8 Reasons Why Agribusinesses Fail
The number of entrepreneurs venturing into farming in Kenya grows by the day, more so now that agricultural information is easily accessible and there is advanced technology to make the process easier and more efficient. The venture becomes even more attractive when you hear successful farmers boasting about their huge profit margins.
However, it has been noted that a lot of small agribusinesses end up failing because of some avoidable mistakes done by beginners.
Below are 8 reasons why small agribusinesses fail:
- The notion that farming is easy and can be done by anyone
If you are one of those people who think farming is the art of growing and selling food for money, which is relatively quite easy, think again. Succeeding in agribusiness requires one to invest their time, money and patience. You also need to be quite passionate and determined to succeed.
Unfortunately, many potential farmers are not willing to put in the necessary effort.
- Venturing into agribusiness because your neighbor does it too and they are very successful
In Kenya, you can never miss a conversation that goes something like this, “I want to buy a milk vending machine and start selling milk in our estate.” “Why milk?” you would ask. “Because it is a booming business; ‘mama nani’ is now driving a Harrier all from selling milk,” would be the typical response.
If people continue having this kind of mindset, soon enough all the neighbors will be selling milk hence creating a surplus that forces the prices to drop, making the venture not as profitable any more.
Just because you see others succeeding from doing something does not mean you will have the same fate.
- Poor management
One of the greatest challenges facing most agribusinesses currently is inexperienced and unskilled managers. New farmers frequently lack relevant business and management skills in areas such as record keeping, purchasing, marketing, production and managing employees. This leads to them making missteps that eventually result in business failure.
To address this issue, farmers/agripreneurs should equip themselves with the necessary management skills. For example, a good farm manager must be aware of all the costs and returns of the farm, and always looking for ways to reduce these costs.
A well-managed agribusiness should also have the right infrastructure in place, such as the right systems, procedures, processes and controls.
- Not keeping proper records
Consistent, systematic and readily accessible records are very key to the success of any agribusiness. It is however quite unfortunate that majority of farmers do not keep records at all.
Without proper records, a farmer lacks clarity on how the business is performing, and they may not be able to plan for the future or even secure funding to expand their enterprise. This begs the question, ‘if you do not know where you are coming from or where you are currently, how will you possibly know where you are going?’
- Not carrying out market research
Many farmers think that farming starts with land preparation and planting, or by building structures for animals in case of livestock farming. Truth is, successful farming starts with carrying out proper research.
out thorough market research before venturing into farming will help a farmer
get great insights such what is on demand or what needs more suppliers. Remember,
people will not buy because you grow, instead, you grow because they will buy.
- Looking for market when your produce has matured
Many farmers have a tendency of jumping directly into farming before they look for potential market for their produce. A farmer may be growing say cabbages and they start looking for customers when the cabbages start forming the heads. At this point, a farmer may result to using middlemen, who are at times likened to vultures because of their extortion traits. Under the worst case scenario, the produce may end up rotting in the fields due to lack of market.
- Being a jack of all trades
Some farmers do not have the discipline to focus on one thing until it is successful. Instead, they keep scratching the surface by growing one crop after the other without a mastery of any.
Identify your main enterprise, for example, poultry farming and focus on it only until you are successful enough. Otherwise, it will only be a matter of time before you call it quits.
- Thinking insurance is only for motor vehicles
Most farmers do not consider insuring their business because they believe insurance is only for motor vehicles and established organizations, only to end up losing everything in case of eventualities such as drought, floods, pests and diseases and political instability.