Developing a business plan with mixed objectives requires more than just data and targeted funding
28 okt 2015
For the past few months I have been trying to lay the foundations for developing a business plan for Vikuruti farm. In addition to its agricultural activities, the farm works as a rehabilitation center for former drug users and provides them with vocational skills related to sustainable agriculture and renewable energy technologies.
My job at Vikuruti is now done. I have returned to Finland, but the project is far from over (technically it has not even started yet) and gladly other volunteers and interns are picking up where I left off. In this post I will attempt to describe the difficulties of generating a business plan in a developing country context and reflect on the things that I learned during my time in Tanzania.
A business plan is generally created to work as a road map that not only serves as an internal planning tool, but can also be used to provide information to external stakeholders such as investors and other funding sources. Previously, the Finnish Ministry of Foreign Affairs has provided the funding for SkillsFAST project. However, due to some recent cutbacks in development aid by the Finnish government, all funding for the farm has been plugged until the next call – in 2016 away. Therefore, now more than ever, the justification for the business plan is big as is the need for Vikuruti farm to be able to operate as a self-sustaining and profit-making business venture.
To attract investors, the data involved in the business plan needs to be accurate and realistic. This is where the problems begin. You see, data for business plan is not exactly hard data. It is not accounting data, which is based on actual history, but it is a forecast to the future. Planning and forecasting are only accurate when based on a long, stable, operating history in a static environment. For Vikuruti farm, any data regarding the operating history, such as financial information or production details can either be difficult to get or do not exist in a form that is accessible to the public. Faced with such a dilemma, the logical option is to present an elaborated and educated guess, which is based on a thorough market research and any scattered pieces of field data available.
Determining what to grow and how to sell it are the first steps in starting a farm-based business. This data on markets can be collected and studied by sitting behind a desk and gathering all the already existing data the internet has to offer. However, to create a solid business model for the particular Vikuruti farm, also other data is needed. The data needed to determine the farm output and production value – for example the exact number of cashew nut trees on the farm – can only be acquired by going to the field and collecting it.
The farmland of Vikuruti entails many naturally occurring tree and plant species, which include but are not limited to: different herbs, cashew, chili, mint, lime, mangoes, maize and coconut. To take advantage of the current output and determine what is worth cultivating, a species inventory needs to be conducted. However, collecting data in the field is a long process and requires many man-hours. Thus, to maximize efficiency in the field, it is important to carefully determine what data to collect and how. This might seem obvious, but sometimes countless of hours are wasted on collecting data that will never be used. Hence, before going through the long process of conducting a species inventory for every possible species on the 64-ha area, it makes more sense to first choose the species we are interested in by researching the markets. Therefore, while it is undoubtedly desirable to collect data on the field – data on markets is equally important.
Urban and suburban farms present unique challenges that are different from conventional agricultural development. Developed land often has a history of uses that may have affected the quality of the soil and that may require site preparation or special growing techniques. Urban farms typically need to address security issues related to crops, buildings and tools. In Vikuruti, the farm development and operating practices also have to account for the proximity of residential neighbours. In its southern outskirts the farm is bordered by a river. The neighbouring community has started to cultivate the riverbed, which is inside the borders of Vikuruti. Despite this “border breach”, the neighbours can provide security for the seldom visited fringes of the farm and thereby this fenceless community can prove to be mutually beneficial for both Vikuruti and its surrounding residents.
It is not easy to produce financial figures that not only show the current value of the farm but also express the future potential of this huge 64-ha area, which at the moment is used neither effectively nor efficiently. The figures should combine all the different agricultural opportunities and take into account their numerous tradeoffs and connections not forgetting the challenges of limited access to water/irrigation as well as electricity. As an example – agriculture depends on honeybee pollination. Therefore, establishing apiaries on Vikuruti farm could increase the yield of fruits and vegetables. All of these (and many other) considerations need to be thoroughly researched and precisely calculated for the business plan to reflect reality. Additionally, working inside the framework of a public-private partnership brings its own little spice to the equation in the form of bureaucracy and different agendas. It is sometimes difficult to get partners and beneficiaries committed to the project when they are not rewarded with a direct grant. After all, it is definitely easier to get motivated by the immediate gains of a sum of money than it is to picture the long-term developments that we strive for.
A business plan is a living document, which should regularly be updated to work as a guide for running the business. As the immediate future of Vikuruti farm and therefore the implementation of the business plan remains uncertain, our objective has been to create a general top-level business plan which can be used as a framework for other farm-based businesses as well as a starting point for more precise planning. The plan has been pieced together in small sections – separating for example beekeeping, chicken husbandry and vegetable farming. Therefore, it is more applicable and versatile as it can be used either in pieces or as a whole.
Despite all the above mentioned challenges, the most important one is to incorporate the social objective into the business plan. The business models should support the recuperation of the people living on the farm, who provide the main source of manpower at Vikuruti but at the same time are patients with special needs. Working with people undergoing mental rehabilitation and especially recovering drug addicts will always be the number one priority in planning our farm-based business. Therefore, the business plan needs not only to be economically viable, but also support the social and environmental objectives of SkillsFAST.