Preamble
What I have said above is being dramatized daily in the lives of many people who are joining the catfish farming craze, for example. Most simply hear that people are making “money” farming catfish. They then decide to attend one of the many one-day seminars offered by a myriad of “experts” (some don’t even bother to take this step!).
Subsequently, depending on the very sketchy, mostly introductory-level information given to them, they start their own companies and discover, to their surprise, MANY problems that arise that their “master” never warned them about. If they are lucky when they ask, he/she (ie, the “teacher”) may offer support or assistance. If they are NOT, they are abandoned and dry.
One aspect of the catfish production business here to which the scenario outlined above easily applies is that of finding a continuously READY and RELIABLE market outlet for the fingerlings and/or table-size catfish you produce. Note that I am referring here to a “selling point” or “selling points” which ensure that you can continuously sell at competitive prices that guarantee you sufficient margins not only to stay in business, but also to gradually develop the ability to expand its operations.
I’ve seen people go ahead and produce 5,000 or more normal fry during the required 4-5 weeks, only to struggle to find buyers for the weeks AFTER, while having to continue FEEDING the fry (incurring MORE expense than translate into lower profit margins) have long been for sale. This would have possibly happened because they related to promises made by some friends and associates who stated that they would buy as they needed a ready source for fingerlings to start THEIR own farms or to “feed” existing ones they owned or had access to. a.
Below, I now discuss fourteen (14) important questions/issues you may need to consider so that you can be better prepared to choose (and successfully start) the right farming business.
1. What type of farm business to run: Will it be livestock or crops, or a combination of both? Are you a fit for the guy you want to start with? Would you enjoy doing it every day, even when it becomes a challenge?
You’ll have to be honest with yourself here; Otherwise, you may regret the decision to start the business when you have already invested your hard-earned money in it.
2. What size farm to operate: Will it be small, medium or large? What specific dimensions (eg 100m x 100m) will be suitable for your farming business, especially given future growth and expansion?
3. What production and/or operation methods will you adopt? This may be a function of the size of the lot or the space available. You can choose to trade “intensive” or “extensive”, for example.
4. How much automation will you need to use, or should you use? For catfish farming, would a recirculating system be ideal, given your resources and budget? Or will a system of earthen ponds suffice? Perhaps you could start with the latter and graduate to the former, after gaining some experience? The same logic applies to crop farming.
5. Will you use family labor or paid labor? Or will you use both, in different areas of your operation, for example family members might function more in supervisory or administrative roles? Regardless of your choice of area of operation, you should reflect the family labor wage rate each time you use it to avoid underestimating your expenses.
6. What will be your Credit/Capital Source? This problem is not as simple as most people tend to think. Your source will often affect how the business operates, including what you do with most of the money you make. And sometimes, you may not be very happy with what you are forced to do with that money at some point, those who gave you the capital or the 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 the loaned money is NOT released when the farmer requires it due to administrative or bureaucratic bottlenecks on the part of the lender. The result is that when the farmer receives it late, he uses it for consumption and consequently cannot pay for it.
Therefore, there are two dimensions to the loan issue, so it is necessary to have (a) Production loan (b) Consumption loan.
If the farmer wants to survive and be successful in using the loan granted to achieve the intended business objective, the lender MUST make the necessary adjustments to add a Consumer Loan to the Production Loan.
If this is not done, the farmer may end up spending his production loan. The Consumer Loan will generally be used by the farmer to take care of things like the children’s school fees, the purchase of books, etc.
When planning to apply for a loan, keep the above in mind as it applies to you, and argue for the Consumer Loan, if applicable.
LEARN HOW TO TAKE SMART LOANS!
But how do you even know if it will be worth taking out a loan at the interest rate the loan provider will charge? Is there a way to calculate in advance and determine with reasonable accuracy whether the business you intend to apply the loan to CAN generate enough returns to match the interest rate you have to pay, leaving enough for you to benefit from?
9. What is the right time to produce? This is very important for agricultural companies. In fact, I’d say it’s the number ONE (1) issue you MUST consider. Without establishing a reliable sales/marketing point(s) for your desired product, you run a great risk of ending up with produce harvested or matured with NO buyers available.
If it’s too early or too late to start production, you could lose out entirely, depending on the type of business you’re involved with. For example, taking advantage of the early rains can be crucial for a good maize crop.
10. What is the right time to market and WHERE? One of the keys to business success has been to correctly speculate on when to market and where. Most people involved in broiler production, for example, schedule their marketing around the holidays (Christmas, etc.), because outside of those holiday periods, broilers tend to generate less market value .
The farmer who is most aware of market trends knows where to find buyers and when/where prices are lowest, highest, etc.
As I mentioned elsewhere, it has been said that the educated farmer is one who knows the difference between January and June, when it comes to earning income from the sales of their produce.
11. How will you obtain 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 example, if you do NOT own the land, you may not be able to start a plantation of tree crops, such as cocoa or rubber, for obvious reasons: the owner may have other plans and may not like the idea of having their land tied up for decades like that.
12. How will you handle entry to the competition? Just like you are considering starting this farming business, someone else may be thinking the same thing. One or more of those “others” may in the future, after you have started yours, decide to do the same. What will you have in place to ensure you maintain a competitive advantage over those who come in for a piece of your market share?
13. What type of building, water system (eg, dam, well, borehole), etc., will you use on the farm? This will influence the type of farming business you can run successfully. For example, when raising delicate livestock such as catfish fingerlings, the quality/integrity of the water must be reliable at all times. This makes use of a well, possibly with some essential intermediate treatment unit.
14. You will have to assume/take responsibility for your actions and decision making. No matter how many people you consult and get ideas about the production or marketing/selling of your farm products, ultimately YOU will only have to deal with the outcome of your farm decision making.
As the best man, the ball will ALWAYS rest on your table.
This is why you should think hard about the issues outlined above long before you start your farming business, so that you can better prepare yourself to make the decisions that will position your farming business for long-term success.