Succeeding in today’s highly competitive fresh produce market can be challenging – and for those wishing to engage in organic farming these challenges can be even more daunting. Perhaps one of the most important aspects of running an organic farming business is to identify appropriate markets. Markets for organic produce are not as mature as those those conventional produce and clear market analysis is absolutely essential.
A great business plan is extremely important when planning for a successful organic farming enterprise.
A good business plan should feature the following components:
1. A description of the enterprise and an executive summary of the contents of the business plan.
2. An extremely detailed marketing plan – with an analysis of the related costs.
3. An outline of the key business personnel, including management (with a summary of their qualifications).
4. An outline of how the production will take place. This should include a detailed timeline, including day-to-day activities.
5. Asset registry – a full description of the assets that are required for successful operation should be included.
6. An exhaustive financial plan should be included. An annual forecast of costs should be included as should a forecast of turnover and profit. Also included should be a risk management plan – including access to emergency funding.
Here, in more detail are some of the most essential components that should form part of any business plan for this challenging business.
1. Market Research.
Market research is without doubt the most important part of any business plan for those who want to engage in organic farming. There are several questions that need to be answered in full prior to sourcing finance for the organic farming operation.
Firstly customers need to be identified and an analysis of the current market should be undertaken. In other words the aspirant organic farmer needs to find out who is purchasing organic produce in their area and if there may be niches where new products can be marketed. The research could be a s simple as visiting local specialty or mass market stores and reviewing the organic produce that is available. For those wishing to enter into production on a smaller scale a review of the products at local farmers markets might be worthwhile.
Read more: Why is the Cost For Organic Food Higher And Is It Worth It?
2. Competitive Analysis.
Researching the competitive environment is extremely important. Finding out which products are available and where they are sold – and the price points of the various products is essential. Without this information the budding new organic farmer cannot plan as far as pricing and potential market penetration are concerned. Knowing the nature of the competing businesses is also important. Planning for small scale production is problematic when the competition can out compete the smaller organic farmer in terms of economies of scale. If the competition can produce larger numbers of a particular product it may be difficult to compete as far as pricing is concerned. For this reason pricing is very important.
3. Customer Benefits
Marketing of organic produce is largely a function of identifying what benefits the customer will enjoy if they purchase particular organic products. These benefits can include price, but in terms of organic produce the benefits are often intangible – health concerns, freshness and eco credentials may feature highly in any efforts to position organic farm products.
4. Customer Preferences
Efforts should also be made to identify exactly which products are most in demand. Although it might be tempting to use the ‘scatter gun’ approach and produce a large number of niche products this can be problematic in terms of sustainable production and the identification of a profitable marketing niche. Customers may also have preferences in terms of availability – organic produce is often marketed with freshness being a selling point. The aspirant organic farmer needs to identify how often they can get produce to market, as well as how fresh that produce will be when it is presented to the consumer. Given this concern an analysis of supply chain logistics is also important – i.e. how often and how quickly can the produce reach the market (taking into account where it will be sold).
5. Market Share
Another argument for focusing on specific niche organic products is the ability of these products to quickly gain and build market share. A simple example would be if carrots were produced by the majority of organic farmers in a particular area it may be difficult for a new entrant to gain and build market share. However, if specialty mushrooms are in short supply gaining market share may be easier.
Planning for success is extremely important, especially in the case of farm production. The niche nature of organic farming makes this planning process even more important. With a solid and exhaustive business plan an organic producer will not only struggle to source funding – but may be in real danger as far as sustainability is concerned.