses than revenue and profit.
10. Poor Farm Management
Many agribusinesses fail because of the problem of poor farm management.
Plants and animals are living things, the same way you take care of yourself is the same way they should be taken care of also.
Maintain a good hygiene on the farm.
Ensure you wear clean clothes to avoid the spread of disease.
Separate sick animals from the healthy ones and then treat the sick ones properly.
Irrigate your plants when necessary.
Apply fertilizers and manure to supply plant nutrients.
Weed the farm when due to avoid competition with plants.
Nothing should be neglected.
Farming is serious business.
It is not a part-time job unless you don’t really take it seriously.
Make every day count on your farm and learn people management skill to be able to manage your workers properly.
There are other common pitfalls of agribusinesses that lead failure which is not covered in this article.
If you’ve had some very bad experiences as a startup, let’s learn from your own contribution. How did you bounce back?
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