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Agronomist notebook: Considering agribusiness? Plan ahead

Saturday October 5 2019

Elburgon farmer, Samuel Karuma inspects vegetables he grows in a seedbed in his farm.

Elburgon farmer, Samuel Karuma inspects vegetables he grows in a seedbed in his farm. Farmers need to understand the purpose of a business in order to develop the mission statement of their investments. PHOTO | JOHN NJOROGE | NMG 

ANN MACHARIA
By ANN MACHARIA
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At the initial stages of any business, there is always the need to have a plan. The plan gives an overview of the activities and the expenditure the business is likely to incur.

As a tool that helps one to acquire capital in the form of loans and grants, a business plan has three main components – the investment capital, production cost and a marketing strategy.

While writing the plan, a farmer needs to consider the overall vision and mission of the crop production investment. These include the short and long-term objectives of the agribusiness.

This means one is required to highlight the steps that are expected to develop the business for a particular period, say five years.

The business plan, therefore, highlights the direction of the project and it should be specific, measurable, achievable and time-bound or simply “smart”.

Farmers need to understand the purpose of a business in order to develop the mission statement of their investments.

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If, for example, a farmer is writing a tomato-business plan, he should have a goal of producing specific quantities, say, by the end of the first season and the entire production period. The mission of the farmer could be to become the leading supplier of the tomatoes in a particular region.

Before preparing the business plan, it is important to conduct a primary survey to familiarise oneself with the background information of the farm.

This takes into account the acreage, location, water sources, conservational soil practices, methods of tillage and others. The investor also needs to consider the current operating costs of the farm. How much, for example, will you spend on irrigation and what is the plan?

This then means one would need to evaluate the value of irrigation in the tomato block and how to reduce the cost while maximising production.

It is at this point that the farmer would consider pumping water using solar batteries and panels if the cost is lower than diesel or mains electricity.

FUTURE OPERATING EXPENSES

Once this is identified, the farmer should develop a strategy for implementing the plan. Most importantly, gather adequate information in line with the market demands and supply. You should also have information on market trends and your competitors.

Conduct a SWOT analysis. This means identifying your strength, weakness, opportunities and threats to your investment.

The threats include government regulations such as pesticides to be used in the production and pests and diseases likely to affect the production of your crop.

One should also create an alternative strategy should there be a threat. Before working on the implementation plan, the investor needs to consider the advantages and disadvantages of the project. The farmer should have many strategies that strengthen his or her internal strength.

The investor should also have a blueprint of market strategies. One should consider where he will market the produce, the least costly means of transport and other factors. It is also at this point that the farmer signs contracts with the people or organisations he intends to supply the produce to.
These include families, learning institutions, companies, supermarkets, hospitals, restaurants and retailers. The investor can also identify a location to set up an outlet for his produce.

The marketing strategy should be based on a survey done on a particular locality because that determines the price of the commodity.

While developing the plan, it is also important to find out the cost of what you intend to produce. The potential investor should identify the amount of money required in the implementation plan and the payback period of the capital. The farmer should also consider the method he will use to settle taxes and other charges.

If, for example, one invests Sh500,000 in the first year of production, the amount should have been recovered in the third year.

In this case, one should list the current finances and the operating costs in detail. It is also vital to include future operating expenses in the investment plan.

Once this is done, start working on implementing your agribusiness.