More now than ever, engaging in agricultural production requires farmers to fully understand all aspects of their production systems, ensuring that they are meticulous in gathering and compiling all the relevant details. Farming now requires a holistic approach that cover aspects such as the farm company structure, goals and objectives, industry analysis, ownership and management structure, market analysis, operational plan and the financial plan elaboration.
Production also now requires farms and firms to also incorporate agricultural, electrical, industrial, irrigation, hydrological engineering, agronomy, human resources, veterinary, information technology, business management and accounting, meteorological and marketing knowledge.
Farm company structures can be divided into the following groups: sole proprietorship, Limited Liability Company, partnership, corporation or co-operative. The farm company structure that is used will determine how operations are undertaken and how decision-making is executed.
Most farmers in Africa usually function as a sole proprietor or limited liability company, occasionally undertaking partnerships. In developing countries, there is a growing interest from governments, non-governmental organisations and the private sector to partner with farmers as agriculture is now growing and these entities are seeking ways to increase their country’s Gross Domestic Product (GDP) and foreign currency earning options.
Goals and objectives of the farming activities must be SMART:
- Realistic, and
The lack of clarity when it comes to farming operations usually leads to underperformance or losses and debt. Objectives are the specific actions and measurable stages needed to be taken to achieve a goal. Objectives are the activities a farmer or firm takes within a certain time frame.
The industry analysis in the sphere of operation of the farm aids a farm/company to comprehend its position relative to other companies within that industry that produce similar products or do value addition to the produce. This also aids the start-up or expanding farm to scale up their production systems to meet the standards being set by other farms and firms in that industry, thereby improving competitiveness and marketability of the farm products.
Ownership and management structures have more to do with the internal organisation of a business entity and the rights and duties of the individuals holding a legal (appointed) or equitable interest in that business. Usually, the managing director or farm owner decides how the farm/firm must be structured. Where this is challenging, the managing director or farm owner can engage a consultant or seek advice from other experienced farmers/firms.
The quantitative and qualitative assessment of a market is known as the market analysis. The amplification of this part assesses the size of the market both in volume and in value, the various customer segments and buying patterns, the competition, and the economic environment in terms of barriers to entry and regulation. This is one of the most important themes of preparation that needs to be covered as this can make or break the farm/firm.
One of the keys aspects to fundamentally explore during the market analysis is utilising a statistical analysis of past and present performance of produce prices. From the observed trend, forecasts of produce pricing are made to determine the best time to plant, in order to maximise profitability of the farming enterprise.
The operational plan is a practical document which outlines the key activities and targets a farm/firm will undertake during a period of time, usually one year. It is often linked to funding agreements as well as being linked overall to the farm/firms strategic plan. The operation plan must be accessible and flexible. Changes in the agricultural sector do arise and the firm/farm must be ready to make changes in functionality to adapt as soon as possible. The plan must also be accurate, objective, and relevant with a high level of detail.
A financial plan is a comprehensive picture of finances. It may include details of past, present and forecasted performance. Good financial planning should include particulars such as cash flows, balance sheets, income statements, savings, debt, investments, assets, insurance and any other financial elements of the farm/business. When a financial institution, investor or potential business partner has interest in the business the financial plan is the main part of the business that determines if the venture to be pursued is profitable, viable and a risk worth undertaking.
In picking the production project to be involved it is important to remember that Covid-19 has reduced the spending capacity of most individuals, thus high-end produce – depending on the market to be supplied -may not be bought, nor are they as in demand as they were pre-Covid-19.
Adherence to the comprehensive farm plan will to a large extent guarantees that project goals and maximum profitability are both achieved.