Module 3: Eight steps to start an agribusiness

Learning objectives

Participants will:

 Gain knowledge of the business plan concept

 Understand that running a business is a dynamic process

 Be prepared to writing their personal business plan

When you have developed a good business model, a model where you have designed a good
product or service that your customers love / get value from buying you must decide how you will
start and manage your business. To this job you will get a lot of help from using the business plan
knowledge and the business plan templates.

Contents
3.1 What is a business plan

3.2 Start writing

3.3 Agribusiness model concept

3.4 Customer value and benefit

3.5 Clear goals

3.1 What is a business plan

A business plan is a written description of the business you want to start. It is also a plan for how
you intend to run and develop it. After making a business plan you will have great knowledge of the
business world - the world in which your future lies. You can download a mini-business plan
template at the course website. It will guide you to write the business plan.

The business plan gathers all the bits and pieces from the business preparations and your general
life experience of relevance to your business. It contributes to a more well-arranged start-up –
beneficial to the entrepreneur, his/her family, personal network, consultants, and sources of finance.

You should not see the business plan as the final statement for your business. Instead, you should
see it more like a platform from where you gain access to the business world. It is a dynamic world
so your plans for your business must be dynamic as well.

Working out a business plan serves many purposes:

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  Help structure and realise your visions

 Gather knowledge and compelling information

 Facilitate a framework for better business decisions

 Convince family, banks and other investors that you are worth an investment

 Proof of dedication

 Base for better counselling from co-operators and sparring partners

When the business plan is written it will describe the following issues:

Business concept
A good idea is only a good business idea if you are able to make enough money from it for you to
live independently.

Once you have got an idea, in most cases it needs adjusting and further development before it turns
into a commercial concept. This means you must create a good business model.

Personal Resources and Objectives

Running a newly established company is a very personal thing as its owner is typically the only one
present in the company. Therefore, it is important to emphasise to yourself and others alike that you
do possess the capacity and resources necessary to run a business.

Product/Service
The product or service you offer is the lifeblood of your business. Thus, it is important to analyse its
various aspects. Special attention should be paid to what the customers demand from the product or
service.

Market Description
Before you are able to carry out any sort of sales or marketing action you need to identify the
market you want to penetrate. A good marketing result requires thorough market and customer
insight.

Sales and Marketing

Sales and marketing are your tools to approach potential customers in order to raise an interest in
your product or service. Whether to run local newspaper advertisements, direct mails, work out an
internet solution, or attend international trade fairs, is entirely dependent on what you sell and what
customer profile you want to approach.

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Practical Organising of your Business
You need to describe the every-day running of your company and also consider the cost of
arranging and running your business.

Budgets
Budgets are the above topics described in economic terms. The more specific the plans, the easier it
becomes to work out budgets. Budgets will also contribute to the concretizing of the plans and it is
ok to go back and change plans if the budgets prove them unrealistic.

Financing
Financing merely asks: “How do I raise the funds that I need to start my own business?”

Never ending process

The moment you finish writing the business plan it will contain obsolete information. Every time
you retrieve new information in one area it affects another area in the plan. You therefore have to
look at the business plan as a process, and not as a final statement.

Hopefully the concept of Business plan will be fixed in your memory. If it is, you will always be
alert to the dynamic changes in the business world, and be able to act upon them.

Below you see the concept of the Business Plan illustrated. You need to gain knowledge about all
the topics, and know that all the topics interact with each other. They also never stop interacting
even when you have started your business.

Picture 1: Concept of the Business Plan. Source: Writers own work

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Unexpected event
There will always come unexpected events that will change the way you manage your business. If
you have a poultry farm where you have specialised in selling “ready to cook” chicken and
suddenly nobody wants to buy chickens because of a chicken scandal in the neighbouring country.
What to do? One solution could be to start selling raw and hard-boiled eggs.

As you will learn in module 5 about successful entrepreneurs they use 5 principles. Principle 4 is
called the Lemonade principle. It illustrates well the above problem and solution.

A successful entrepreneur knows that the future is uncertain and in a split second everything can be
changed. Instead of making plans for worst case scenarios she embraces change and makes the best
out of it or takes it as an opportunity to innovate – find ways to overcome the obstacles.

The lemonade principle will later be explained this way: If you get a sour lemon (you meet a
problem) you sprinkle it with sugar, add clear mountain stream water (find a solution to the
problem) and sell it as Mountain View Lemonade (your business can continue despite the problem
you encountered).

3.2 Start writing

It is very empowering to write a business plan. When your business ideas are put on paper it feels
like you already have a business or at least your business is fastened in your mind. It is much easier
to imagine that you really can become a business owner.

Therefore, you must as a part of this course you write a mini business plan. You have to download
the APO mini business plan template from the website where you find your course modules.

Go get it now and save it on your computer to work on or print it to work on. In the following
modules you will get sufficient knowledge to create your personal business plan.

Picture 2. Page 1 of the business plan

template - available at below the Module file
to be downloaded

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3.3 Agribusiness model concept
This part of the module is a further elaboration of the agribusiness module. It is about looking
deeper in the business model you have chosen. Can it be even more precise and likable for your
customers?

A good idea is only a good business idea if you are able to make enough money from it - sufficient
money for you and your family to make a decent living.

Once you have got an idea, in most cases it needs adjusting and further development before it turns
into a commercial concept. If the idea is not convertible into a commercial concept, then is it not
advisable to start a business based on that idea.

Below are topics to help you develop your idea.

Mission statement
When starting a business there is a tendency of basing it on specific knowledge or on a specific
product.

If you like cooking you may want to open a stand and serve hot chicken soup at fair prices, and if
you are educated within IT and software you may want to establish a company specializing in
making websites.

By basing your business on one specific product

or service you make your new business
vulnerable. If its foundation crumbles away, the
market will lose interest in your business. You
will have nothing else to offer the market.

What you need to do is look behind the apparent

features of the product – see FAB tool later.
Feature is: how long and wide the product is, the
Picture 3. Mission statement is the company's
color of it, the durability, and how many
leading star
rotations per minute and so on. Try instead to
determine which human, business or society
related challenges the product meets.

If you like cooking and sell “chicken soup” your mission statement could be “to serve tasty and
healthy takeaway food for the public at fair prices". By choosing this statement you will be able to
continue your business even if the public should stop liking chicken soup. You will also open your
mind to new ideas and new commercial ventures by widening your business statement.

Are you able to write down your mission statement? If not, wait and come back to this item later.
When working with the business plan the right mission statement might just pop up.

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Elevator pitch
The mission statement must be right for you, but you also need to
know exactly what you actually sell.

If you are asked: “so, what are you doing?” it is often quite hard
to come up with a swift and clear answer for what your company
actually sells. Many have a tendency of maundering, deepening or
understating leaving the questioner with a diffuse impression of
what has been said.

Try to prepare the perfect sales/ elevator pitch brief enough to be

told to a stranger in an elevator going up three floors. He or she
might be a potential customer. You have 5 to 10 seconds to hand
over your message.

A restaurant owner and a pepper grower could have the below

elevator pitches: Pic 4. Woman entrepreneur
delivers her elevator pitch
to a possible customer.
Source: YNG Inc

The restaurant owner

I own the city’s best pan - cake restaurant.

All ingredients – vegetable and meat - are produced by local

farmers so everything is fresh and healthy. You can take away or
dine in our 20 seats restaurant.

We have specially trained staff to cook and serve our menus and
drinks at fair prices. Here is my business card, it is a one-meal-
free voucher for you and a friend.

The pepper grower

We are a group of organic pepper grower women who grow, dry,

pack and distribute black and white pepper online to customers all
around the world. We sell direct to private customers via our
webshop and in larger quantities to wholesalers in the province.
Source :pixabay.com

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3.4 Customer value and benefit
What benefits do the customers get from buying your product or service? It is a key question when
developing your business model.

As customers have to spend money on your service or product it is important to analyze which
motives they have for doing so. If you do not know these benefits it becomes difficult for you to
develop and sell the service or product to the customer.

Usually it is hard for an entrepreneur to envision what kind of customer demand is satisfied by
purchasing her service or product. The entrepreneur would rather let the customer know about the
properties of the product. This means facts on the product/informative labelling like how long and
wide, the weight or how many ingrediencies in the package.

However, a customer most focuses on the benefits and output to be gained from a given service or
product.

Benefits group into several categories – they could be saving time, money, trouble, or
transportation. A benefit for the customer could also be increased sales, a more distinguished
appearance, being acknowledged and recognized, moving into nice surroundings or being able to
show off.

FAB tool (Feature – Advantage – Benefit)

Use the FAB tool to make your service or product more customer friendly.

Feature is the facts - the obvious features you are planning to sell. E.g. You might sell organic
falafel burgers with a fiber rich bun from a food truck.

Advantages are which advantages the customer gets from eating organic falafel burgers from your
food truck. E.g. the food truck is parked convenient when a factory has lunch break, access to a
quick and healthy meal.

Benefits are the underlying advantages the customer is looking for - sometimes without knowing.
E.g. living an organic life, eating a burger without meat helps saving the planet, show the co-
workers you do the right thing for the planet and your children.

Always search for Advantages and Benefit in the service or product you are selling. Write down
three features, advantages and benefits in your product. Like this:

Feature in my product/service

1)

2)

3)

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Advantage in my product/service

1)

2)

3)

Benefit in your product/service

1)

2)

3)

Different from your competitors?

Look at your community, the area in the city, the new mall or the local market. You are probably
able to buy whatever product or service you like. So why start a new business when you can already
buy everything?

Because you can do better. You have to ask yourself: “In what way is my product or service better
than the ones already available?”

The differences can be small but crucial. E.g.:

 Your family can supply you with fresh shrimps

 Few have the computer skills you have

 Your stand is very close to a bus station

 Your cousin has studied in Europe and has contact with a European businessman

 Your education gives you new knowledge to perform better

 Your personality will give your customers a good feeling so they purchase more

 You have, over the last 10 years, become friends with important purchasing agents

3.5 Clear goals

Set clear goals for your new business. By doing this you will put psychological pressure on yourself
and will probably perform better. The aims have to be very precise so you are able to measure them.

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Clear goals could be:

 Within 12 months six major customers will deliver 60% of the turnover

 At least one new product has to be developed each year

 I will close down the business if it has not reached 70% of anticipated profit within 12
months

 The gross profit will have to be at least 55 %

 After eight months I will have paid back the loan to cousin Giang