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Farming as a Business: The Three Cogs Crucial to Success

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By Phillip Chichoni

Before the establishment of organized settlements in Zimbabwe around the first century, the land was inhabited by hunter- gatherers, the San people commonly known as the “Bushmen”. They survived by hunting wild animals as well as gathering fruits, roots and insects for food. Each day they would go out with bows and arrows or sticks and stones to find food for their families. That is all they had ever known, seen or heard in order to survive.

Then came the agricultural age, when people learned to grow crops, keep animals and thus became farmers.

Farming has progressed over the years. Ancient agriculture produced enough food for a family to feed itself. Later, surpluses began to be barter-traded for other goods and then for money. Farmers managed to buy clothes and send their children to school from selling their surplus produce. But they were barely surviving. Peasant farming was limited in its productivity due to its reliance on physical labour. When farmers adopted the use of animal labour, productivity improved somewhat.

The transition from one stage of productivity to the next is never easy. Imagine you were a hunter-gatherer being introduced to farming. You would see someone digging holes on the ground and throwing in little seeds. Days pass by and after it rains, little plants start shooting from the ground. Over a few months you see the farmer tending to the crops, pulling out weeds and adding fertilizers. Then food is harvested.

You begin to wonder if you will be able to do what the farmer did; but you have no choice. With some training and practice you become a farmer. You teach your children farming and thus build a new generation of farmers, a move up from hunting and gathering.

A farmer produces fifty times more food than a hunter- gatherer. That is why everyone saw the need to move up the ladder.

Then along came the industrial age. Factories were built and people learned specialization, delegation,   scalability and replicability. Raw materials moved efficiently through assembly lines, with finished products coming out the other end.

Farm mechanization

The industrial process was duplicated at the farm, with mechanization making food production hundreds of times more efficient that at the peasant or family farm. For example, figures from the United States Census office show that 3% of the population produce enough food to feed the whole nation, with a big surplus being exported all over the world.

How would you cope with industrialization?

You would need new tools, learn new skills and adopt a new mindset to cope in the new world. Continuing to apply the old mindset would make you irrelevant in a changed world.

Now we are in the knowledge age. We need more than just farming knowledge, but a new mindset altogether. We have to learn how to run farming as a serious business, how to create value and to be continuously innovative.

  1. Run it like a business

In the agricultural age, farming was a practice meant to produce a family’s own food. If you want to take it a step forward and make money from farming, you need to run it as a business. There are four essential things you need to do when running any type of business:

a)         Know your figures

Important decisions, such as what crops to grow and in what quantities, where to sell the produce, how much money to borrow and how many workers to employ all need to be backed by financial information. You must know your cost of production, margins and profit.

Every year, around the month of May, we hear farmers decrying the maize producer price gazette by the government, saying it does not cover their costs. In 2013, GMB was buying a tonne of maize for $385. One needed to make the decision to plant maize again after considering the costs, knowing that inflation is almost zero in Zimbabwe and there is a very slim chance of prices going up.

Knowing your figures enables one to see if a certain crop is viable to produce. It also allows you to make decisions in managing costs where necessary.

b)      Manage your finances

Budgeting is a key process in managing a business. With the current low liquidity, you must know how much money you need in a period and where it’s going to come from. Spending has to be as per budget, taking into consideration your cash position. Prudent business people analyze their cash position regularly in order to avoid being caught in a cash crunch.

c)       Have the right skills in your team

A horticultural farmer I know had been doing well since 2008, exporting significant quantities of fresh produce to Europe. In 2012 he fell ill for four months. During that time no production took place at the farm. It seems the workers did not know what to do.

A serious business must have more than one person managing it. There must be a management team with the four essential skills required in every business: production, financial management, marketing and people management. If you cannot afford to hire full time people, get them on a part-time basis. Or get friends with the necessary skills into your board of advisors so they give you advice whenever it is necessary, for a reasonable fee of course.

d)      Understand your product and your market

Instead of following the crowd, have a deep knowledge of your product and the people who consume it. The challenge in farming is that prices of commodities fluctuate according to the laws of supply and demand. You need to be continuously researching and analyzing your market and its trends.

……………..to be continued on Tuesday.

 

Note: This article appears in full in the June issue of BusinessLink magazine. Get a copy delivered to your email inbox here.June Cover1

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