5 Key Components of success in Agribusiness

Written by Brendan Kuria, a student at JKUAT and currently taking part in the Lapid Leaders Experience:

Recently, some of the Lapid Leaders and I had the privilege of holding a mentorship session with Sammy Ndonga, who is one of the leading Agribusiness consultants in the continent, and is currently working with Africa Agriculture and Trade Investment Fund (AATIF).

Burning with a lot of expectation and intricate questions about agri-business, we were keen to learn from the great guru of agriculture.

He started off with a brief background of his life and how he ended up in the agri-business sector. Sammy grew up in a coffee plantation, and therefore agriculture was always a part of him. He obtained a degree in Statistics but managed to intermarry the degree with his passion for agriculture to become the expert he is today. Some of the key lessons that he shared are below.

 

  1. Intensifying production

With the rate at which land space is reducing, one of the best ways to intensify production is by using mechanization. The use of advanced machines and tools helps increase output per unit area of land thus increasing production. Mechanization also helps in ensuring that there is maximum use of space available.

Use of more viable seeds (for crops) /breeds (for animal rearing) boosts production output. Seeds that are able to withstand turbulent weather conditions as well as disease resistant are very reliable. Animal breeds that are more productive should also be used to increase production.

  1. Understanding the Market

Image result for Africa Agriculture and Trade Investment Fund

The best way to understand the market for any agricultural based business lies in in-depth research. In agriculture, there are very many areas where one could specialize hence creating vast opportunities. It’s very tough trying to be a “Jack of all trades” in agriculture.

Narrowing down to one area of specialization is the key to succeed in agri-business. For example, if one decides to rear chicken, it could be indigenous or exotic, broilers or layers etc. In chicken alone there could be more than four areas of specialization, all which have their own different ways of approaching to ensure maximum profitable output.

But deciding on which area to specialize in lies in the next point.

  1. Customer Validation

Customer validation dwells on understanding the target customers by getting information directly from them. Questionnaires come in hand during this time as it helps in getting a wide range of personalized information. In these questionnaires it is best to target the following;

  • The type of agriculture product that is preferred i.e. Indigenous or exotic
  • The price points that the customers are willing to pay for a particular product

This will help you prepare financially and strategically with the end game in mind.

4. Survive

As basic as it sounds, this is a very important aspect in any business, especially with agri-business, due to its unpredictable nature. Many factors affect the productivity of agricultural products. Main factors affecting productivity are the new unpredictable weather patterns and disease.

To be able to survive, you always need a separate source of emergency finances. To achieve this, one should be able to cut costs and make necessary sacrifices (avoid meaningless spending).

Most importantly one should remember that cash is the blood of the business. You should not base your profits on the normal cash books but by the cash you have at hand.

5. Financing

Agric

At the emerging stage, it is difficult to get startup funds. This is primarily because of the high risk in this area of business. It is prone to failure and most investors would not like to invest in an inexperienced business. The 3 F’s as Sam called them, is where you could get possible startup capital. (3 F’s: Family, friends and fools). You could also be funded by willing venture capitalists or save until you are ready to go into the business.

At the developing stage, it is easier to get finances from commercial banks as they see your development and expertise in dealing with agri-business.

Once you have matured your business, it is necessary to devise a proper renewal strategy to ensure the business doesn’t fail but continues to grow.

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