Some Find Farm Business Model Best Tool for Success
"Failing to plan is planning to fail” is a popular saying. Unfortunately, many tradition-bound farmers in Ukraine have never paid much attention to planning. In the past, they sold what grew and stored well. Nowadays, the modern market demands a broader variety of products, including high-quality fruit and vegetables, some of which may require more sophisticated handling to get to market.
Commercial agriculture follows the same entrepreneurial laws as any other business. To teach farmers how to maximize profit, the USAID-supported Agricultural Marketing Project (AMP) in Ukraine introduced the Farm Business Model, a tool which helps farmers make better management and planning decisions based on analysis of current revenues and expenditure.
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AMP specialists demonstrate Farm Business Model to Serhiy Panchenko,
(right), a table grape grower from Odesa Oblast
Photo Credit: Dmytro Chernyak |
“Each agricultural producer keeps track of his farm’s performance (production and sales), but not everyone is able to calculate economic data professionally,” explained Vitaliy Bilan, of BILAN, a private enterprise in Odesa oblast. “For several years we used dozens of methods just for vegetable crops. In 2004, we started to use the AMP Farm Business Model, which allowed us to choose the optimal sales channels for each crop and to produce more cost-efficient vegetables. As a result, the profitability of our farm increased by 5 percent.”
The Farm Business Model allows agricultural producers to organize revenues and expenses in a clear, unified format, and de-sign sales options through different marketing channels. Based on the data they gather, farmers can make decisions on expanding, decreasing or diversifying their crops. They can also utilize the model when supplying raw materials to food processing enterprises and negotiating prices.
The AMP Farm Business Model is an exclusive tool as it provides those in the agricultural market with necessary start-up (benchmark) information. AMP client farmers involved in the process, submit budget information that is compiled in a database and updated regularly. Thus, the business model can also serve as an industry overview, a production plan and/or marketing plan. It also helps farmers to compare their results with those of others, giving them a basis for judging how well they perform. Having a useful decision-making tool, AMP clients can also receive consultations from industry experts. All these services are presented in a user-friendly (Excel) format, so even a novice computer user can feel comfortable.
Most farmers also find that they have an easier time obtaining bank loans because their business data is clearly organized and easily understandable, and they receive their financing after up to three weeks rather than after the usual two-three month processing period. Vasyl Voloshyn, a farmer in Zakarpattya oblast, was surprised how smoothly everything went when he used the AMP business model approach. “I applied for a bank loan to purchase an irrigation system for my cucumber production, and was delighted to have an answer in a week,” explained Voloshyn.
Although it is predominantly for farmers, food processors, credit institutions, researchers and policy makers have also found the Farm Business Model useful in their work.
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