As a small or medium agribusiness or farmer, you play a critical role in meeting the demand for food by linking smallholder producers to national markets. You also have the potential to help create jobs for millions of people. But you can only realise this potential if your business is profitable and shows growth.
Many farmers and agribusinesses struggle to become profitable and remain small. This is not necessary. Let’s talk about 10 ways to double profits in agribusiness and farming within 2 years.
10 ways to double profits in agribusiness and farming within 2 years
Research by the World Bank shows that when a country’s agricultural sector is not competitive, it has a greater reliance on imports and poverty in rural areas is not alleviated.
Small and medium-sized agribusinesses and farmers in developing and emerging countries face many challenges when they try to increase profits. However, with the right strategies, it is possible for these businesses to double their profits within 2 years.
1. Control costs
One key strategy for increasing profits is to focus on cost control. This can be achieved by negotiating better prices with suppliers, cutting unnecessary expenses, and streamlining operations.
For example, a small vegetable farmer in India might negotiate with suppliers of seedlings and fertilizer to lower the cost of inputs, or a small dairy farm in Nigeria might reduce waste by implementing a more efficient feeding schedule.
2. Expand your customer base
Many smallholders simply sell their raw products to large national or international buyers. This is a good strategy, but it limits your potential to increase profits.
If this is you, consider doing some basic processing to create products for your local market. Or, if that is not possible, try to see how you could start exporting to other countries, including those that are located near you.
Here are two practical examples of how to double profits in agribusiness and farming.
- A small coffee farmer in Mexico might start exporting their beans to specialty coffee shops in other countries.
- Or, a small fruit producer in China might start selling their products directly to consumers through a farmers’ market.
Another strategy for increasing profits is to diversify crop or livestock offerings. This can be achieved by adding complementary crops or livestock that can be grown or raised alongside the primary crop or livestock.
Two practical examples:
- A small grain farmer in Brazil might start growing soybeans as a complementary crop to wheat.
- In the same way, a small poultry farm in South Africa might start raising rabbits to sell on local markets as an additional source of protein.
4. Improve quality
Improving the quality of your crops or livestock is another good strategy for increasing profits. This can be done by investing in genetic improvement, better breeding practices, and improved animal health and nutrition. It can also be achieved by going on the Internet to do research and take advantage of the free research that is available.
Two more examples of how to double profits in agribusiness and farming:
- A tomato farmer in Indonesia might invest in breeding programs to develop disease-resistant varieties.
- A cattle farmer in Vietnam might invest in improved feed and veterinary care to improve the health and productivity of their herd.
For those of you that raise poultry, you may also be interested in ways to grow a small poultry business.
5. Build a strong brand
A strong brand is a key strategy for increasing profits. A strong brand helps customers to recognise your products and it also allows you to charge higher prices.
Building a strong brand can be achieved by:
- having a strong online presence by creating an informative website or by using a Facebook business page that is regularly updated
- interacting with customers on social media
- maintaining consistency in all your communications, including in your emails and your marketing.
For example, a honey producer in Bangladesh might invest in creating a recognisable logo and consistent branding across all of their marketing materials. A small fish farmer in the Philippines could use social media to showcase customer testimonials and pictures of their farm to build trust and credibility.
6. Use a data-driven approach
Another strategy for increasing profits is to use data-driven approach. This can be done by using data to track crop and livestock performance, weather patterns, and market prices.
For example, a maize farmer in Ethiopia can use data to identify the best planting dates and fertiliser rates and a goat farmer in Pakistan can use data to identify the best times to sell their animals based on market prices.
7. Focus on upselling and cross-selling
Upselling and cross-selling are marketing strategies that you can use to encourage customers to buy more. This can be achieved by training staff to identify opportunities to offer complementary or value-added products to customers. See this article to learn more about upselling and cross-selling.
For example, a Peruvian pepper farmer could start offering dried or processed pepper products – like pepper sauce – in addition to fresh peppers. A small sheep farmer in Colombia could start selling wool products – for handicrafts or woolen clothing – in addition to meat.
8. Optimise your pricing strategy
Your business cannot be profitable if your prices are not right. To find out if you are charging the correct price for your products, calculate the gross profit margin for each.
Once you have identified where your pricing strategy should be improved, start by doing some market research to learn the optimal prices for products.
You can also experiment with dynamic pricing strategies. This means that you increase or reduce prices based on demand.
For example, a fruit grower in Thailand could use business data about customer traffic to adjust prices for certain fruits or to encourage customers to come in when business is slow.
9. Create a unique customer experience
This is a strategy that I don’t see many agribusinesses using. One reason may be because it may require you to bring in additional people to help you.
Creating a unique and memorable customer experience helps to build your brand. It also helps you to stand out in the customer’s mind and makes your business memorable. This also means that it helps you to distinguish your business from competitors.
There are many ways that agribusinesses and farmers can create a unique and memorable experience for customers. Here are some ideas:
- Organise educational tours around the farm on certain days
- Offer personalised solutions to customers, perhaps by creating bundles of products that meet the needs of their entire family. So the sheep farmer that I mentioned earlier could consider offering handicraft products as part of a product bundle that also includes branded woolen clothing for children.
- Create special promotions, maybe to celebrate customer birthdays or farm anniversaries
10. Invest in technology and automation
This can be done by using software or machinery to streamline operations and improve efficiency. Depending on the size of your business and how much money you have available, this could be an inexpensive investment or a bigger one.
For example, a small coffee farmer in Colombia could invest in a small-scale pulping machine to automate the process of removing the outer layers of the coffee cherry. While a rice farmer in Colombia might invest in precision farming equipment to optimise planting and harvesting.
Case in point: cashew in Côte d’Ivoire
Côte d’Ivoire is the world’s largest producer of cashew nuts and produces about one million tonnes per year. Yet, only 10% is processed locally. The rest are exported as raw products, mainly to Asia.
The government of Côte d’Ivoire wants to process 50% of national cashew production by 2026 so that they will be able to compete with the world’s umber one processor of cashew, Vietnam. Ensuring robust ties among actors in the local value chain will improve the capacity of Ivorian cashew to supply international markets.
As agribusiness opportunities in African markets grow, more and more entrepreneurs are positioning themselves to take advantage.
For example, in 2021, the Rajkumar family business from Singapore invested about 16.5 million USD in Côte d’Ivoire to set up a state-of-the-art processing plant for cashews that is 95% automated and capable of processing 50 000 metric tons of cashews per year.
There are more opportunities. If interested, take a look at the World Bank report about the potential for agribusiness in Africa.
What net profit margin should agribusiness aim for?
In terms of profit margins, agribusinesses and farmers in these countries should aim for a net profit margin of 5-10%. This margin can vary greatly depending on the type of crop or livestock, the scale of production and the efficiency of the operations.
The highest net profit margins are found among agribusinesses and farmers that specialise in high-value crops such as fruits, vegetables and specialty crops, and those that have a direct-to-consumer sales model.
Additionally, agribusinesses and farmers that have adopted technology and automation also tend to have higher net profit margins.
When it comes to expanding the customer base, agribusinesses and farmers can increase profits by looking for consumers beyond their local markets.
Organisations like the World Bank help farmers scale up their operations and reduce costs by providing access to information and communications technology, business development services, education and other opportunities to increase revenues.
They also offer advisory services that help businesses improve their productivity and implement climate smart practices. It might make sense for you to check what programmes are available in your country.
In addition, organisations like CBI also support farmers and producers who want to export their products to take advantage of the huge opportunities on the European market. The kind of support that they offer depends on the product and the country. Check out their website for more information.
These 10 ways to double profits in agribusiness and farming within 2 years can help small and medium businesses in developing and emerging countries generate higher profits and grow their business faster.
Remember however, that in agribusiness, success is a continuous process, so be ready to experiment, learn and adapt to new trends and technologies.