Agripreneurship Module

Module 11: Agricultural
Entrepreneurship
In 2012 GFRAS developed the “New Extensionist” document, which details
the role that extension plays in an agricultural innovation system, and the
strategies and capacities needed (at individual, organisational, and system
level) http://www.g-fras.org/en/activities/the-new-extensionist.html. Based
on this document the GFRAS Consortium on Extension Education and
Training emerged to promote the New Extensionist, mainly through training,
curricula review, and research on extension.
The Learning Kit contains 13 modules designed for self-directed, face-

to-face, or blended learning and can be useful resource for individual
extension field staff, managers, and lecturers.
The Agricultural Entrepreneurship module is developed as part of the

New Extensionist Learning Kit http://www.g-fras.org/fr/652-the-new-
extensionist-core-competencies-for-individuals.html.
We acknowledge the generous support of the European Union contributions

through the Global Forum on Agricultural Research for the development of
the New Extensionist position paper, its validation, and the development
of these learning materials. Special thanks go to a core group of GFRAS
Consortium on Education and Training, Country fora (e.g. Cameroon) and
individuals who volunteered their time and participated in the testing of the
module and to participants at the 7th GFRAS annual meeting in Cameroon
for the review and feedback of the module.
Lead author: Shaun Ferris

Technical writer: Lucia Geyer
Editor: Caryn O’Mahoney
Quality assurer: Margeaux Erasmus
Layout: Deborah Els
Coordination team: Kristin Davis, Hlamalani Ngwenya,
Lorenz Schwarz & Natalie Ernst
Financial support:
This module was made possible through the support of the Deutsche
Gesellschaft für Internationale Zusammenarbeit (GIZ). The contents of this
module are the responsibility of the authors and do not necessarily reflect
the views of GIZ or Government.
2016
All work by Global Forum for Rural Advisory Services is licensed under a
Creative Commons Attribution-NonCommercial 3.0 Unported License.
ii
Contents
Module 11: Agricultural entrepreneurship.........1
Module overview.....................................................................1
Module introduction................................................................3
Study unit 1: Introduction to agripreneurship..................4
Study unit overview................................................................4
Study unit introduction............................................................5
Session 1.1: The role of the extensionist in agripreneur

development.....................................................................6
Introduction...........................................................................6
The importance of agripreneur development.............................7
The role of extension agents working on agripreneur

development..........................................................................9
Pluralistic extension and extension agents working with other

agents..................................................................................10
Identifying the clients of agripreneurship.................................19
Who are the agribusiness service providers?............................30
Matching clients with market opportunities..............................34
Type of agripreneur clients....................................................36
Session 1.2: Criteria for a successful business...............43
Introduction..........................................................................43
Elements to consider when starting a business........................45
Free service methods and fee-for-service methods for business

upgrading for farmers/farmer groups......................................51
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Session 1.3: Evaluating entrepreneurs (clients).............55
Introduction..........................................................................55
Identifying reasons and motivation for becoming an entrepreneur

............................................................................................55
Assess client readiness to take on a business approach............57
Identifying the market opportunities in your location................58
Designing individual plans for farmers.....................................61
Designing group plans for farmers and cooperatives................67
Session 1.4: Defining the business idea................................74
Introduction..........................................................................74
Assist clients in defining their business idea...................................74
Identify the business gap.......................................................76
Defining the value proposition...........................................................78
Identify and describe your client’s customers...........................79
Outlining the key activities involved in an agri-business............83
Testing the viability of the business idea.................................85
Concluding remarks...............................................................88
Study unit 2: Evaluating the key skills involved in running

a business.......................................................................89
Study unit overview...............................................................89
Study unit introduction..........................................................90
Session 2.1: Evaluating the key skills involved in running

a business.......................................................................91
Introduction..........................................................................91
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Business planning.................................................................92
Market analysis.....................................................................92
Making decisions on market opportunities...............................93
Calculation skills....................................................................93
Production operation.............................................................94
Managing equipment and labour............................................94
Negotiating skills...................................................................95
Customer relations................................................................96
Marketing and sales..............................................................96
Developing a training programme...........................................97
Basic and advanced bookkeeping...........................................98
Basic financial skills.............................................................................99
SMART skills.........................................................................99
Using rating scales to assess skills........................................100
Concluding remarks.............................................................102
Study unit 3: Identifying markets, mapping resources and

conducting business planning......................................103
Study unit overview.............................................................103
Study unit introduction.........................................................104
Session 3.1: Identifying market opportunities.............105
Introduction........................................................................105
Spotting the market gap......................................................105
Assessing seasonal supply and demand.................................113
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Market supply.....................................................................113
Identifying key buying conditions..........................................115
Interviewing buyers.............................................................124
Creating the sales agreement...............................................125
Session 3.2: Managing key activities and partners in a

business........................................................................131
Introduction........................................................................131
Mapping key activities in the production cycle........................131
Identifying key partners.......................................................132
Designing an implementation plan........................................133
Monitoring progress.............................................................134
Session 3.3: Business planning: From canvas to business

plan...............................................................................135
Introduction........................................................................135
Using the business canvas to design your business plan.........135
Using calculators and digital applications in cost and revenue

calculations.........................................................................147
Identifying investment needs...............................................148
Study unit 4: Financial management, sales and risk

management.................................................................149
Session 4.1: Identifying sources of finance.......................150
Introduction........................................................................150
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Savings...............................................................................150
Investors............................................................................156
Session 4.2: Managing financial resources........................159
Introduction........................................................................159
Separating household and business finances...............................159
Create a seasonal calendar for financing needs...........................161
Arranging finances when working as a group..............................164
Calculating the production costs of a product/service..............167
Pricing a product.................................................................168
Working on mark-up levels...................................................170
Managing cash flow...........................................................................172
Working with revenue and profit....................................................174
Forecasting money needs.....................................................175
Session 4.3: The basics of sales....................................179
Introduction........................................................................179
Identifying different types of agreements for sales.................179
Profiling clients and sales obligations.............................................181
Understanding the contract for sales.....................................182
Conduct sales forecasting.....................................................188
Reviewing the quality and volume of sales.............................191
Identifying opportunities for growing sales............................192
Session 4.4: Assessing risk...........................................194
Introduction........................................................................194
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Identifying key risks in agriculture........................................194
Study unit 5: Record keeping.......................................205
Session 5.1: Operations record keeping.......................206
Introduction........................................................................206
Production records..............................................................206
Session 5.2: Financial record keeping..........................211
Introduction........................................................................211
Selecting a record keeping system........................................215
Study unit 6: Building a business and managing

relationships.................................................................220
Session 6.1: Putting plans into action and monitoring

progress........................................................................221
Introduction........................................................................221
Launching and growing business..........................................221
Running and growing a business..........................................226
Monitoring progress against targets......................................228
Session 6.2: Managing relationships............................231
Introduction........................................................................231
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Managing business relationships...........................................231
Managing customer relationships..........................................233
Glossary........................................................................238
Definitions...........................................................................................238
Abbreviations......................................................................256
Resources......................................................................257
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1. Before you begin
1.1 General instruction
This module should be used in conjunction with the workbook
provided. As you read through the module, you will find different
visual features that are designed to help you navigate the
document.
Activity Case Did you Example Keywords Take note

Study know
Figure 1: Icons used to highlight important information

throughout the manual
The module makes use of keywords (difficult or technical words

that are important for you to understand). To ensure that you
receive the full benefit from the module, keywords will be marked
the first time they occur and defined in a box containing the
keywords symbol. Make sure that you read the definition of any
words that you are unsure about.
1.2 Activities
Each session in the module will contain various types of activities
to help you become knowledgeable and competent. The module
contains three types of activities:
A pre-assessment is to be completed before reading through

the module overview and introduction, and a post-assessment
is to be completed once the entire module has been covered.
This will measure the degree to which your knowledge has
improved by completing the module.
x
Each session contains one or more session activities to be
completed, in the workbook, where indicated in the module.
These activities measure your ability to recall and apply
theoretical knowledge.
At the end of each study unit a summative assessment needs

to be completed. These assessments are longer than the session
activities and will test your knowledge on all the work within the
study unit.
1.3 Assessment instructions

Keep the following in mind before doing any of the assessments:
⚫ All assessments are to be completed in the provided workbook.
⚫ The manual contains all relevant information you will need
to complete the questions, if additional information is
needed, such as the use of online sources, facilities will be
made available.
⚫ Work through the activities in a study unit and make sure
that you can answer all the questions before attempting the
summative assessment. If you find that you are not certain
of any part of the training material, repeat that section until
you feel confident.
⚫ The summative assessment must be done under the
supervision of your trainer at the end of your learning
period.
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Part of the New Extensionist Learning Kit
Module 11: Agricultural

entrepreneurship
Module outcomes
After completing this module, you will be able to:
1. Understand the concept of agripreneurship;
2. Evaluate the key skills involved in running a business;
3. Identify markets, map resources and conduct
business planning;
4. Understand the basic principles of financial
management, sales and risk management;
5. Perform operations and financial record keeping; and
6. Build a business and manage relationships.
Module overview
Over the past 30 years, there has been a major shift in
agricultural markets and the international trade of agricultural
products. The world is moving from local and national markets
towards a global system of trading, which means that
neighbouring farmers working on small plots of land may
be competing with large industrial farmers from another
country in a single marketplace.
In developing countries, there is increasing pressure on
farmers to commercialise their operations. This change is
driven by the following factors:
⚫ Declining land size, which means that farmers need more
intensive production systems to support their family needs;
⚫ Urbanisation and rapid population growth and
⚫ General modernisation, which means that farming families
need to generate larger incomes to support their family needs
and expectations in terms of medical support, education,
transport, communication and to cover the rising costs of
their cultural traditions.
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Module 11: Agricultural Entrepreneurship
In order to meet the drive for greater commercialisation,

extensionists need to develop new skills to support the
agripreneur needs of farmers and other actors in the value
chain. For the farmer, this includes working with individual
farmers to develop farm plans, as well as working with various
levels of farmer organisations—from groups to cooperatives—in
areas of market analysis, financing, sales and building business
opportunities for farming clientele.
New extensionists also need to take on a more market focused
and systems approach to work in ways that strengthen the
roles and opportunities of other actors in a value chain, such as
farm workers, input suppliers, warehouse managers,
transport companies and financial services, so that they can all
work towards a common business goal.
This module familiarises extensionists with the key terms and
concepts required to introduce agricultural entrepreneurship to
farmers, farmer groups and agricultural businesses and to
support improved productivity and market engagement. The
module provides a practical approach to improving the
knowledge, skills and attitudes of extension agents as they seek
to help the farming community take on new enterprise skills.
Agripreneur: An individual who starts, organises and

manages a business venture focusing on the agricultural
sector.
Value chain: A set of connected actors that work
together to add value to a product and increase efficiency
and competitiveness, while linking producers to
processors and markets.
Supplier: A company or a business that supplies goods
or services to another business, in this case a farming
operation or an agripreneurship.
2
Module introduction
Approximately 1,5 billion people are engaged in smallholder
agriculture across the world. This mainly rural community
includes 75% of the world’s poorest people whose food, income
and livelihood depend on agriculture. Despite their important role
as food producers, the commercial prospect for millions of poor
smallholders remains challenging. There is a growing perspective
that better market engagement is a critical element in improving
the livelihood prospects of rural families. However, poverty is
endemic to this community and, in order to support this
farming sector, several global agencies have renewed their
investments in smallholder agriculture, but with a stronger focus
on upgrading the agripreneur opportunities for farmers.
To stay relevant and meet the needs of the rural community, the
new extensionist must acquire new skills in business support. The
methods used will depend on the scale of the business venture
involved. With the more pluralistic nature of extension, business
services will be provided in a combination of free and fee-based-
service business models.
Smallholder: Farmers who owns a small plot of

land on which they grow self-sustaining crops, and who
rely mainly on family labour.
Endemic: A condition that is regularly found in a
particular area or among particular people.
Pluralistic extension: Extension that is characterised
by the inclusion, interaction and coordination of multiple
public and fee based providers, services and information
sources.
Complete the pre-assessment in your workbook.
3
Study unit 1: Introduction to

agripreneurship
Study unit outcomes

After completing this study unit, you should be able to:
⚫ Understand the role of the new extensionist
in agripreneur development;
⚫ Identify the clients of agripreneurship; and
⚫ Define a business idea.
Study unit overview

There is an increasing awareness in extension work that
agriculture should be seen as a commercial activity. Within
this context, farmers are seen as agripreneurs and farmer groups
or cooperatives are seen as enterprises. This means that the
goal of extension services will be to enhance profitability and
sustainable productivity. In this way, the focus of extension
needs
to expand from focusing on poverty reduction to include value
capture and wealth creation.
In this study unit, you will be introduced to agricultural
entrepreneurship, the role of the extensionist in
agripreneur development, agricultural entrepreneurs and
successful business ideas.
Commercial activity: Activity that involves trade and

trading.
Enterprise: Any business operation or organisation that
provides goods or services with the primary motive of making
a profit.
Value capture: The process of maintaining a percentage of
the value provided in every transaction.
4
Study unit introduction

Entrepreneurship refers to the capacity to take risks, develop,
organise and manage a new business venture in order to make a
profit. Agricultural entrepreneurship (agripreneurship)
relates to marketing and producing various agricultural products,
as well as agricultural inputs. Most smallholder farmers
produce food for their families, but at the same time, almost all
smallholders sell a portion of their produce into various markets
and that level of market sales is growing. Therefore, smallholder
farmers are working towards being, or already are, agricultural
entrepreneurs. All types of entrepreneurship have the common
goal of making a profit. Entrepreneurs may work alone and keep
the profit of their ventures for themselves, or they may choose
to become part of a farmer group where they invest in their
production system as an individual but sell collectively. Farmers
are increasingly entering into regular business relationships with
other value chain partners. Over time, farmers tend to shift from
working as individuals towards some form of cooperative or
contractual marketing approach and, if successful, they go on
to create medium to large-sized businesses.
Agripreneurship: Entrepreneurship that relates

to the marketing and production of various agricultural
products, as well as agricultural inputs.
Agricultural inputs: Products or resources that farmers
use in farm production, e.g. seed, fertilisers and agro-
chemicals.
Contractual marketing: A marketing approach in which
companies at different levels of the value chain (e.g.
production and distribution) work together to achieve
greater financial advantages than they would have on their
own.
5
Session 1.1: The role of the extensionist

in agripreneur development
Session outcomes
After completing this session, you should be able to:
⚫ Understand why agripreneur development is important;
⚫ Identify the clients of agripreneurship;
⚫ Identify the characteristics of a successful entrepreneur;
⚫ Identify the criteria for a successful business;
⚫ Outline the elements to consider when starting
a business; and
⚫ Understand free service methods and fee-for-service
methods for business upgrading for farmers or
farmer groups.
Introduction
In order the meet the challenges of becoming agricultural
entrepreneurs, farmers—particularly smallholder farmers—and
farmer groups need to expand their understanding of markets
and economic opportunities. In this way, they should be
able to achieve success in running their farms, groups and
cooperatives as sustainable and profitable businesses.
Even though farmers may be innovative and
entrepreneurial, they often lack the know-how to engage
with markets on a consistent basis and they need the
advice and support of extension services to shift from
opportunistic sales to regular and consistently profitable sales,
based on the selection of sales opportunities that support
business goals.
Opportunistic sales: Sales that are based on responding to

any sales opportunity that becomes available.
6
The importance of agripreneur development

In research that was conducted in 2015, the World Bank
established that:
⚫ Only 10%–12% of small farmers were able to access vital
extension services, mainly because large farms were crowding
out the smaller farmers’ access to key benefits;
⚫ Small farmers focused on their own livelihood needs first and
not on their farms as enterprises; and
⚫ Any extension support that small farmers received was
geared towards improving productivity and not towards
improving profitability to make sure that their livelihoods
were sustainable.
Based on this information, it was decided that a new
perspective to extension services and practices needed to be
introduced that involves the following changes:
⚫ Agriculture should be seen as an enterprise and the farmer as
an entrepreneur;
⚫ The perspective of extension services should move
from poverty reduction to wealth creation; and
⚫ The goal of extension services should expand
from productivity enhancement to include
profitability enhancement.
Rural development is increasingly linked to
entrepreneurship, which is seen as a development
intervention that could promote and speed up the
rural development process. Furthermore, institutions
and individuals agree that there is an urgent need to
promote rural enterprises. Apart from the potential benefit
of offering employment, rural entrepreneurship is seen as a
way of improving the quality of life for individuals, families and
communities and sustaining a healthy economy and environment.
The main idea was to get the farmers to think as entrepreneurs,
then to learn as entrepreneurs and, finally, to perform as
entrepreneurs.
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Entrepreneurship is becoming a key factor in the survival of

smallholder farms that have to keep up with the demands of a
changing and increasingly complex global economy.
How is agripreneurship different from traditional

extension methods?
Traditionally, most extension agents, especially those
supported by Governments and NGOs have focussed on
helping farmers to work in groups, to grow more produce and
to develop agri- enterprise options with a cooperative
approach.
Since the 1990s, much of the extension work has included a
marketing component to their work with the aim of linking
farmers to markets. The marketing approach has, however,
mainly focused on achieving economies of scale through
aggregating produce to sell through collective group marketing.
The farmer group support model has a proven track record and
should not be considered as outdated, because this approach
works to the advantage of millions of farmers around the world,
in diverse product ranges and different types of markets.
However, the farmer cooperative model is not the ONLY
approach and this guide offers a complementary approach
which seeks to support the more individualistic
agripreneurs.
This approach in considered catalytic, especially within
value chains, and the aim is to foster new business
opportunities which create greater value and more jobs.
There is also a general recognition that agriculture is not
offering enough farmers sufficient value to keep them on the
land and many of the more entrepreneurial members of rural
communities are migrating to urban centres where they can
realize their business ambitions more readily. Fostering more
agripreneurs is therefore a means to support latest trends in
extension work. The role of some extension agents is then to
work in ways that support agriculture as a fully commercial
8
activity. The value of extension in agripreneurship is to help

agripreneurs to:
⚫ Create more agricultural businesses;
⚫ Create wealth, jobs and work opportunities both on and
off farm;
⚫ Help agripreneurs to modernise their local farming
community; and
⚫ Provide more opportunities for more farmers to access
better pay to support better lives.
Advisory services need to support this new set of clients to take
on new opportunities in new ways.
The role of extension agents working on

agripreneur development
In order to meet the drive for greater commercialisation, farmers
need the support and advice of extension agents. Extensionists
can work with individual farmer-entrepreneurs and with farmer
groups, associations and cooperatives, in order to support them
in:
⚫ Conducting market analyses;
⚫ Working in value chains with partners;
⚫ Developing farm plans;
⚫ Financing;
⚫ Sales;
⚫ Building business opportunities for farming
clientele; and
⚫ Developing skills and competencies required
for successful entrepreneurship.
Agripreneur development is a complex task that involves
working with actors within a market chain and linking to
business services supporting the value chain. In this way, the
success of an agripreneur generally requires working with others
and being part of an organisation that can help find partners
from the public and the private sector to support the business
process at specific points. Given the range of needs, the farming
community
9
and governments are increasingly turning to pluralistic advisory

service approaches.
Pluralistic extension and extension agents

working with other agents
Pluralistic extension recognises the differences in farmers
and farming systems and the need to address challenges
in agriculture development with different approaches. It
is
characterised by the cooperation between different public, private
and mixed extension systems and approaches, multiple providers
and types of services, different funding streams and multiple
sources of information.
Pluralistic extension offers a number of benefits in agripreneurial
development, in that it:
⚫ Addresses the need for specific extension services
for specific contexts, economic enterprises,
livelihood operations and for different farmer
categories;
⚫ Addresses the wide variety of demands, while making
better use of the variety of service providers available;
⚫ Develops better services through cooperation
between community-based, public and private sector
actors;
⚫ Shifts the coordination and accountability between
extension services and other service providers to the
level of the farmers, farmer groups and
organisations; and
⚫ Provides a system in which the quality and content
of extension services are more responsive to the
needs and priorities of farmers, e.g. some services
focus on enhancing the social inclusion of vulnerable
groups and others focus on developing and
empowering the value chain.
In pluralistic extension services, the extension agent may team up
with farmers and lead farmers, farmer groups and associations,
local volunteer agents, commission agents, business support
services, NGO field agents and private sector service providers.
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Farmers and lead farmers

Farmers play a central role in agricultural development and
transformation. They grow crops or raise livestock and they, or
their family members, do the initial processing (harvesting,
drying, sorting, etc.). Farmers can sell their products directly to
consumers (often other people in their village) or to traders.
Lead farmers are farmers with
agricultural expertise. They are often the Lead
more progressive farmers with a higher farmers:
level of education than their peers, which Farmers who
means that they are likely to be literate and lead farmer-to-
numerate, although this is not a general farmer extension
rule. Based on local respect and their services,
status as a leading member of the local based on their
farming community, lead farmers often agricultural
play a dominant role in extension services. expertise.
Farmer groups, cooperatives and associations

Farmer groups are primarily organisations of farmers, typically
informal in nature with a membership of 15–50 farmers.
Cooperatives are larger, second-order and more formal
associations that look after the interests and causes
of farmers. Farmer organisations, which are often
community-based, can be grouped into two types:
resource-orientated organisations and market-
orientated organisations.
Resource-oriented farmer organisations
This type of farmer organisation deals mainly with production

inputs needed by the members (farmers) in order to enhance
their productivity. Resource-oriented farmer organisations
are:
⚫ Generally small organisations, with well-defined geographical
areas;
⚫ Predominantly concerned with access to inputs; and
⚫ Typically focused on a small number of the most
commonly grown products in their area.
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Market-oriented farmer organisations
These farmer organisations have taken on a more commercial

role and they often specialise in a single commodity. They are
not specific to a single community and their members can include
farmers from an entire region who are interested in investing
capital to acquire the most recent processing technology and
professional manpower. These farmer organisations, which are
generally bigger and more competitive than the resource-
oriented organisations, focus on areas such as new technology
and innovation, input supply, credit, bulking and storage and
processing and marketing, with the aim of maximising the
returns on investment for their members.
Commodity: A raw material (e.g. copper) or an agricultural

product (e.g. coffee) that can be bought and sold.
Capital: Money or other assets that farmers have available and
that they can use to contribute to particular cause or invest in a
business effort.
Bulking: Storage of a large quantity or volume of a product.
Commission agents
As farmers make the shift towards more commercial
farming, they require access to improved agricultural
inputs, such
as new varieties of improved seed, fertilisers, credit and
agro-chemicals. Input suppliers are steadily expanding
their input supply outlets and networks to meet this
demand. In order to accelerate the process of
marketing
inputs to farmers, local input firms are hiring progressive
farmers as agents—known as commission agents—to help
advertise their goods and to inform farmers about the benefits of
using improved technologies.
Business development services

Agripreneurs and smallholder farmers often face financial
and non-financial factors that have a negative influence on
their
12
business growth, e.g. low educational level, inadequate technical

skills, lack of information and poor market access. Business
development services assist these farmers by providing
services that help them to increase their productivity and
profitability, as well as their competitiveness in the market.
Business development services: Services that improve the

performance of agripreneurs and entrepreneurships, their access to
markets and their ability to compete in these markets.
With the growing pluralism of extension agencies, farmers are

gaining access to business development services through different
types of supporting agencies. To meet the business needs of
farmers and farmer organisations and to enable them to compete
more effectively in target markets, the new extension agencies or
more diversified service industries must build their ability to help
farmers gain business skills, particularly in the following areas:
⚫ Analysing market opportunities and market demand;
⚫ Mapping market chains;
⚫ Making production and demand led decisions for
product(s) selection;
⚫ Defining and recording production costs;
⚫ Undertaking profitability analysis;
⚫ Keeping financial records;
⚫ Evaluating which business development services
are needed to improve their competitiveness;
⚫ Developing a common business vision for
investment; and
⚫ Both preparing and investing in a business plan.
As the business skills of farmers and their organisations become
more sophisticated, the groups will need to learn more about:
⚫ Meeting product specifications at a profit;
⚫ Negotiating new business models with chain partners;
⚫ Evaluating sales, growth and profitability on a seasonal basis;
⚫ Whole farm profitability; and
⚫ Generating long-term upgrading plans that include chain
wide processes.
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Providing business development services requires organised and

cooperative actions—which are focused on creating favourable
business environment for agripreneurs—between all stakeholders
in the value chain.
Table 1 shows the categories that business development services
can be divided into.
Table 1: Business development service categories
Service category Description

Technology and Services that support research
product development and identify new ways to
produce, process and market
agricultural products, e.g. new
mobile
information systems and
improved, drought-resistant seed.
Training and Services that develop the capacity
technical assistance of farmers and enterprises to
plan and manage their operations
better and to improve their
technical expertise.
Input supply Services that help farmers to
improve their access to, and
use of raw materials and
production inputs, such as
seeds, fertiliser, agro-chemicals
and tools.
These services also facilitate the
linkages between farmers and
suppliers and enable suppliers to
expand their outreach to farmers
and offer better, less expensive
inputs.
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Finance Financial service providers offer
credit to smallholder farmers and
agri-entrepreneurs, usually in the
form of loans, (for example, from
formal service provides such as
commercial banks) and informal
service providers, such as money
lenders and savings cooperatives.
Financial services can also
include supplier or buyer credits,
warehouse financing and
venture or private equity capital.
Market access Services that:
⚫ Identify and establish new
markets for smallholders and
agri-enterprises;
⚫ Facilitate linkages between all
actors in a given market;
⚫ Enable buyers to expand their
outreach to, and purchases
from rural producers; and
⚫ Help entrepreneurs develop new
value-added products and meet
buyer specifications.
Infrastructure Services that establish
sustainable infrastructure and
distribution networks that enable
producers to increase
production, sales
and profitability, e.g. irrigation,
refrigeration and storage,
processing facilities, transport
systems, loading equipment,
communication centres, improved
ports, and expanded road and rail
routes.
15

Policy Policy service providers:
⚫ Conduct research and analysis
to improve overall terms of
trade, strengthen sectoral
governance and correct any
power imbalances;
⚫ Identify and reform policies
and regulations that restrict
smallholder farmers and agri-
enterprises; and
⚫ Facilitate the organisation of
businesses, donors, government
officials and academics around
policies.
In terms of payment, business development services are
supported in the following three ways:
⚫ Free public services, which are financed by government, NGOs
or public sector agencies;
⚫ Specialised fee-based services, which are provided by
private and specialised companies at a cost; and
⚫ Embedded services, which are included in a commercial
transaction in which the farmer or agripreneur does not
pay direct fees for the embedded services, but the cost
of the services is included in the price paid for a
particular product, e.g. quality specifications and
production tips from a buyer to a small-scale supplier.
NGO field agents

Over the past 20–30 years, there has been a rapid establishment
of NGO-based extension agents. Although the NGO field agents
do not have as broad a coverage as the government extension
systems, they often have better resources and they have more
clearly defined objectives and work plans.
The accountability and management expertise of the international
NGOs and contracting companies for short-term interventions
16
has often favoured them as implementing partners for externally

funded agricultural projects. The contracting companies’ access
to resources has enabled them to strengthen and specialise
their extension services.
Most government extension agents still focus their efforts on
basic production systems, whereas many NGO field agents have
broadened the types of services to include issues such as
financial education, savings and loans, credit, business planning,
nutrition and farm plan diversification. This complementary
service can provide more balanced services to the farming
community.
Private sector service providers

There are various forms of private sector extension services,
such as those paid by producers and those paid by a lead firm.
Private sector field agents are paid by a farmer or a farmer
organisation to provide specialised training targeted at a specific
product or sector. These extension agents work with farmers to
help them sell higher volumes of quality produce to meet
market requirements. In most cases, the more commercial
farmers pay for these services to increase their share of produce
that will achieve the highest premium prices.
When lead firms offer private extension services to farmers,
it is often part of a contractual sales agreement. The
extensionist is paid to work with farmers or farmer
organisations to enhance production and quality. The
field agents essentially make sure that certain production
practices are maintained, that farmers grow a specific
variety of produce and that they are using a tested
production system to meet the quality specifications required.
The field agents providing these services are assessed by the lead
firm in terms of their ability to improve the supply of goods from
the farmers. Farmers are keen to access this type of support,
because it provides them with knowledge, new technologies,
access to more reliable markets and often credit, which enhances
their ability to increase their income through the sales of higher
value goods.
17
Fee-based agents
As NGOs transition their roles from a large, paid field force to a
lighter and more sustainable approach, there has been a shift
from paid field agents and free services to farmers to a greater
use of commission agents and fee-based service providers. In
this case, field agents are trained by NGOs to
become local knowledge brokers, Knowledge
offering their services to the broker: An
farming community at a fee. intermediary
(an organisation
In the past, farmers have been reluctant
or a person)
to pay for any services that were also
that develops
offered by the government for free.
relationships
However, farmers now realise that they
and networks
are unlikely to receive the levels of
between or among
support they need from government
the creators
services, as there are not enough
(producers)
government agents in most countries and
and users of
the services offered by the government
knowledge by
are limited in scope.
providing linkages,
It has also become clear that farmer
information
organisations need support from a range
or knowledge
of service providers if they are to run
sources, e.g.
competitive enterprises.
technical
As such, there is a trend towards fee- knowledge,
based service providers and field market insights
agents who offer services such as: and research
⚫ Seed supplies; results and
⚫ Tractor or power services findings.
for tillage, harvesting and
post- harvest services;
⚫ The application of agro-chemicals in field and in
storage;
⚫ Veterinary products and services;
⚫ Financial education and links to credit;
⚫ Farm business planning;
⚫ Farmer group financing; and
⚫ Advanced production advice.
18
These services are linked to greater commercialisation and

farmers are willing to pay for such support to enhance their
production, financial and market performance. The performance-
related payments of fee-based agents are typically based on the
sales of goods and services.
Identifying the clients of agripreneurship

It is important for extensionists to know who their
agripreneurship clients are. They have to identify their
entrepreneurship clients within their farmer client base. There
are different types of farmer that an extensionist can look at
to identify potential agripreneurs based on their assets,
natural resources, farm size, expertise, technology use, access
to markets, level of organisation, access to agricultural
services and the types of products that they produce. The
categories of farmers, as identified by Bill Vorley, are:
⚫ Rural World 1: Farmers who are globally competitive,
embedded in agri-business, commodity producers and
processors, politically connected, linked to formal markets and
often export-driven;
⚫ Rural World 2: Locally orientated farmers with access to
and control of land, multiple enterprises, who are often
undercapitalised and declining in terms of trade; and
⚫ Rural World 3: Farmers known for their fragile
livelihoods, limited access to productive resources,
multi-occupational migrants straddling rural and
urban residencies, unskilled and uneducated and
dependent on low-waged, casual family labour.
Within these larger segments of farmers, the farmer
types discussed below are involved in the identification
of entrepreneurs.
Women farmers
The economic importance of women farmers and their role in
increasing household income is often overlooked and so is their
potential as clients of extension services and, therefore, potential
clients for entrepreneurs. Women farmers often experience a
19
unique set of challenges, including the availability of labour, lack

of authority and decision making within the family, which
impacts on their farming system options.
Small-scale family farmers

Small-scale family farmers are characterised by limited
resources in terms of land (generally less than two hectares),
water and money. These farmers are an aging population, they
are often not well educated and, therefore, they are a more
challenging set of clients for the extension agent when it comes
to communicating with them about potential entrepreneurship.
Figure 1 highlights the fact that within many farming
communities, most smallholder farmers are net buyers.
Therefore, there are few smallholder farmers who have the
capital, capacity and desire to become agripreneurs. However,
smallholder farmers are an important farmer segment as they
make up the bulk of farmers in a country. To support these
farmers, extension agents need to find ways of identifying the
catalytic farmers, and then develop methods to foster their
business ambitions.
Figure 1: Smallholder farmers as net buyers
20
Small-scale family farmer: Self-sustaining farmers who

focus on growing enough food to feed their families with occasional
sales of goods to market. This is a group in transition and in many
cases, the farm is a complementary source of food and income, but
their livelihoods often include other non-farm and off-farm activities.
Medium-scale farmers
Medium-scale farmers are key contributors to the production
and marketing of major food crops such as cereals and oil seeds.
They typically have access to at least 2–10 hectares of land, may
have a primary school education and have better access to credit
and other resources than small-scale farmers. Because of their
higher socioeconomic status in the community, these farmers
are often more progressive and may be more easily
approached about new business enterprises. These farmers are
often in positions of leadership within farmer organisations.
Commercial farmers
Large-scale commercial farmers usually do not make use of
public extension services. They have access to resources, such
as capital, marketing information, technologies and
Information and Communications Technology (ICT)
tools. It is likely that commercial farmers are
entrepreneurs and that they pay for specialised services
which will include market development, management
and financial aspects of entrepreneurship.
Information and Communications Technology: The

integration of communication devices, applications and services,
including computers and computer networks, mobile phones and
television to enable users to access, store, transfer and manipulate
information.
21
Farmer Cooperatives
In addition to the farmers, there are also opportunities to develop
the business skills of target farmer organizations and or the
marketing managers who work within these organizations. Most
farmers are engaged with some sort of farmer organization and
much of the support work done by extension agents is to help
farmers come together in groups to improve their access to
learning, technologies and markets.
As shown in Figure 2, there is a steady progression of farmer
organisations from individuals, through small groups to
associations and farmer cooperatives who may become
businesses. As these organizations become more sophisticated in
their operations, they also take on personnel that support specific
roles and one of these is generally related to business
management. There may be interesting opportunities for
extension agents/services providers to support the enterprise
operations of these staff members, so that the organization as a
whole improves their competitiveness.
Figure 2: Progression of farmer organisations
22
Processing firms
In addition to farmers, a growing number of agripreneurs are
found off farm, these are often processing companies who
may have a farm to supply some of their raw materials. This
is illustrated in Figure 3. These firms typically buy a
considerable
amount of their raw materials from other farmers. This category
of agripreneur is focused on value addition and exploring new,
higher value market opportunities. They are seeking new types
of technologies to give them a competitive edge and they
generally have a strong business background. They will be
seeking
both private and public types of extension support to improve
production, processing efficiency and marketing.
Regulation and Infrastucture
Infrastructure Regulation Grades Food safety
Core Chain actors
Farmers Co-ops Traders Processors Wholesale Retail Consumers
Services
Extension Inputs Finance Transport Storage Packaging Marketing
Figure 3: Categories of agripreneurs

In order to identify clients who can be considered for
entrepreneurship, the extension agent has to be familiar
with the characteristics of a successful entrepreneur. These
characteristics are discussed in the following section.
The characteristics of a successful entrepreneur

Successful entrepreneurs usually have a number of common
characteristics, in that they:
23
⚫ Have the initiative, drive and ability to identify and

take advantage of opportunities;
⚫ Are single minded, willing to take on ideas and
unconventional views;
⚫ Can operate in a zone that takes on ideas that may not
be popular with established views and perspectives;
⚫ Are creative leaders, ready to disrupt the status quo;
⚫ Are always looking for opportunities to improve and
expand their businesses;
⚫ Are determined to implement their vision and ideas to
achieve their goals;
⚫ Thrive on change and cope well with risk and uncertainty;
⚫ Know how to identify and evaluate risks and are willing to
take calculated risks, while accepting responsibility for both
profits and losses;
⚫ Can organise people, strategies and technologies to fit
changing environments;
⚫ Are creative problem-solvers, understand the decision-
making process and enjoy making decisions;
⚫ Establish strong partnerships and other relationships and
work well with other people;
⚫Are innovators who are always looking for better and more
profitable ways to do things, which is particularly important
in the face of strong competition and a changing market
environment;
⚫ Are honest and trustworthy, but often highly
demanding and singularly focused (they are not always
good team players); and
⚫ Are eager to learn and keep themselves informed
about the latest developments and trends in the
agricultural environment.
It is important to mention that determination and optimism are
a true entrepreneur’s main features. Although planning,
market analysis and market opportunity identification
(MOI) are
necessary parts of starting an enterprise, real entrepreneurs often
do not wait for the results of these analyses to see whether they
should launch their new idea: they see an opportunity and they
jump in.
24
Innovator: An individual who is known for creative thinking

and for introducing new methods to existing processes and ways of
doing things.
Market analysis: The study of a market in order to determine
the attractiveness of the market in a particular industry and to
understand the opportunities and threats in the market as they
relate to the strengths and weaknesses of an enterprise.
Market opportunity identification: A systematic, participatory
method for collecting market information to identify and select
products and services for investment and agripreneur development.
Examples of some individual farmers as

agripreneurs
Mr Srikanth Mannam is a retired Air Force officer living near
Hyderabad. On leaving the Air Force he decided to set up an
Organic Dairy Unit of indigenous cows, focussing on A2 milk
properties (A2 type of beta-casein protein rather than the more
common A1 protein commonly found in regular milk). This milk
is free from antibiotics. This agripreneur has targeted a
premium market and is selling branded milk, at a premium
market price.
He is ahead of his counterparts in the region who continue
with conventional milk production.
RAS Options: Mr Srikanth Mannam was supported
in developing his business through the Agri-business
Incubator established by the National Academy of
Agricultural Research Management (NAARM), which is an
outreach organization of the Indian Council of Agricultural
Research (ICAR) in Hyderabad
Mr Amar Singh, shown in Figure 4, is a pig farmer who maintains
400 pigs of various breeds and he is selling piglets at the age
of 2 months for approximately for $40/piglet. He has annual
sales of 800 piglets with a net annual income of approximately
US$20,000.
25
RAS Options: Mr Singh was trained by Krishi Vigyan Kendra

(Farm Science Centre) of ICAR- IVRI. The centre is now working
with Mr Singh to train other farmers in upgrading their piggery
businesses. The agripreneur becomes the catalyst for change.
Figure 4: Mr Amir, his farm and his pigs

Mr Karamvir is a cow breeder, who has become a millionaire, not
through selling meat, but by selling semen of his prize winning
bulls as shown in Figure 5. This farmer has developed a high
quality genetic stock and a state-of-the-art farm and
facilities
where he is able to collect semen and store it safely. The
semen is diluted scientifically from each session and he is
able to make 500 to 600 doses for sales to surrounding
farmers. He sells a single dose, preserved inside plastic
straws and stored in liquid nitrogen containers, for Rs 300
(US$5)
RAS Options: Extension wing of ICAR- Central Institute for
Research on Buffaloes helped him to develop semen collection
and marketing infrastructure and now the field agents refer their
farmers to Mr Karamvir’s farm to improve the genetics of the
cattle in their herds.
26
Figure 5: Mr Karamvir and a prize bull

Remo Pedon is the CEO of the Agricultural Commodity Supplies
firm (ACOS) which is a joint owned Italian/Ethiopian company set
up in 2005. The company established a modern bean processing
centre at Adama City in Ethiopia. This company aimed to supply
high quality beans into the canning factories in the United
Kingdom, rather than selling beans to wholesale traders in
Ethiopia, and exporters who supplied low value markets in
the Middle East.
The target markets for the bean sales were as follows:-
⚫ Bean Canning markets – export (70%)
⚫ Local food markets – local (15%)
⚫ Local Feed markets – (15%)
ACOS buys beans from approximately 20,000 farmers and may
in the future invest in a farm to produce its own beans, to
maintain supply to the processing factory.
There were many challenges in establishing a new market for the
Ethiopian bean sales. The first being access to access to sufficient
27
volumes of quality beans. To access larger volumes the company

worked with local NGOs to set up regular meetings between the
farmer groups and the sales team from ACOS. Over 2-3 seasons,
these groups developed improved relationships and this led to
higher volumes being sold to ACOS. ACOS also were able to
explain to farmers, that the quality of the beans was critical to
being able to access the premium markets and this meant that
farmers should not store on farm where the beans were infested
with bruchids.
In addition to the farm to factory challenges, the company also
faced problems in getting the produce to port, which was 1000
km away and maintaining fumigation all along the distribution
points.
As with all trade operations, having sufficient capital is a major
restraint to procurement, but having the Italian partners, enabled
the factory to access sufficient levels of funds to support the
buying.
RAS opportunities:
⚫ Improved genetics: The Government researchers were able to
work alongside the processing firm and the farmer groups to
introduce new, higher yielding varieties for farmers to test
and grow for sales to the factory.
⚫ Financial services: Catholic Relief Services, (CRS)
the NGO who were supporting a value chain project
on white pea beans in the Rift Valley, were able to
work with local micro-finance institutions, to offer a
loan instrument, which enabled farmers to buy seed,
and repay at the end of the season.
⚫ Famer Organization: The NGO sector worked with the
Government extension teams to strengthen farmer groups
to multiply seed and also to bulk grain for sales to ACOS.
⚫ To supply quality beans in groups
⚫ Upgrading Trade storage: CRS also worked with the major
traders, who linked small traders and farmers with the
factory, to provide basic standards for the storage of
beans at the warehouse, to reduce damage from pests
and disease.
28
Note in all these examples, this is not business as usual!

Agripreneurs pose a challenge to many extension agents,
especially those who focus on the traditional approach of giving
lessons on basic capacities.
When working with extraordinary farmers and business owners,
the Rural Advisory Services (RAS) have to be extraordinary if
they are to be relevant and helpful to agripreneurs. Working
with agripreneurs is a learning partnership! Sometimes the
extension team will lead and sometimes the agripreneur will
lead.
To remain relevant, RAS cannot rely on production advice to play
an effective role, extension agents who work with agripreneurs
will need new skills and attitudes to support business owners
working in value chains. Most extension agents will need to
upgrade their technical, business and soft skills training to
become enterprise advisors.
New extensionists will need to work alongside agripreneurs
to help design, foster and mentor new business models
that transform value chains. Extension services should use
their resources strategically, as the aim is to speed up agri-
transformation process and create growth and
employment.
Complete Activity 1.1 in your workbook.

29
Who are the agribusiness service providers?

Extraordinary farmers and business leaders, seek extraordinary
agro-enterprise service providers. These agribusiness service
providers can be public or private. Many are fee based and
they generally offer specialised services which can rapidly yield
value to their clients.
What types of services do agribusiness providers

offer?
Business mentors: Farmers generally know how to produce
crops and raise livestock, what they want to learn is how to
improve their farming business skills from long-term business
mentors, who can advise them on how to make investments to
improve existing enterprises.
Marketing experts: agents who can work with farmers to
identify new markets to explore.
Production experts: Specialists who can provide information on
how to improve productivity
Technology experts: Specialists who can support rapid
innovation in technology options
Postharvest handling experts: Specialists who support
value addition
Financial services: agencies who can advise on the
most appropriate financing method
Value chain specialists: who can work on ways to
strengthen investments across a value chain
To support this new type of client, RAS will need to develop
new approaches and working relationships where they can
engage with agripreneurs. There are a range of possible
strategies, approaches and methods that can be used to
support agripreneurs. These approaches often use pluralistic
models that combine free and fee-based RAS business services
to foster
30
agripreneurs through various stages in their development. Some

examples of ways to support agripreneurs are listed below.
Agripreneur workshops
Agripreneur workshops design training sessions that work with

combinations of agro-enterprise agencies, investors, production
experts and marketing experts. At these workshops, service
providers can work with different types of agripreneurs on specific
aspects of their business models. For example having specific
topics around key issues such as product development, marketing
strategies, book keeping, investment management and how to
grow the customer base.
Agripreneur competitions
RAS agencies can sponsor enterprise competitions, where the

best business plans are funded to a specific level, or winners
enter into training programs that helps agripreneurs to plan
and launch their businesses. This is a useful way to help
identify
the promising agripreneurs and filter out the business teams
who have most promise for growth and continued growth and
investment.
Agripreneur incubators
Capacity building programs that enable RAS providers to

identify agripreneurs and work directly with agripreneurs.
Incubators take on different approaches depending
on the type of agripreneur that is being selected for
support. Once a cohort of agripreneurs are selected the
incubator teams can provide specialized assistance in helping
to identify new markets, strengthen business models, provide
training in key areas of business management, book keeping and
brokering business relationships.
Agripreneur accelerators
Short term booster services that work with agripreneurs to
31
fine tune specific parts of a business model. The Santa Clara

University in California runs booster courses to help agripreneurs
launch, maintain and upgrade new ventures.
Agripreneur mentoring/coaching services
Once agripreneurs have launched their businesses, these

services provide occasional support as required to maintain
business focus, competitiveness and innovation. These types of
services are often provided by networks of investors or
agripreneurs who have the experience to diagnose weaknesses
in existing firms and find ways to work with the business teams
to address these issues.
Informal Youth Incubators
There is a growing realization that more needs to be done

to motivate younger farmers to enter the agricultural
sector.
Attracting youth agripreneurs and especially highly skilled youth,
into working the land requires RAS to provide new thinking and
one of the options that is being tested include
Business basics courses for Youth
To address the concerns around increasing migration of youth

from rural areas into low paid or unemployed situations in
urban centres, Government and development agencies
are explore methods to support rural youth business
training courses. These short, but intensive courses aim to
bring together small teams of youth or individuals and
give them a crash course in basic business management.
This
help the clients to visualize a business idea and then over
a period of 1-5 weeks to gather information to develop a
basic business plan.
These plans are regularly monitored by business advisors, who
help the youth teams to develop viable business options and also
learn the most essential book keeping skills, such as cost ledgers,
receipt books, revenue ledgers and then develop basic cash flow
32
information. These book keeping skills are complemented with

skills training in production, use of improved, or more effective
technologies and the basics of how to sell and maintain business
relationships.
At the end of the business training period, the business plans are
typically presented to an advisory panel, who make decisions on
whether the individual or group are ready to take on a loan of
$50-$500, depending on the type of business being developed.
At the business launch stage, the credit is often disbursed based
on initial needs with subsequent disbursements being given
based on milestones that need to be achieved. The progress of
the agripreneurs is then mentored for an additional 5-10 weeks
to help get the businesses on their feet.
Formal Youth business incubators
More formal training is given through incubators, such as the

youth agripreneur incubator being run by the International
Institute of Tropical Agriculture in Nigeria. This incubator
offers more specialised training over a 6-18 month period,
which enables youth agripreneurs to learn and hone their
business skills. These types of incubation approaches are high
cost and so there are currently few of these in operation. The
types of training they offer includes:
⚫ Business training;
⚫ Market gap identification;
⚫ Developing products and Pilot testing;
⚫ Business plan development for investors;
⚫ Loan preparation;
⚫ Launching the business;
⚫ Coaching and Mentoring; and
⚫ Cohort management.
33
Matching clients with market opportunities

If RAS is to provide inclusive agribusiness services to all types of
farmers, then we must find ways to identify and target specific
types of clients and then identify specific business opportunities
with them. Matching clients with appropriate markets is a skilful
process and it takes trust and judgement to know how much risk
farmers/business owners should sensibly take on.
Risk analysis tools

The Ansoff matrix is a simple way to assess levels of risk that
certain business opportunities offer. In Figure 6, the least risky
businesses are those which focus on market penetration and are
essentially selling more of an existing product into an existing
market.
Figure 6: Ansoff matrix

The most risky businesses being those which sell new
products into new markets. Depending on the clients,
business advisors can work with clients to make informed
decisions about the level of risk they would like to take
on.
Risk assessment questions

When talking with your agripreneurs, it’s also helpful to review
the following questions:
⚫ How much money is needed to start the business?
⚫ How long until first payment?
⚫ How long to break even?
⚫ How long to profitability?
34
The answers to these questions are important, as the extension

agent can judge whether the responses match the means and
ambitions of the client and if the match works.
Figure 7: Pathway diagram

Catholic Relief Services uses the graphic in Figure 7 to gain an
idea of where farmers are on an economic scale within their
communities. Based on where farmers fall in this pathway
diagram, field agents can assess the types of risk that
farmers want to take on and the levels of
investment that they have to set up and maintain
their business operations.
Recover: These are established farmers, who are
either recovering from a major shock or who face regular
shocks, these farmers are often dealing with chronic poverty.
Farmers in this category often struggle with basic food security.
They have limited land and often limited access to water and
they only sell into markets when they occasionally have surplus.
This is the largest segment of farmers, in developing countries,
they are often described as net buyers, as they do not produce
all they need to support the food for their families. Given their
high level of vulnerability, these farmers have a high level of risk
adversity,
35
nevertheless, there are potential agripreneurs in this segment and

RAS can help to identify the innovators and work with them to
build their business options.
Build: Farmers within this category, are more stable, generally
have more assets but are lacking in a number of skills areas,
which would enable them to use their assets more productively.
This group of farmers have more regular engagement with
markets and may be actively seeking farmer groups to join, so
that they can upgrade their farming systems.
Grow: These farmers are often the most progressive farmers
within a community. They already have productive assets and
are regularly engaged with markets. However, they may not
have access to new technologies and often lack critical business
and marketing skills that could enable them to significantly
raise their business capacity. These farmers are prime clients
for agripreneurial support and they can play strong leadership
roles within communities, helping to raise opportunities for
their neighbours and farmers within cooperatives.
Off farm Agripreneurs: In addition to the different types of
farmers, there are other potential agripreneurs who live and work
in rural areas or are associated with a particular value chain.
These are aggregators, food and feed processors and service
providers that also seek knowledge and advice in how to
develop business ideas and invest in agricultural markets.
Type of agripreneur clients

This section will take a more in depth review of the types
of clients that an extension may need to work with to
achieve inclusive agripreneurial support services.
Smallholder Agripreneurs
These smallholder farming families typically have 2-3 acres of
land and mainly farm for their home needs, with some sales into
markets. These farmers make up the bulk of smallholder
farmers. Within this group of farmers there are a few exceptional
farmers,
36
and some budding agripreneurs, who in addition to growing basic

grains, are also producing some high value products, such as
spices, wood, fruits, nuts, vegetables, honey livestock, they may
also do some basic processing in areas such as special foods,
drinks or fabrics and by selling these higher value products, they
can develop very successful micro-businesses.
These smallholders however, need considerable support to
transition from farming for the family to farming as a business.
Although these farmers have fewer assets and make lower
investments, the transition towards being an agripreneur uses the
same methods and skills as it takes to transform a larger farmer.
The key for the extension agent is to identify the best in class
farmers and foster the ambitions of the most innovative
producers and help them grow into local business people. Figure
8 shows the interventions and constraints for smallholder
farmers.
Figure 8: Smallholder farmer constraints and interventions
37
Development horizons for vulnerable smallholder

farmers
The development prospects for land constrained smallholders

in poor countries with conventional extension approaches are
limited. Even with significant gains in technology, most of
these
farming families have insufficient land to become middle income.
Investments in this social segment should aim to support stability
and resilience as rapid growth is unlikely in most cases. These
farming families can however, achieve transformational change
across generations. Improvements in food security and modest
improvements in market linkage, will enable more of these farmer
types to educate their children, so that they have better
prospects in off-farm activities.
Increasing production of staples is unlikely to provide major
changes in income, as production levels are limited by land area
and labour and grains are generally low value products. However,
production gains will reduce hunger and levels of food buying
as famers shift from net buyers to market neutrality and limited
surplus for sales.
Support to market linkage will improve aspects of collective
marketing and powers of negotiation with buyers. This category
of farmers, in prevailing resource and market conditions,
should aim towards increased consistency in earnings and
greater resilience through food and income stability.
RAS role in developing marketing strategies

for more vulnerable farmers
In the first place, the extension agent will need to consider

helping these farmers to improve their food security and social
organization first, to build the capacity to take on additional
upgrading, before embarking on more commercial activities. Due
to their limited land area, it is important for these farmers to
consider commercialization plans that include diversification
in their production. Their business plans should include
incrementally increasing their staple food production whilst
38
investing in small plots for higher value products and or small

livestock options.
Off-Farm incomes: Farming families working on small plots will
increasingly need to make ends meet through access to other off
farm incomes. Some of these will be agricultural in nature, others
will require non-agricultural work and in many cases business
options will include periods of migration, for short and longer
durations.
By helping farmers to upgrade their farm plan, extension
agents can help farmers to develop a clear vision for their
farm businesses. Improved organisation can help farmers to
realize
economies of scale and support business planning and marketing:
⚫ Production gains: Identify specialized markets and link
farmers into growing supply chains.
⚫ Market linkage: Focus lower risk, producer to first link buyers.
⚫ Income Diversification: Poor farmers cannot rely on a single
value chain, they need a mix of products to stabilize cash
flow.
⚫ Increased staple food production, (food security first).
⚫ Market identification.
⚫ Product diversification.
⚫ Stable cash flow.
⚫ Slow asset accumulation.
⚫ Improved family nutrition.
More commercial farmers

For smallholder farmers, with 2-10+ acres of land,
their asset levels allow them to develop more
extensive business plans. With larger areas of land to
test new
technologies these farmers are often termed progressive
farmers. These farmers have assets, skills and ambition, but
are often limited by access to new technologies and services
which would enable them to transform their existing assets to
economically productive assets. These farmers are interested
to
take on new ideas and are often interested to join groups of other
farmers with commercial ambitions.
39
Prospects for farmers with land and labor assets that they are
unable to use effectively can change relatively quickly when given
the opportunity to link with higher value or higher volume
markets. These farmers are likely to show gains in productivity
when exposed to better genetic materials and improved
production technologies. However, they need to be able to sell
their surplus if they are to make gains on their investments.
There are numerous cases, where growth, in higher value crops
for urban domestic markets are providing farmers with stable
income gains. Figure 9 shows the constraints these farmers have.
Figure 9: More commercial farmer constraints

Given their ability to expand production and productivity,
gains by this segment of the farming community can
rapidly go beyond reducing hunger and shift towards increasing
surpluses to bulk sales of key staple and cash crops. As these
farmers can benefit from economies of scale, they are more able
to rely on a less diversified market strategy, as they can raise
their incomes through greater specialisation in value chains to
provide growth in their incomes.
40
Role of RAS
Support farmers in market analysis to enable farmer groups to

identify and secure new business opportunities. Expose farmers
to the use of new technologies, such as new varieties of existing
crops, to increase on-farm productivity. Improved financial and
business planning skills to support more systematic farming and
work with farmers on basic cost and revenue book keeping so
that they can track their profitability.
Work with farmers in collective marketing groups to help
aggregate produce for sale to target buyers. Identify
better market linkage options and more reliable buyers, to
enable farmers to grow farm their enterprises and increase
sales to target markets. Raise women’s roles in
management and
marketing, especially when many of the men are engaged with
migratory work.
Business for Farmer Groups

Examples of methods for farmer organisation in market linkage
include:
⚫ Farmer group management;
⚫ Financial skills and access to credit;
⚫ Linkage to agri-dealer networks;
⚫ Value chain support within the chain;
⚫ Collective marketing;
⚫ Agent networks; and
⚫ Community fee-based service providers.
Beyond the farm
There are a growing number of agripreneurs and firms, who

are more focused on value addition and processing rather than
production. These agripreneurs may have land and some may
farm, but they generally are seeking value addition options
and
supplies of goods from other farmers to support their processing
activities
These agripreneurs are interested in accessing suppliers from
41
other farmers and investing in technologies that will enable them

to access higher value markets.
Example 1: Karite Oil Ltd.

Karite Oil is a shea processing company based in central Nigeria.
They buy shea nuts from women’s groups living in Northern Nigeria
and bring them to their factory in Ondo State.
Whilst there is a robust market for shea oils in Nigeria, the company
is targeting the export market in confectionary and cosmetics.
Shea is not commercially grown, but the nuts are collected through
women’s groups who collect the nuts as they fall from the trees. The
company aims to work with at least 6,000 women collecting shea
nuts to supply their factory.
Key challenges:
⚫ Logistics/transport
⚫ Quality of shea
⚫ Availability of trade finance
⚫ Sufficient supply of raw materials
⚫ Cost of staff in field for training
RAS opportunities:
⚫ Improved market analysis
⚫ Production upgrading at Factory
⚫ Training for women’s groups –
⚫ Business skills and
⚫ Financial management to meet Investor requirements.
There are different levels of farmers, but all can engage

in agripreneurship. Smallholders that are limited by land
size need to focus on a full farm plan that is diversified.
Smallholders with more assets may be able to take on more risk
and can specialise in a few value chains.
Off farm agripreneurs, or those who add value to produce,
may be seeking ways to link to more lucrative or higher
volume markets. RAS needs to identify the type of client and
then find ways to match markets with their risk profiles

42
Session 1.2: Criteria for a successful

business
Session outcomes
⚫ Identify the different business types;
⚫ Identify and analyse the cost of resources needed
to start a business;
⚫ Identify the risks involved in starting a business; and
⚫ Discuss free services versus fee-for-service methods
for business upgrading.
Introduction
In agriculture, the criteria outlined in Figure 10 are generally
regarded as essential to a successful business:
Capable farmers
with skills, capacity and New business
organisation models
Willing buyers
Favourable with adapted private
environment sector policies
with favourable public
policy and donors
Figure 10: Agripreneurship criteria
43
Then to:
⚫ Product management involves selling a product that holds
unique benefits to customers (i.e. a benefit that they
cannot find anywhere else);
⚫ Marketing is one of the key elements in
Marketing:
business success, in that it coordinates
The process
the efforts of ensuring that the product
responsible
actually reaches the customers by
for identifying,
coordinating product, price, place
anticipating
(distribution channels) and promotion;
and satisfying
⚫ In order to achieve business success,
customer
the enterprise should have a strong
requirements
reputation with its customers;
profitably.
⚫ Sales are the lifeline of any business
Reputation:
and, in order to achieve success, a
The beliefs
business should focus on setting
or opinions
objectives for increasing sales to regular
that
customers, attracting new customers,
customers
increasing
generally
or improving distribution strategies and
hold about a
opening new possibilities;
business, its
⚫ Even if a business has a great product
products and
and a solid customer base, it still has to
services.
manage its finances properly, in order
to achieve business success. This
includes compiling the following financial statements and/
or documents:
◦ An annual budget;
◦ Regular cash flow statements;
◦ Regular income statements; and
◦ Profit and loss statements.
Budget: A financial document that gives the estimated future

income, costs, expenses and resources of a business for a particular
period, e.g. a year.
Cash flow statements: A financial report that gives information on
the cash generated and used in operations, investments, financing
and supplementary activities, such as income tax and interest.
44
Income statements: A financial statement that shows the

profitability of a business during a particular period.
Profit and loss statements: A financial statement that
summarises the income, costs and expenses of a business during
a particular period in order to provide information on the ability of
the business to generate profit by increasing income or by reducing
costs.
Profit and growth relate to the generation of wealth and are

often used as the main criteria for the performance and success
of a business; No business can be successful unless it achieves
customer satisfaction. To support long term operations, a
business owner has to ensure employee satisfaction as far as
possible because it influences the performance of employees. A
business owner’s ability to continue the business, while
maintaining growth for an indefinite period is a crucial
requirement for maintaining a competitive advantage and
continuous business success.
Customer satisfaction: A term that is often used

in marketing and that points to the extent to which
the products or services of a business meet or exceed
customers’ expectations.
Employee satisfaction: The extent to which employees
are happy and content in their jobs or in their positions in a
particular business.
Competitive advantage: The factors that allow a
business to differentiate its product(s) or service(s) from
those of its competitors in order to increase its market
share.
Elements to consider when starting a business

When an entrepreneur starts a new business, there are a number
of elements that they need to consider, including:
45
⚫ The type of business they want to establish;

⚫ The amount of money involved in starting a business;
⚫ The costs of getting into the business;
⚫ Time for first income and time to break even;
⚫ The potential profit that the business may generate;
⚫ The location of the business;
⚫ The number of employees that may be needed; and
⚫ The market where they will be selling their products.
The main elements to consider when starting a business are
discussed in the following sections.
Identifying the type of business

The first element to consider is the type of business that the
agripreneur wants to establish. The types of business that the
agripreneur may consider are working as an individual and as a
partner within a farmer organisation or group. These business
types are outlined in the following sections.
Single ownership (Individual ownership)
Single ownership is the simplest

business form. It is a business that is Single
owned and ownership: A
controlled by one person (individual) business that
or with their family. In is owned and
agripreneurship, this would be the controlled by
farmer and/or one person—the
their family, a trader, processor or a owner (producer
retailer. or trader).
The main characteristics of single

ownership are:
⚫ The business is owned and managed by
a single individual or family;
⚫ The single ownership is not a legal identity, which means
that it has no existence separate from the single
(individual) owner;
⚫ Although he owns and controls everything himself, the single
trader may employ paid workers to assist him;
46
⚫ The owner receives all the profits of the business;

⚫ The owner is also responsible for all the debts and taxes of
the business; and
⚫ Because the owner represents the legal identity of the
business, there are no other legislated structures and
positions involved in the single ownership.
Organised farmer organisations
Smallholder farmers, who operate as individual ownerships,

generally receive poor market prices for inputs, services and
produce sales, particularly farmers selling lower value field crops.
One of the most important reasons for farmers working together
in groups is that it enables them to come together and enjoy
the benefits of economies of scale, so that they can compete
more effectively with larger farmers. Farmer
groups or organisations can plan together Economies
and, for example, buy inputs at a lower of scale: The
cost through bulk procurement. Farmers cost advantage
can also use their economies of scale in resulting from
groups and cooperatives to support bulk an increased
sales of aggregated goods, so as to access output of a
better unit prices, higher volume and product.
higher value markets.
Identifying resources
A resource can be regarded as any physical entity that is
required to carry out a particular task, activity or project,
e.g. materials, money, people, equipment or facilities.
In this way, it is possible to distinguish between financial
resources (e.g. cash and investments), physical resources
(e.g. land, animals, water, buildings, facilities, machinery, tools,
equipment and vehicles), human resources (workers) and
information resources (e.g. internal documents and procedures).
The type of resource that you as the extension agent will identify
relates to the farming business, the farm product, business
processes and the goals and activities involved in the business.
47
Once you and the agripreneur know which resources they

will need to start the business, you also need to analyse the
costs involved in the identified resources.
Analysing the cost of resources

The best way of analysing the costs involved in the identified
resources is to inspect all the information about the resources.
This is often referred to as the cost of production. The following
process can help you identify, analyse and prioritise resources:
Step 1: Visioning
Visioning: A
Identify all the possible costs and benefits group discussion
of each resource by: that is conducted
⚫ Listing all the activities that have to be in order to map
performed from planning, production, out a situation or
post-harvest and getting the product process and use
to market; the information to
⚫ Allocating costs to each of the identified produce solutions
activities and resources; and to problems or
⚫ Identifying the benefits of the resources develop new
listed. ideas.
Step 2: Prioritise resources by comparing costs

and benefits
It is important to compare the value of costs to the

value of benefits and to use this analysis to prioritise
resources. This is done by calculating the total costs and
total benefits and compare the two values to determine
whether the benefits outweigh the costs.
After analysing the cost of your resources, you can further
prioritise your resources in terms of advantages and
disadvantages.
48
Evaluating the identified resources

After the activities and resources have been identified and
analysed and then prioritised, they will have to be evaluated
according to the contribution they will make towards achieving
the business’ goals. The following questions will help you as the
extensionist evaluate the resources available to the agripreneur
to determine the potential competitive advantage they would
give:
⚫ Is the resource valuable to the business? Will this resource
provide a competitive advantage to the agripreneur? For
example, will a new type of seed improve yield?
⚫ Is the resource easy to find or gain access to? For example, is
a tractor available to smallholder farmers?
⚫ How well is the agripreneur organised? If it is being run
by a farmer group or cooperative, are all the members
in agreement and do they all understand their role in
the enterprise?
Once the resources have been clearly identified, the agripreneur
has to be organised around these resources to make sure that
they are used effectively and efficiently. One this has been done,
the next step would be to identify the risk issues involved in
starting the business.
Identifying risks
A risk is anything that may lead to loss, damage, danger
or injury. There are four major types of risks: financial
risks, operational risks, reputational risks and employee-
related risks.
Financial risk
Financial risk refers to the money flowing in and out of the farm
enterprise and the possibility of a financial loss occurring. For
example, if a large part of the farmer’s income comes from the
sales of a single crop and that crop fails, the farmer will run a
high financial loss. If the farmer cooperative is selling to a single
large customer and that customer buys elsewhere, the enterprise
49
runs a high financial risk. If that customer is unable to pay or

makes a late payment for whatever reason, then the enterprise
may face serious financial problems. If the enterprise has a great
deal of debt, it will run a high financial risk.
Examples of financial risks include:
⚫ External economic pressure which may lead to changes in
currency values, which, in turn, affects the import of inputs,
such as fertiliser and agro-chemicals and also affects the
prices for export goods, such as coffee or cotton;
⚫ Loss of a key supplier or a key customer;
⚫ Increase in production or operational costs; and
⚫ Increase in lending rates, bank charges and interest rates.
Operational risk
Operational risk refers to an unexpected failure in production or

the business, which may be caused by:
⚫ A climatic effect that leads to crop failure, low yields or animals
losses due to drought, pests or disease;
⚫ Storage infestations leading to major losses in quality; and
⚫ Problems at a key processing stage.
Operational risks may also be caused by external events, which
are beyond the farmer’s control such as a natural disaster or
political unrest.
Employee-related risk
The workers in the farmer’s employ may also cause risk

in the business, for instance:
⚫ Seasonal labour not being available at the right time,
such as at harvesting;
⚫ Lack of knowledge and/or training;
⚫ Employees providing poor customer service;
⚫ High staff turnover; and
⚫ Theft.
50
Customer service: The process of ensuring customer

satisfaction with a product or service by taking care of customer
needs and providing professional and helpful assistance to the
customer.
Staff turnover: The number of permanent employees who leave a
business within a reported period versus the number of actual active
permanent employees on the last day of the previous reported
period.
Reputation risk
The reputation of a business is linked to the beliefs or opinions

that customers generally hold about a business, its products and
services. Reputational risk may occur if the enterprise is seen
as unreliable in terms of being unable to meet the quality and
volume needs of buyers, not honouring contract agreements,
selling to alternative customers at the last minute, and not
repaying loans. These types of activities and decisions can lead
to negative publicity about the business, criticism of the quality
of the products and, in some cases, legal action.
If the reputation of the enterprise is damaged, it may result
in a loss of income, as customers will hesitate to buy from the
business. Suppliers may also start to question the business
and offer less favourable terms.
Free service methods and fee-for-service

methods for business upgrading for
farmers/farmer groups
Because the budgets for extension services have been cut in
several countries, other options and approaches to these
services have been explored. These options include structural
changes and financing alternatives, and fee-for-service methods.
As a result of alternative financing approaches being investigated
and implemented, terms such as private extension services, paid
extension, commission agents and commercialised extension are
51
being used to refer to the emerging fee-for-service extension

services.
There are different types of fee-for-service methods, depending
on the local physical, economic and institutional conditions
involved in a particular agriculture sector. For example, in
developing countries, the following types of fee-for-service
methods have been implemented:
⚫ Direct contracts between governments, local authorities and
private consultants to provide extension services for a limited
period (for example, in Uganda and Nicaragua);
⚫ Direct contracts between governments, local authorities and
private consultants, which include payment rates based on the
producer’s’ income level (for example, in Chile, Mexico and
Columbia);
⚫ Direct agreements between producers and extension services
in which payment is calculated in terms of crop or profit share
(or example, in Ecuador);
⚫ Tradable extension vouchers that are funded and awarded
to low income farmers by government, based on certain
criteria (for example, in Costa Rica);
⚫ Direct contracts between farmer Para-vet
groups and extension services and extension
other experts (for example, in Kenya, agent: A local
Nigeria, Argentina and China); service provider
⚫ At source payments made that provides
between farmers and para- basic frontline
vet extension agents who medical services
offer advice and veterinary for farm
services, (for example, in animals, in most
Kenya and throughout Africa); cases diagnosis
⚫ Direct instalments paid per training for common
session to local community-based pests and
private service providers, who train diseases and
farmers in NGO-managed capacity sales of
building courses for basic financial medical/veterinary
services and marketing services, (for products.
example, in Malawi, Zambia, Kenya and many others in Africa);
52
⚫ Mobile phone based payments paid by farmers to service

providers, for regular advice for key products in terms of
tips and access to experts, (for example, in Ghana,
Kenya, Malawi); and
⚫ Mobile apps linking farmers to services such as tractor use
and transport of farmer goods (for example, in Nigeria).
In developed countries, the following fee-for-service methods are
applied:
⚫ A combination of funding options via direct payment by
farmers and contributions by agricultural organisations (for
example, in France);
⚫ Charge on a time-cost basis for certain services (for example,
in the United Kingdom); and
⚫ Negotiated fee per an agreed, project-based activity
performed by the extensionist (for example, in Queensland,
Australia).
Investigative studies undertaken in a number of countries have
identified the following key characteristics of farmers’ willingness
to pay for extension services:
⚫ Gender of the head of the household: The fee-for-service
requires sufficient resources (e.g. land and livestock), which
women farmers often do not have and, therefore, men
appear to be more willing to pay for services;
⚫ Leadership status of the farmer: Farmers with higher
social status in their communities are more willing to
participate in fee-based extension services;
⚫ The use of credit: Farmers with access to credit are
more willing to pay for their extension services;
⚫ Exposure to mass media: It has been determined
that farmers who listen to the radio were more
easily
convinced to take the option of fee-for-services models;
⚫ Age and experience of the farmers: Experienced farmers
in their thirties and forties are willing participants in fee-
for- service models;
⚫ Education background: Farmers who learn more from formal
education interpret and understand information better and
manage their farms better on a fee-for-service basis;
53
⚫ Family size: It is generally farmers with a smaller family size

who are willing to consider the fee-for-service approach;
and
⚫ Land holdings and farm income: Farmers with bigger
farms and higher income are willing to pay a fee for
extension services and support.
54
Session 1.3: Evaluating entrepreneurs

(clients)
Session outcomes
⚫ Determine the reasons and motivation for a farmer/
farmer group wanting to be an entrepreneur, or invest
in a collective enterprise;
⚫ Assess client readiness to take on a business approach;
⚫ Identify the main business opportunities in a
farmer’s location;
⚫ Design a farm plan for individuals; and
⚫ Design a group plan for farmer groups and cooperatives.
Introduction
In this session, the reasons for farmers wanting to be
entrepreneurs will be investigated and their readiness to be
entrepreneurs will be assessed. After identifying the main
business opportunities in a particular location, the design of
individual and group plans for farmers will be outlined.
Identifying reasons and motivation for

becoming an entrepreneur
Farmers may want to become entrepreneurs for different
reasons, such as being able to take control of their own
lives and building a successful business. Establishing a business
requires a clear vision of the opportunities and goals, a great deal
of commitment and the willingness to master numerous skills.
Therefore, any entrepreneur or farmer organisation needs to fully
understand their reasons for starting or upgrading their business.
55
To identify the reasons why your clients want to become

entrepreneurs, you may start by asking them the following
questions:
⚫ What is the driving force behind your wish to set up a new
business?
⚫ Do you know exactly what your business will do?
⚫ Will you be making the most of your strengths?
⚫ Can you make decisions and work well on your own?
⚫ Will your business make enough money for you?
The reasons for becoming an entrepreneur or establishing an
agripreneur are generally identified in four main categories:
personal satisfaction, financial gain, independence and self-
fulfilment. These are based on the type of reward that they
believe results from being an entrepreneur, as shown in Table 2.
Table 2: The rewards of entrepreneurship
Nature of reward The entrepreneur

Personal satisfaction Wants to do something different
and wants to choose his/her own
way of doing things and making a
life.
Financial gain Sees an opportunity to make a profit by
starting his/her own business enterprise.
Independence Seeks the opportunity to make his/her
own decisions and to set his/her own
targets and standards.
Self-fulfilment Wants to use his/her own skills and
abilities more meaningfully and
profitably.
56
Assess client readiness to take on a business

approach
As an extension agent, it is important to make sure that your
clients are ready to undertake the challenges and demands
of entrepreneurship. Farmers who decide to take the route
of agripreneurship, are taking on a business approach to
their farming operations. Therefore, they have to understand
that taking a business approach to farming requires:
⚫ The primary goal of making a profit;
⚫ Decision-making ability;
⚫ An investment in infrastructure that includes elements such
as improved production methods, farming more land,
business management, financial management and mastering
new technology;
⚫ A strong focus on customer needs and requirements; and
⚫ Facing the challenges involved in maintaining and growing
a business.
In order to assess your client’s readiness to take on a business
approach, you may consider asking them the following questions.
Problem-solving
⚫ Do you usually come up with solutions to the problems
in your farming operation or do you turn to others for
help in finding a solution?
⚫ Do you consider the needs of your buyers when
approaching problems in your regular farming
operation?
Facing challenges
⚫ When you fail at a particular task, do you see it as a
challenge to try even harder in order to succeed, or do
you give up?
⚫ When you face a challenge or a difficult situation, are you
committed to finding a new way to succeed?
Approaching money matters
⚫ Do you believe that your hard work will eventually pay off,
even when you cannot see immediate financial rewards?
57
⚫ Do you consider the profitability of a specific product or

the financial well-being of your entire farm operations
when making decisions and solving problems?
Communicating effectively
⚫ Can you easily explain processes and procedures to
your group/cooperative members?
⚫ Can you express yourself clearly when communicating with
suppliers, distributors, buyers and other role players in
your farming operation?
Identifying the market opportunities in your

location
Before entering into any business venture, you, as the
extensionist, need to work with the farmers/agripreneur to
explore a relevant business opportunity. Farmers should look for
the following elements in a good business opportunity.
Elements of a good business opportunity

In order to identify a good business opportunity, farmers should
look for the elements discussed below.
The product meeting a need
The most important element in a business opportunity is

whether the product has demand in the market. When
evaluating a business opportunity, make sure that the
farmers consider the following questions:
⚫ Is there actually demand for the product in the
market?
⚫ Does the product solve a problem for
consumers/ customers?
The opportunity working in a location
Demand and prices change for certain products according to

location. Therefore, farmers must find out how prices and costs
change when selling into different types of market, such as their
local village market or the wholesale market in the next town.
58
Access to resources
The farmers need to decide if they have the resources to take

on the business opportunity, even if there is demand for the
product and the selling price is attractive. As an advisor, you
have to help the farmers determine if they have access to the
necessary amounts of money, information, technology and people
(employees) to enter into the business venture.
Providing the product at the right price
The farmers have to consider the market that they intend to enter
and the product price. As the advisor, you need to ask them:
⚫ Can you provide the product at a price that the market is
willing to pay?
⚫ Will the price attract customers, while still making a profit?
Timing
Timing is a key element when evaluating business opportunities.

Everything has to line up in order for the opportunity to really
work. If the timing is not right, the farmer may want to consider
exploring the opportunity at a later stage.
Methods for identifying business opportunities

The question that every farmer or farmer organisation
who is thinking of starting a new business has to face is
how do you find the opportunity that is right for you? The
following methods may be considered when identifying a
business opportunity:
⚫ Identify a market opportunity: Study the agricultural
market and find out what is in high demand, and when,
and what is in scarce supply and why;
⚫ Explore new markets: Many farmers tend to sell traditional
products into their nearest market. Often farmers can gain
information on new opportunities by visiting other markets,
or larger, more distant markets, or by visiting new types of
markets such as processing companies, poultry or beer
59
factories, rather than only selling into an informal wet

market;
⚫ Matching risk with resources: One of the Wet
key skills of a good business advisor is market: A
to match the risks of a specific market market that sells
opportunity with the skills, resources fresh meat and
and ambitions of the clients. The aim of produce.
business development is not to match the
most vulnerable farmers with the most profitable and volatile
markets. This process of risk assessment is a particularly
important part of the commercialisation process. Farmers may
need help in supplying to the local market or to export markets
and the extension agent needs to match risk with farmer
capacity;
⚫ Identifying customer (buyer) problems: Farmers should
investigate the key problems or issues that their customers
face when buying a product in their market and think about
the ways they can improve on the product or introduce a
better product to the market e.g. selling in bulk rather than
small lots or selling sorted goods rather than selling mixed
quality goods;
⚫The farmer should investigate the key problems or issues
that customers face when buying a product in a market and
think about the ways they can improve on the product or
introduce a better product to the market;
⚫ Addressing the customer’s need for something new: If
there are clear demands in the market, the farmer
may consider the customers’ need for new or
alternative products, e.g. in the food market,
customers have developed the need for all organic
products;
⚫ Considering a growing industry or market: A growing
industry always offers a high demand, which, in turn, gives
the opportunity to establish and grow your business. For
example, in many countries, meat production is increasing—
particularly poultry—but they do not have enough quality
feed which opens the growth opportunity of supplying to the
feed factories;
60
⚫ Deciding on a differentiating factor: Determine what would

make the farmers’ product a better option for their
potential buyers, rather than buying from existing
producers or suppliers; and
⚫ Considering seasonality: The agricultural market is highly
seasonal and, therefore, farmers should explore ways to
expand and raise value in their markets by selling early or
late in the season. Farmers also need to consider ways of
using their farm assets during the off-season.
Designing individual plans for farmers

As extension services adapt to the new, more commercial
farming environment, in which farmers are more focused on
modernising to support their goals in terms of food, finances and
nutrition,
the public and private sector extension agents will need to work
in new ways to meet the various demands of different types of
farmers. In many cases, extension agents will need to support a
combination of individual farmers and farmers in an organisation.
In all cases, the extension agent will need to help these clients
gather information and develop production and marketing plans
based on their abilities and aspirations. For the individual or
family farm situation, the support will focus on how to use
the existing assets, market options and business capacity of
target farmers and find ways to upgrade them.
Extension agents may receive enquiries from larger
individual farmers or they may meet farmers as part
of a farmer organisation who will seek out specific
information to help optimise their farming systems. This
transition to working with both farmer groups and farmer
organisations is apparent in most countries. In some ways, the
balance of individuals versus group support will depend on who
pays for the service.
In Nicaragua, some of the more progressive coffee cooperatives
are providing individual coaching plans to farmers, so that they
can supply the cooperative with high quality coffee but also
develop a long term investment plan to upgrade their farms.
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In addition to assisting with coffee production, the cooperatives

are also keen to help farmers manage their risk by helping them
to manage their soil and water resources, diversify their
production systems to increase their incomes and improve their
dietary options. As part of this upgrading process, farmers need
to gather relevant information, develop upgrading plans for their
production systems and learn basic business methods so that
they can make more informed investment decisions. Figure 11
shows a farm plan, developed with a coffee farmer in Nicaragua.
Figure 11: A farm plan, developed with a coffee farmer in

Nicaragua
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In this case, the extension agent has helped the farmer divide
his farm into parcels of land, each with a specific set of plans,
so that the farmer can work on upgrading one part of his farm
at a
time. This approach helps the farmer to work in smaller and
more manageable steps, while slowly working towards a farm
that is more productive and meets the diverse needs of the
family.
Table 3 outlines the types of steps that an extension agent can
consider when working on a farm family plan.
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Table 3: An example of the steps to create a farm family plan
Management Finances Production Marketing

Create a profile List their Map the Analyse
of the farmer main existing farm the cost of
and include income production production for
their age, land products by plot and main income
size, phone and costs. develop a map product(s),
or contact of the plans compare
number, family for the future values with
members, farm. neighbouring
estimated farmers
annual and identify
income and current
their annual market
investment options.
levels.
List the key Develop a Develop a List the
food/income seasonal seasonal current
crops and the calendar production market
main food of income calendar. outlets and
items that are and costs. prices for
List key
procured on an products.
activities for
annual basis. Analyse
target plots
new market
Create a food and products.
opportunities
balance sheet.
(this can
be done for
individuals or
groups).
Decide
on target
products
and market
options with
the farmer.
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Review and Identify Develop a soil Compare
prioritise key means and water sales options
challenges of access upgrade and as individual
the farmer is to credit/ management versus
experiencing, resources plan. through a
e.g. to support collective
productivity, the marketing
markets, access farming group.
to water, etc. system.
Use visioning Initiate Identify key Link
to map the entry to threats to the production
current a savings production and
situation versus and loan system. marketing
the farmer’s club. plans and set
goals, assets, marketing
skills and goals.
marketing
ambitions.
Develop a farm Enrol the Assess Evaluate
plan with goals farmer in options for market
for the main a financial diversification performance
plots over the education and devise a at the end of
next seasonal process diversification a season.
cycle. and plan.
prepare a
financial
plan.
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Work with Work with
the farmer the farmer to
to prepare prepare an
an implementation
implementation plan with
plan with achievable
achievable steps.
steps based on
the farm plan.
Develop a farm Develop a farm
diary so that diary so that
the farmer the farmer
can follow the can follow the
steps. steps.
Set indicators
for monitoring
progress.
Set baseline
with soil
test, water
assessment
and agronomic
practices.
Establish dates
to assess
performance
and a payment
or visiting
schedule.
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Designing group plans for farmers and

cooperatives
Extension must simultaneously focus on farmer organisations and
on upgrading the management skills of existing structures, in
order to help farmers raise their competitiveness within a market
or value chain.
Examples of methods for farmer organisation in market linkage
include:
⚫ Farmer group management;
⚫ Financial skills and access to credit; Collective
⚫ Linkage to agri-dealer networks; marketing:
⚫ Value chain support within the chain; A marketing
⚫ Collective marketing; approach in
⚫ Agent networks; and which a number
⚫ Community fee-based service providers. of farmers,
producers or
Farmer groups in collective growers work
marketing together to sell
their combined
A study tour organised by the Catholic
crops.
Relief Services (CRS) and the International
Centre for Tropical Agriculture explored how
their
support to farmer groups could be improved in order to
improve market linkage. The study tour discovered that
a common feature of farmer groups who were more
successful in their ability to link with markets was their
ability and drive to acquire and combine five basic ‘skill
sets’. This set of desired skills was common across wealth
levels and locations in the farmer groups.
The skill sets were classified as follows:
⚫ Group management skills;
⚫ Financial skills (starting with internal savings and lending);
⚫ Marketing skills;
⚫ Innovation skills for accessing new technology; and
⚫ Sustainable production and natural resource
management (NRM) skills.
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Most groups proactively sought to develop most, if not all of

these skill sets, even in the absence of external support. This
provides a strong signal to modern extension services that
their strategies could benefit from developing programmes
that address the demand for this set of skills.
The area of innovation is also often limited to ideas of
demonstration plots, but this is a somewhat outdated
top-down approach. Extension systems need to change their
approach to farmer-led experimentation and information
gathering significantly if innovation is to address the highly
diverse needs of farming communities. Instead of demonstration
plots, extension agents, the private sector and farmers need to
work together at learning points, where new ideas in terms of
new varieties, new ways of tillage and new business methods
are tested, assessed and, if effective, adopted by the group.
Demonstration plot: A field or a small area of land that

is used to teach, experiment and share ideas about agricultural
practices, so that farmers and farmer groups can learn, practice and
track the cost of new crops and improved techniques.
Tillage: Preparing soil or land for growing crops.
Farmer organisation to support collective

marketing
One of the most important aspects of a marketing
approach is to help farmers organise and gain economies
of scale, in order for them to compete with larger
farmers. Extension agencies need to help farmers to buy
inputs at lower prices by buying in bulk and then support bulk
sales of the produce to gain higher unit sales prices.
In a typical value chain project, the approach will have an
upgrading package that includes organisation, access to better
inputs, market analysis and the use of improved production
technologies to enhance productivity, post-harvest cleaning and
bulking and sales to an identified buyer. The ultimate goal of an
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extension process is, however, not to do all of these things for

the farmers, but to build the capacity of the farmer organisation
to invest in these methods and develop durable trading
relationships.
The following sections explore some of the farmer organisation
methods being testing and scaled by various extension
services that have successfully linked farmers to markets.
Collective marketing groups
At the most basic level, extension workers can work with

farmers to bring together groups of farmers to learn new
technologies and prepare basic production and sales plans to
produce a specific level of surplus production for sale to a local
trader.
Organising farmers into groups helps in training events and
provides farmers with better negotiating powers at the time of
sale through collective marketing.
Figure 12 provides an example of a flexible approach to combine
produce for sales that can be applied at the local level with less
than 100 farmers. When only a few farmers are involved in this
type of structure, the management can be minimal and meetings
beyond the farmer group unit to agree on sales conditions may
only be required at the start of the season and at the time
of storage and sales. It is important that when farmers
start to associate beyond the primary group, they have
a transparent system for group representation at the
association level, as well as reporting mechanisms
to provide regular and timely feedback to members.
This process can be scaled to include several thousand
farmers, but as the number of associated groups expands,
more effort is required at the second order level to provide
effective and transparent management. Many farmer groups and
cooperatives fail when they become too large.
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Figure 12: Collective marketing organisation
Cooperative support
The classic farmer-based organisation is the farmer cooperative.

The cooperative movement has a long history based on a
more formal arrangement of farmer groups linked to
professional
associations, or second tier organisations. When it has
worked well, the cooperative movement has made
huge changes in the prosperity of millions of farmers.
Cooperatives, through market linkage mechanisms such
as certification schemes like Fair Trade, have
improved long-term trading relations in specific value
chains, i.e.
coffee.
However, the cooperative movement has also suffered from
major problems with corruption and inept management,
particularly those systems where governments were instrumental
in establishing the organisations. Many of these cooperatives
were manipulated for political means, with cooperative funds
being misdirected to support political campaigns at the expense
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of the farmers. Frustration with years of mismanagement and

government interference, often linked to poorly managed
financial arrangements, led many farmers to abandon the
cooperative movement and strike out as lone operators. Even if
working alone reduced their market options, it protected them
from extortion and intimidation.
As the role of governments in most agricultural marketing
systems has declined due to reforms such as the structural
adjustment programmes, farmers have started to return to
more formal farming organisations. However, they often need
considerable capacity building in terms of management and
financial operations and, at the same time, they need lean
management systems to hold down administration costs and to
retain members to show fair representation and effectiveness
in the market place.
Value chain support

Where there is reluctance from farmers to work in
cooperatives, or the lack of farmer cooperatives in key value
chains, modern extension services will need to devise different
systems of organisation that support greater collective action.
NGOs have piloted a number of interim structures that support
better market coordination of farmers.
Important factors in the design of these value chain
structures include the level of maturity or formality
within the chain and the emphasis that is placed on
developing more durable trading relationships with
farmers.
In the example in Figure 13, support from the external
facilitating agency is planted firmly within the supply chain.
In this process, the facilitating agency controls inputs to farmer
groups, has staff hired to play coordinating roles within the
supply chain and manages pack house operations. This type of
support investment method seeks to support rapid integration of
farmer produce with the needs of the buyers.
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Figure 13: Extension support to value chain with fully integrated

support
This type of approach can be very effective in introducing farmers
into a formal supply chain, but the costs are generally high and
can be a challenge to maintain when the project ends. If the
local input services, farmers, traders and processors are not
able to take on these roles at a profit by the end of the
project, the viability of the chain can be compromised. A
modern example of this type of integrated market
support is demonstrated by the One Acre Fund in Kenya
and Babangona in Nigeria.
The One Acre Fund is a NGO that supports smallholder farms

in East Africa by providing agricultural training and asset-based
financing.
Facilitated value chain support

To avoid problems associated with being too heavily involved
within the chain, many external agencies now attempt to
facilitate
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the roles of the chain actors, rather than work within the chain.
In this case, technical advice and training is given to the chain
actors to establish an upgrading process, which is implemented
by the chain actors. The purpose of remaining outside the chain
is to support greater sustainability of the value chain when the
facilitation process ends. You can see an example of this in
Figure 14.
Figure 14: Extension support to value chain as external facilitator
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Session 1.4: Defining the business idea
Session outcomes
⚫ Assist clients in defining their business idea;
⚫ Identify the business gap;
⚫ Define the value proposition;
⚫ Identify and describe the farmers’ customers;
⚫ Outline the key activities involved in the
agripreneur; and
⚫ Test the viability of the business idea.
Introduction
At this point, you should understand the importance of
agripreneurship, the characteristics of a successful entrepreneur
and the motivation for becoming an entrepreneur, the readiness
to take a business approach, the characteristics of a successful
business and the elements involved in starting a business. In this
session, you will learn about the business idea as the first step
in starting a new business venture. You may find it helpful
to study this session along with the elements of a good
business opportunity, as discussed in Session 1.1.
Assist clients in defining their business

idea
A business idea is the starting point for all entrepreneurs.
Defining and expanding a business idea will help the entrepreneur
decide what they want to accomplish, identify the tasks involved
and evaluate the potential challenges and pitfalls involved in the
new business. In their business ideas, entrepreneurs have to:
⚫ Identify products or services;
⚫ Define the market;
⚫ Identify their main competitors; and
⚫ Identify resources.
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Identifying a product or service

Every business relies on a product that is sold to customers and
the business idea has to identify and define that product clearly
and accurately. The extensionist may need to ask the following
questions about the product:
⚫ What product will the enterprise or farming operation be
offering to customers or buyers?
⚫ What are the main features of the product?
⚫ What are the benefits that the product will bring to potential
customers?
⚫ Are there any additional services offered by that product?
Defining the market

Once your client—be it the farmer, a trader or a local service
provider—has decided on a particular product or service, the
market where the product/service will be served must be defined.
The following questions are relevant when defining the market:
⚫ Where is the market? Which value chain? Which city, region,
country or continent?
⚫ Who are the target customers and what are their
characteristics in terms of gender, age, ethnicity,
income, etc.?
⚫ When will the product be sold: season, time of day and
dates?
⚫ What will be the frequency of sales: will the
product be sold at one time, regularly or all year?
⚫ What are the terms of payment: cash on
delivery, cheque, within 60 or 90 days, after
delivery?
In many cases, people use the 4 P’s of marketing to
determine
⚫ Product: What are you going to sell?
⚫ Place: Where will you sell from?
⚫ Price: What price will you sell at?
⚫ Promotion: How will you find/attract your customers?
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Identifying the main competitors

All businesses have to face competition and, therefore, it
is important that the business owner identifies the main
competitors. In terms of competitors, the agripreneur needs to
consider the following questions:
⚫ Who are the five largest competitors in the market?
⚫ What, where and how do these five competitors offer their
products to the market?
⚫ What are the main features of their products?
⚫ What are the benefits that they provide to the market with
their products?
At the same time the agripreneur needs to think why will
customers buy my product? Is it better? Is it cheaper? Is it
faster, more convenient? What is the advantage of your offer?
Your value proposition?
Identifying resources
Identifying the resources available involves answering the
following questions:
⚫ How many farmers and/or workers will be needed to
produce the product and deliver it to the market?
⚫ What knowledge and skills would farmers and
workers need to perform their jobs?
⚫ What financial resources are needed and where
will the agripreneur find those financial resources?
⚫ What material resources will the farmer need and
where will they find them?
⚫ Which information resources does the farmer need
and what are the chief sources of this
information?
Defining a business idea relates to identifying a business gap,
which is discussed in the next section.
Identify the business gap

The ideal situation for an agripreneur is to find a profitable niche
market on which to focus their efforts. Finding a niche market
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involves identifying a business gap for a

product, which is not addressed by Niche
mainstream providers or competitors. A market: A
business gap can be found in an area in profitable portion
which consumers are not yet buying a of a particular
particular product, or in which there is a market where
customer demand that has not been met. business efforts
However, for many business ideas, the are focused. Note
gap is quite small and there may be many these markets are
people offering similar products. Business often quite small
gaps range from the need for similar and therefore
products that are better quality, or lower prone to being
price, to new products and to changing a oversupplied!
current product, or offering it in an
alternative way, e.g. importing bulked
soybean or providing organic coffee to the international market.
Identifying a business gap involves the following:
⚫ Study trends in the market that the farmer or producer
intends to enter; determine if this is a growth market? Or if it
is static or even declining?
⚫ Listen to customers and try to determine what their
expectations and concerns are and what they like or dislike
about the farmer’s competitors;
⚫ Establish what customers require in terms of product
cost, quality and service delivery;
⚫ Identify customer needs that are not currently
being addressed;
⚫ Determine if there is room for the farmer’s product in
the market by identifying competitors’ strengths and
weakness in order to identify gaps in their services
that the entrepreneur may offer;
⚫ Identify areas of specialisation that the
entrepreneur’s competitors do not address; and
⚫ Define the competitive advantage of the entrepreneur’s
product.
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Defining the value proposition

A value proposition is a statement that identifies and briefly
describes the unique value that a bundle of product(s) and
services would bring to the agripreneurs customers that its
competitors’ products do not offer. In other words, the value
proposition summarises the reasons for a customer buying a
particular product and, in this way, it:
⚫ Offers a clear explanation of the product or service;
⚫ Gives an indication of the way in which the product
differs from alternatives on the market; and
⚫ Shows the reasons why customers would prefer this
product over competitors’ products.
Before the value proposition is finalised, the farmers or producers
may want to ask themselves the following questions:
⚫ Do I offer a product/service bundle with
superior quality, or a product that can solve an
existing problem in an alternative way?
⚫ Can my product be customised to suit the needs,
requirements or preferences of customers?
⚫ Are my prices lower than those of your competitors?
⚫ Does my product offer a set of unique benefits to the
customer?
⚫ Are my distribution methods better to those of
my competitors?
Steps in writing a value proposition

As an extensionist, you may use the following steps to
assist your client in defining a value proposition. Please
note that market research may be required to obtain the
information involved in the value proposition.
Step 1: Know the customer
Knowing the customer involves the following information:

⚫ Who are the agripreneurs’ customers?
⚫ Which customer problems or needs should the agripreneurs
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product address?
⚫ What product improvements or benefits are the customers
looking for?
⚫ What do they value?
⚫ What are the gains that they are offering their customers?
⚫ What are the obstacles that they are removing for
their customers?
Step 2: Know the product
Knowing the product requires knowledge about:

⚫ How the product addresses the customer’s problem; and
⚫ The value or benefits the product offers the customer.
It is important to be as specific as possible, which may require
the entrepreneur to add numbers or percentages regarding their
product in their value proposition, e.g. expected crop yields, etc.
Step 3: Know the competitors
You and the agripreneur or farmer must ask yourselves how the
product creates better value or more benefits for the customer
than those of the farmer’s competitors.
Step 4: Write a customer-oriented value

proposition
The final step is to write a customer-oriented value

proposition. You and your client may consider
approaching it from the customer’s viewpoint, by
answering the following questions:
⚫ ‘I want to buy this product, because it will …’
⚫ ‘What I value most about this product is …’
⚫ ‘This product is better than competing products, because …’
Identify and describe your client’s customers

In the agricultural industry, there is a range of customers starting
with farmgate customers. These customers buy directly from the
farmer. Farmgate sales occur when the farmers sell their
products
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directly from their farm to their neighbours, traders who travel in

search of goods to buy, or to local buying agents.
Selling to farmgate customers:
⚫ Is convenient for the farmer;
⚫ Has no additional marketing cost, such as loading
or unloading; and
⚫ Has no problems in reaching agreements with the
other members of a marketing group before the sale is
made.
As the agripreneurs business grows, sales shift from local
informal sales to larger and more formal markets. Individual
farmers, who have regular surpluses of goods or farmers in
groups, can bulk their goods for sale in a range of informal
markets. As farmer organisations become more specialised they
tend to sell higher quality and volumes of goods into the more
formal markets, where they can access better buying conditions
and often higher prices.
In the following sections, the different customers in informal and
formal markets will be discussed.
Customers in the informal market

Informal markets include local assembly markets, where
farmers sell to traders, informal wholesale markets and
informal retail customers. In developing countries, informal
markets make up more than 60-70% of the available
markets, this is the mainstream marketing area. Markets
are formalizing with greater urbanization and increasing
numbers of middle class buyers, who want more
regulated food products, but this transition will take several
decades.
Informal assembly markets
Informal assembly markets involve farmers and small local traders

coming together regularly to sell their goods to larger traders.
In other words, the buyers in assembly markets are traders, not
individual consumers.
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Assembly markets are normally found in rural areas or in small

towns close to farming areas. Many assembly markets are held
only once or twice a week and some are held in the harvest
season only.
Informal wholesale markets
Informal wholesale markets, which are Retailers:

generally found on the outskirts of larger Businesses that
towns and cities, are markets where sell goods directly
farmers deliver produce in bulk. to individual
Retailers come to these wholesale consumers.
markets to buy bulk goods, which they Wholesaler:
make into smaller lots to sell in their stalls A company
and shops. that buys
large
Informal retail customers
quantities of
Informal retail customers are consumers products or goods
and small businesses (such as restaurants from different
and street-food vendors), who buy their producers or
daily or weekly supplies of food. It is farmers, stores
possible for farmers to sell in bulk directly them and sells
to these customers, but in order to do them to retailers.
so they must work out a system with the
retailer. Wholesalers may try to prevent farmers from
selling directly to retailers.
Formal markets
Formal markets consist of all the businesses, enterprises
and economic activities within the agricultural and food
sectors that are structured, monitored, protected and
taxed by government. The formal agricultural markets include
supermarkets, hotels and restaurants, feed markets, selling
to government buyers and export markets.
Supermarkets
As towns grow, people want to buy in convenient, one-stop

shops. Supermarkets enable consumers to buy a large variety of
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different types of goods at the same time. The food is

attractively packaged and of a standard/good quality. In
developing countries, supermarkets serve mainly middle to
higher income urban people. Farmers can sell directly to
supermarkets, but they must meet strict volume and quality
requirements.
Hotels and restaurants
One of the market consequences of

Urbanisation:
urbanisation and rising incomes is
The process by
changing diets, with consumers buying
which towns
higher quality food products and also buying
and cities are
higher value products, such as vegetables,
formed and
meat, dairy products, processed foods and
become larger
other agricultural goods such as flowers
as more and
and ornamental plants. Urban centres also
more people
concentrate large numbers of consumers
begin living
whose lifestyle involves buying meals
and working in
at restaurants in addition to food that is
central areas.
prepared later. Hotels and restaurants pride
themselves on serving customers with food
made with fresh, high quality produce. In order to ensure the
supply of high quality goods, chefs often work directly with
farmers or with reliable suppliers of high quality produce. The
higher value of these markets offers new opportunities to
farmers for higher income buyers.
Feed markets
In urbanised countries, consumers’ diets have changed

to include an increasing consumption of meat and milk
products. There is also a growing demand for animal feed
products, which is driving a new market opportunity for farmers.
Livestock feed processors require sources of both carbohydrates
and protein in the feed they develop, which offers farmers
the opportunity to grow a range of crops, including maize and
soybean to supply these to feed processor markets.
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Government or public sector markets
Governments are major buyers of products and they offer

regular tenders to buy food and feed for their different service
industries such as schools, hospitals, prisons, as well as for the
military.
Export markets
Export markets involve goods produced in one location or country

that are sold and consumed in another country. Examples
of export trade traditionally included a mix of food and fibre
products, such as coffee, cocoa, tea, tropical fruits, nuts and
cotton. However, nowadays the export trade in agricultural
produce is a fully globalised process with goods moving in all
directions.
The global trade in goods is particularly being fuelled by the
current consumer demand for year-round supply of all food
products, which requires retail outlets to have suppliers from
across the world provide their fullest inventory of goods through
the local seasons.
Farmers have experienced major threats and benefits from
the globalisation of agricultural markets, but the growth in
this market sector offers farmers real opportunities to sell
high volume, high value produce—if they can meet the
increasingly strict food safety and traceability requirements
of these markets.
Outlining the key activities involved in an

agri-business
Although the key activities involved in a business may differ,
the key activities outlined in the following sections are
generally performed in any agricultural business.
Crop production activities

The following core activities relate to crop production:
⚫ Land preparation;
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⚫ Planting and fertilising crops;

⚫ Weeding and pest and disease control or prevention;
⚫ Harvesting the crops; and
⚫ Crop conditioning, including cleaning, bulking, bagging and
storage.
Marketing and sales

Marketing and sales involve the following key activities:
⚫ Managing the marketing mix: product, price, distribution and
promotion;
⚫ Managing the marketing communication mix:
advertising, sales promotions, public relations (PR) and direct
selling (personal selling);
⚫ Writing advertisements and press releases; and
⚫ Selling the product to target markets.
Marketing mix: A set of tactics and strategies that

an enterprise uses to promote its product in a particular
market and that is made up of the so-called four P’s of
marketing: product, price, place and promotion.
Promotion: The process of creating customer awareness
of a particular product in order to generate sales and
increase customer loyalty.
Marketing communication mix: The specific blend of
advertising, sales promotions, public relations, personal
selling and direct marketing tools that an enterprise uses
to communicate product value to its customers.
Accounting activities
Accounting activities include:
⚫ Doing financial planning and compiling and managing the
budget;
⚫ Paying bills; and
⚫ Managing the credit of the business.
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Managing farmer groups and human resources

Although this section is more relevant to farmer groups and
agricultural processing companies, the principles apply to farms
and farmer organisations too. The activities involved in managing
human resources include:
⚫ Having clear roles for the business team;
⚫ Having elected committee members and constitution for
the farmer group;
⚫ Planning human resources (employees/workers) for
the business;
⚫ Recruiting and selecting suitable workers
Payroll:
for the business;
The record of
⚫ Developing and training workers;
the salaries,
⚫ Paying employees and managing the
wages, bonuses
payroll;
and taxes for
⚫ Managing employee performance
the workers
and productivity; and
employed in a
⚫ Resolving conflict among employees.
company.
Administrative activities
The following key administrative activities are usually performed
in a business:
⚫ Responding to customers;
⚫ Managing financial resources;
⚫ Answering customer enquiries and queries; and
⚫ Filing.
Testing the viability of the business idea

In the business context, viability refers to the ability of an
enterprise to operate and compete effectively in a particular
market and to make a profit. A viable business is one that:
⚫ Covers the expenses of manufacturing a product or delivering
a service and running the business;
⚫ Generates adequate profits;
⚫ Withstands business risks that it may encounter;
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⚫ Remains viable in the long-term; and

⚫ Meets the goals set by the founders or owners.
One way of determining the viability of a new business is by using
the results and findings of market research.
Market research: The process of collecting and analysing

information about the market into which an enterprise or a new
business is entering in order to evaluate the viability of the new
product or service.
Market research
When a new business opportunity is identified, market research
will give an indication of whether the idea is going to be
successful or not. For example, market research results can
provide the agripreneur with information on:
⚫ The way in which customers in a target market view the
product;
⚫ Whether they would actually buy the product;
⚫ How much they would be willing to pay for the product; and;
⚫Any additional features they would like to see on the product.
Another way of determining the potential success of a
business is to conduct a feasibility study.
Feasibility study
A feasibility study is an analytical tool used to study the
viability of a business idea by:
⚫ Identifying potential problems and opportunities;
⚫ Determining objectives;
⚫ Defining successful outcomes; and
⚫ Assessing the costs and benefits involved in the
alternatives for solving problems.
A feasibility study usually addresses the market viability, financial
viability, technical viability and management viability of a
business.
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Rather than just diving into a project and hoping for the best, a
feasibility study allows entrepreneurs and new business owners
to investigate the possible negative and positive outcomes of a
project before investing too much time and money.
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Concluding remarks
In this module, you learned why it is important to develop
agripreneurship and who the potential extension clients of
agripreneurship are. You also learned what the characteristics
of a successful entrepreneur are and what makes a business
successful. You learned how to determine the motivation and
readiness of farmers to go into business. The difference
between free and fee-for-service approach to upgrading farmers
and farmer groups was discussed. You learned how to identify
business opportunities in a particular location, how to define a
business idea, how to identify a business gap and how to define
a vision and value proposition for a business. Finally, you
learned how to test the viability of a business idea and what the
key activities involved in a business are.
Complete the summative assessment in your workbook.
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Study unit 2: Evaluating the key skills

involved in running a business
Study unit outcomes

After completing this study unit, you should be able to
evaluate the key skills needed to run a business, including::
⚫ Business planning;
⚫ Market analysis;
⚫ Making decisions on market opportunities;
⚫ Learning basic calculations;
⚫ Financial basics;
⚫ Mapping the production operations;
⚫ Managing equipment and labour;
⚫ Basics of negotiating with partners;
⚫ Developing customer relations;
⚫ Marketing and sales;
⚫ Basic and advanced bookkeeping;
⚫ Skills/competencies and scale assessment; and
⚫ Developing a training programme.
Study unit overview

This study unit identifies the different types of skills that
extension clients need to design, start, and run and grow
an agricultural or a rural business. The study unit
focuses on business principles and skills, stepping away
a little
from the agronomic thinking to a more focused approach
to the business methods and skills that will help agripreneurs
to upgrade their production and business operations.
Agronomic: A branch of agriculture that deals with crop

production and soil management.
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In order to facilitate the process of agripreneurship, the
extensionist will need to use their skills to support agripreneurs
establish, run and grow a business. Completing this study unit
should allow you to identify the basic competencies that a client/
client group should have and to work on developing a learning
programme that will enable your extension clients to acquire the
skills they need to run their businesses.
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Session 2.1: Evaluating the key skills

involved in running a business
Session outcomes
evaluate the key skills needed to run a business, including:
⚫ Business planning;
⚫ Market analysis;
⚫ Making decisions on market opportunities;
⚫ Learning basic calculations;
⚫ Financial basics;
⚫ Production operations;
⚫ Management of equipment and labour;
⚫ Basics of negotiating with partners;
⚫ Developing customer relations;
⚫ Marketing and sales;
⚫ Basic bookkeeping;
⚫ Skills/competencies and scale assessment;
⚫ Advanced bookkeeping; and
⚫ Developing a training programme.
Introduction
Successful agripreneurs are technologically competent
and innovative and they plan ahead, so they can steer
their agricultural and food businesses through the stages
of enterprise development. In this session, you will learn
about the different skills that an entrepreneur should have in
order to make a success of an agricultural enterprise.
Innovative: Capable of thinking about and introducing new and

original ideas.
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Business planning
A business plan is a document that outlines the financial and
operational goals of a business for the near future and shows
how these goals will be achieved. A business plan also describes:
⚫ The value proposition;
⚫ Means of delivery to key customers;
⚫ The resources and partners needed to deliver the product; and
⚫ Basic income and costs.
Business planning is the process of establishing goals and
objectives for future performance and identifying the tasks
and the resources needed to achieve the goals. In order to
do
business planning, the agripreneur should develop the following
skills:
⚫ Setting goals that align with the value proposition of
the business;
⚫ Identifying a value proposition that fits with customer
needs;
⚫ Collecting, organising, analysing and interpreting
information and situations;
⚫ Diagnosing problems and identifying relevant
causes of the problems;
⚫ Evaluating and comparing courses of action to
address problems;
⚫ Predicting and forecasting;
⚫ Estimating the time and effort required to
complete tasks; and
⚫ Implementing and monitoring actions and tasks.
Market analysis
The agripreneur needs to be confident about conducting market
analysis in order to determine market opportunities, market
trends, growth potential in the market, major challenges and
opportunities and realistic business opportunities in the market.
In order to conduct market analysis, the entrepreneur needs
the following skills:
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⚫ Critical thinking skills to identify

challenges and market Market
opportunities and to analyse needs opportunity:
and product requirements; A favourable
⚫ Decision-making skills to make condition in the
decisions about opportunities in the market that a
market; business can use
⚫ Problem-solving skills to identify to its advantage,
complex problems and design e.g. a changing
solutions;
trend or an
⚫ Coordinating skills to enable value
increased demand
chain actors to succeed together in for a product
the market; and
that competitors
⚫ Communication skills to present
have not yet
market analysis results to partners and
recognised.
customers.
Making decisions on market

opportunities
Decision-making is the ability to make sensible choices on market
opportunities, which involves the skills of:
⚫ Seeing the most important information quickly;
⚫ Considering the positive and negative sides of each option;
⚫ Selecting options and forecasting the outcome of
each option or alternative; and
⚫ Rapidly deciding on the best option for the business.
Calculation skills
Basic maths skills are essential to all areas of
agripreneurship and, therefore, the agripreneur needs to
be comfortable with:
⚫ Adding;
⚫ Subtracting;
⚫ Multiplying;
⚫ Dividing; Fraction:
⚫ Calculating percentages; A quantity that
⚫ Calculating fractions and decimals; is not a whole
⚫ Calculating averages; and number, e.g.
⚫ Calculating area and volume. ¾.
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Production operation
Production operation refers to all the activities involved in
producing a product, which requires the following skills:
⚫ Managing and updating the production system;
⚫ Short- and long-term planning in terms of what and how
to produce;
⚫ Making decisions in terms of the timing of production
operations, e.g. sowing according to soil conditions
and seasons, sowing methods and fertiliser levels;
⚫ Selecting the right resource mix including varieties, agro-
chemicals and use of labour to produce at optimal efficiency;
⚫ Scheduling production processes;
⚫ Operating farm machinery and equipment in some cases;
⚫ Workflow management from selecting the input (e.g. seeds,
fertilisers and agro-chemicals) to the point of packaging
and selling the product;
⚫ Monitoring and evaluating the production operation; and
⚫ Innovation to explore new ways of solving complex problems.
Managing equipment and labour

Agricultural businesses use equipment to produce crops or raise
animals. The agripreneur needs the following equipment
management skills:
⚫ Deciding on the right equipment use for the situation,
e.g. ownership, hiring services, renting, sharing or a
combination of the options;
⚫ Considering the costs involved in equipment options,
including equipment housing, operating and repairing
costs, fuel consumption, interest on investments,
taxes and insurance; and
⚫ Assessing the performance of equipment.
Agripreneurship also requires labour—i.e. employees—and they
need to be managed. Therefore, the agripreneur needs the
following labour management skills:
⚫ Human resource planning and recruitment;
⚫ Employee training and development;
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⚫ Employee motivation;
⚫ Payroll management;
⚫ Performance management;
⚫ Conflict resolution.
Human resource planning: The process where the agri-

entrepreneur makes sure that they have the right workers capable
of completing specific tasks.
Recruitment: The process of finding workers to fill vacant positions
in the agri-business.
Conflict: A strong disagreement between individuals or groups
regarding ideas or interests that may result in an argument.
Conflict resolution: The method of finding a solution to a
disagreement between two or more parties.
Negotiating skills
In order to negotiate with their partners and buyers, agripreneurs
must be able to:
⚫ Use their active listening skills;
⚫ Clarify issues by asking relevant questions;
⚫ Identify the key issues involved in the negotiation;
⚫ Identify areas of common ground between
negotiating parties;
⚫ Develop a line of logical, reasoned argument;
⚫ Put their points across clearly and
understandably using verbal communication
skills;
⚫ Identify and structure the problem, identify possible
solutions or courses of action and decide on the
most suitable option using problem-solving skills;
⚫ Plan alternative outcomes if a satisfactory decision cannot be
reached;
⚫ Use decision-making skills;
⚫ Use presented facts to make decisions with reasoning
skills; and
⚫ Use persuasion skills.
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These are known as basic negotiation skills.
Active listening: A structured form of listening and responding

in which the listener focuses attention on the speaker, thereby
improving mutual understanding.
Persuasion: The process of changing an individual or a group’s
attitude or behaviour towards an idea, event or issue by means of
written and verbal communication.
Negotiation: A discussion method where differences between
individuals and groups are settled.
Customer relations
Customer relations refers to links between business actors in the
market chain, referring to sales support, technical assistance
and customer service.
Good customer relations include:
Customer
⚫ Rapid and effective response
service: The
to customer needs and
process of
questions;
ensuring customer
⚫ Active listening skills;
satisfaction with a
⚫ Verbal and written
product or service
communication skills to
by taking care of
interact with the customer;
customer needs
and
and providing
⚫ Time management.
professional and
helpful assistance
Marketing and sales
to the customer.
Marketing is central to any
successful business, as it links the
product to the customer. The most
important marketing skills for agripreneurs are:
⚫ Interpersonal communication skills like active listening and
verbal communication skills;
⚫ Strong written communication skills and the ability to
present content creatively;
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⚫ Influence, persuasion and negotiating

skills; and Prospecting:
⚫ Advertising and promotion skills; The sales
process of
Sales drive business success. The sales recruiting or
process has six basic steps: searching for new
⚫ Prospecting for new leads; customers for a
⚫ Initial contact with the prospect; business.
⚫ Presentation of sales materials; Lead: An
⚫ Objection handling; individual who has
⚫ Closing the sale; and provided contact
⚫ Follow up/after sales service. information that
Closing a sale is the most important may point to a
sales skill to perfect. It is also the most potential sales
difficult area to overcome for people opportunity.
without a sales background. Sales
presentation:
The skills required to perform the sales The detailed
function include: presentation of
⚫ Prospecting skills; information (which
⚫ Written and verbal may include a
communication skills; demonstration)
⚫ Active listening skills; on a particular
⚫ Influencing and persuasion skills; product.
⚫ Presentation skills in order to
make effective sales presentation;
and
⚫ Reporting writing skills in order to compile regular
sales reports.
Developing a training programme

The following skills are required to design a training
programme:
⚫ Conducting a training needs analysis;
⚫ Conducting a task analysis;
⚫ Conducting a person analysis;
⚫ Identifying the training objectives and standards; and
⚫ Designing the content of the training programme, based
on the different analyses.
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Training: The process involved in teaching employees a

particular skill or behaviour in order to perform their jobs.
Training needs analysis: The systematic process where the
training needs of a business are identified.
Task analysis: The systematic collection of information on a
particular job, in order to determine exactly what employees should
be taught so that they achieve satisfactory job performance.
Person analysis: Identifying employees who do not meet
performance standards and requirements and, therefore, require
training.
Training objectives: The desired results of the training
programme.
Standards: Success criteria.
Basic and advanced bookkeeping

The main objective of bookkeeping is to record and summarise
financial transactions into a form that provides financial
information about a business. The agripreneur should have the
following bookkeeping skills:
⚫ Purchase supplies and equipment;
⚫ Pay supplier invoices on time;
⚫ Issue invoices to customers;
⚫ Record cash receipts and make bank deposits;
⚫ Conduct a monthly reconciliation of every bank
account;
⚫ Maintain the petty cash fund;
⚫ Check the bank statements of the business;
⚫ Issue financial statements;
⚫ Calculate and issue a financial analysis of the financial
statements;
⚫ Maintain an orderly accounting filing system;
⚫ Maintain the annual budget;
⚫ Calculate variances from the budget and report
significant issues to management; and
⚫ Process payroll in a timely manner.
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Reconciliation: The process that explains the difference

between the bank balance shown in the bank statements of the
agri-enterprise (as supplied by the bank) and the balance in the
financial records of the enterprise.
Basic financial skills

It is important for agripreneurs to manage their money according
to sound financial principles and they require the following skills
to do so:
⚫ Compiling financial goals;
⚫ Understanding and applying the concepts of income and
expenses;
⚫ Creating a budget, which can be used as a plan for
business and household expenses (spending money) and
income (earning money);
⚫ Compiling a seasonal calendar; and
⚫ Identifying wants and needs in order to set priorities
and reduce expenses.
Because the income of farmers and agripreneurs varies
from month-to-month, they should be able to compile a
seasonal calendar which gives an overview of their financial
situation for a year, thereby making it possible to identify
the times
of high/low income and high/low expenses.
Financial management is discussed in detail

in Study Unit 4, where you will also learn how to
develop a seasonal calendar.
SMART skills
The CRS created the SMART curriculum. SMART skills aim to
provide farmers and their organisations with a set of core skills
to link to markets successfully. The following manuals are used
in the SMART curriculum:
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⚫ SMART skills for rural development;

⚫ Organising and managing farmers’ groups;
⚫ Facilitating savings and internal lending communities;
⚫ Understanding natural resources;
⚫ Managing natural resources;
⚫ Marketing basics;
⚫ The seven steps of marketing;
⚫ Promoting innovation; and
⚫ Financial education.
Each module in the curriculum has the following four parts:
⚫ Lessons that provide the necessary technical information
and guidance on delivery methods that field agents should
use to teach the SMART approach to farmers;
⚫ Quizzes for field agents to test their own knowledge;
⚫ Staff exercises that give field agents the opportunity to
practise their skills; and
⚫ Field exercises to use when training farmers.
CRS has also published the content as e-learning modules, which
can be accessed via the following link:
http://www.crs.org/smart- skills-smallholder-farmers.
Using rating scales to assess skills

Once you have identified the skills that your clients need to
run a particular business operation, you need to
determine their skill level and you may consider using a
rating scale to determine the skill levels. A rating scale is a
tool that is used for assessing the performance level of
tasks or the skill level involved in performing a particular
task. A rating
scale is similar to a basic checklist, except that you indicate
the degree or level of the skills involved.
You may consider using a simple number scale in your rating, for
example:
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Skills 1 2 3 Comments
Business planning skills Insert comments
regarding
Market analysis skills
training and skill
Decision making skills development
that should be
Production operation
introduced.
skills
1 = Not competent: Needs training and skill development
2 = Average: Needs improvement
3 = Competent
Once you have designed a basic rating scale, you can customise
it to assess the skill level of different extension clients and you
can break the broad skills categories down into more detail, e.g.
in the category of business planning skills, you can assess the
following individual skills:
⚫ Goal setting;
⚫ Information handling;
⚫ Identifying problems and causes;
⚫ Predicting and forecasting; and
⚫ Monitoring and implementing actions.
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Concluding remarks
In this study unit, you learned about the basic competencies and
skills that are required to run a business. These skills include
business planning, decision-making, market analysis, production
and operation, marketing and sales, customer relations,
negotiation, equipment and labour management and basic
bookkeeping. You also learned how to use rating scales to
assess the skill levels of agripreneurs.
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Study unit 3: Identifying markets,

mapping resources and conducting
business planning
Study unit outcomes

⚫ Identify market opportunities;
⚫ Manage key activities and partners in a business; and
⚫ Conduct planning from business canvas to
business plan.
Study unit overview

Based on the content of the previous two study units, you should
be familiar with the following elements of agripreneurship at this
point:
⚫ The characteristics of an entrepreneur, the motivation
and readiness of the extension agent’s clients in
becoming agripreneurs;
⚫ The basic skills that the entrepreneur needs to run a
business;
⚫ How to define a business idea and a value
proposition; and
⚫ How to test the viability of a business idea.
In this study unit, the concept of agripreneurship is taken
a step further by focusing on the following three elements: the
identification of market opportunities, the management of key
activities and partners and the business planning process.
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Completing this study unit should allow you to identify a variety
of roles that you, as an extensionist, can play in analysing
market opportunities, defining business and production
operations, linking with partners and designing business plans
for farmers and farmer groups.
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Session 3.1: Identifying market

opportunities
Session outcomes
⚫ Spot the market gap;
⚫ Conduct a market visit;
⚫ Interview buyers; and
⚫ Identify the key buying conditions.
Introduction
In this session, you will learn about the process of market
opportunity identification (MOI), which is one of the key
elements in agripreneurship. You will learn about MOI by
addressing the identification of a market gap, the assessment
of the effects of seasonal supply and demand on pricing,
interviewing buyers and the key buying conditions.
Spotting the market gap

A gap in the market refers to a part of that market
where the competitors of an enterprise are not meeting
the customer’s needs and, thereby, opening up an
opportunity for new business. It is usually a matter of
identifying a need that is not being satisfied in a market
and then providing a product that can accommodate
the
need. There are several sources for new business
opportunities. When an agripreneur sees a gap in their market
and they have the idea and the resources to correct it, the gap
becomes a business opportunity.
An agripreneur may also identify a product that is being
consumed in one market that is not available in another market.
For example, if a smallholder farmer identifies a need for a
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particular vegetable in their market and they are able to pool

the resources of several smallholder farmers to meet that need,
they have identified a business opportunity.
Agripreneurs and farmers can also analyse their competitors in
order to identify key business opportunities, expand their market
reach and develop their products and services. For instance, a
farmer group may look at what neighbouring farmer groups are
producing to see where they may sell into the same market or
introduce a new product.
Studying food sector trends are also a good way to identify
business opportunities. A farmer or a cooperative leader may
meet with business colleagues and traders to learn more about
the latest production techniques, new varieties and trends in
the market. For example, a cooperative leader sees that there
is a growing demand for organically grown fresh produce in a
supermarket chain that has a new outlet in a nearby town. Using
this knowledge the cooperative’s members can explore whether
they could supply the store with organic produce.
An MOI is a rapid but structured way of identifying opportunities
in the market. The aim of MOI is to provide farmers and
agripreneurs with a simple and systematic method for collecting
market information to identify and select products for
investment and agripreneur development. The MOI helps
farmers review many products in the market, then select
two or three products for a more detailed study before
selecting which product to invest in. The ability to identify
market opportunities is a core skill that farmers need to
acquire if they are to engage with markets successfully,
particularly when a value chain or market linkage project
ends.
The market opportunity identification process helps extension
agents and farmers evaluate:
⚫ Market demand and buying conditions for existing
products with reference to collective marketing within a
group;
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⚫ Market options for new products to encourage

diversification, with an emphasis on higher value goods; and
⚫ Market options for value-added products, so that service
providers can assist farmers in capturing more value from
their raw goods.
There are four main situations that offer market opportunities.
These are supplying:
⚫ A product that is in high demand or in short supply;
⚫ An existing product in a new or improved way;
⚫ A new product into an existing market; and
⚫ A new product into a new market.
The market opportunity identification is conducted using the steps
outlined in the following sections.
MOI Step 1: Organise a market survey team

In order to identify market opportunities, a market survey has
to be conducted, which requires a survey team. Therefore, the
first MOI step is to organise a survey team to support rural
producers and agripreneurs conduct a market survey. This
team will be responsible for collecting data, conducting the
analysis and writing the final report. Typically the team will
include the extension agent and two to three farmers, who
represent the group.
Diversification: In business, the strategy of entering

a new market or a new industry, in order to increase sales
and profitability.
Value-added products: A product that has been
produced or processed in a way that increases its value,
e.g. processing wheat into flour.
Market survey: The systematic collection of market-
related data (e.g. data on target markets and customers)
from a population or part of a population to determine the
present status of a situation, event or process.
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MOI Step 2: Design an MOI survey questionnaire or

checklist
The extension agent has to support rural farmers or producers in
developing a survey questionnaire or checklist that they can
use to collect market information, such as potential market and
product options. The information is collected from a range of
primary and secondary data sources, but as market
information is highly dependent on the current situation, much
of the information has to be collected. This information is used
to compile a list of product options, based on market demand
and the selected marketing strategy.
Questionnaire: A list of questions that are asked to

respondents (e.g. consumers of a particular product) to
obtain specific information.
Primary data source: Written or oral information
obtained from a direct witness of, or a participant in, an
event or a process, e.g. direct accounts, correspondence
and speeches.
Secondary data source: Primary data that has been
analysed and or processed, thereby providing second-hand
information about an event or a process, e.g. books, journal
articles, newspapers and collected consumer information
made available by consumer research organisations.
Marketing strategy: A model that directs the way in
which a producer will focus limited resources on the best
opportunities, in order to increase sales.
The following types of questions may be included in the initial

rapid survey questionnaire:
⚫ Where can the buyers be reached (i.e. buyers’ contact
information)?
⚫ What are the trends in demand for the (selected) products?
⚫ Which products in this market are in highest demand and
why are they in high demand?
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⚫ Which products are in low supply and why?

⚫ What are the prices of the main products of interest?
⚫ What is the seasonality of the main products of interest,
and does this affect price?
⚫ What are the buying conditions in terms of:
◦ Volume;
◦ Quality;
◦ Minimum purchase lots; and
◦ Buying frequency?
⚫ What are the terms of payment?
⚫ Would you (i.e. selected buyer) be interested in working
with our farmers?
This first survey typically generates a long list of potential
options that may be of interest to the farmers. The next step
reduces the long list of options down to a few products that the
farmers want to explore in more detail.
MOI Step 3: Assess and select market options

Assessing and selecting market options requires the team to
create a series of evaluation criteria so that the first long list of
market options from the previous survey can be filtered down to
a short list. Figure 15 outlines these filters.
OBVIOUS SELECTION FARMERS

DISCARD CRITERIA CHOICE
Figure 15: Identifying filters to create a short listThis short list

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This short list will be reviewed by the agripreneur or farmer

group. The filtering process involves discarding unsuitable
market options. When the farmers have selected or prioritised
their
short list of two to three products, a more detailed analysis is
conducted.
MOI Step 4: Detailed analysis

Having selected two or three products, the extension agent
needs to work with farmers to analyse these options in more
detail. This may require further market visits and interviews
with experts or other farmers who are growing the selected
products, to learn more about how to grow the crop and gain a
better understanding about risks and costs. Key areas to
gather information are listed below.
Production requirements
Production analysis focuses on elements such as:

⚫ Planting date and production time (days,
months, years);
⚫ Technical difficulties (low, medium, high);
⚫ Soil and water requirements;
⚫ Labour needs;
⚫ Major pests and diseases; and
⚫ Expected yield.
Marketing requirements
Marketing analysis focuses on elements such as:

⚫ Defining buyers;
⚫ Type of market (local, regional, national);
⚫ Level of risk;
⚫ Demand (high, medium, low);
⚫ Quality criteria required;
⚫ Delivery requirements (volumes and frequency); and
⚫ Business relationship (agreement or alliance contract).
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Profitability
Profitability analysis focuses on elements such as:

⚫ Price stability;
⚫ Pre-production investments;
⚫ Cost of production;
⚫ Expected revenue based on past experience/unit area; and
⚫ Gross margin.
Revenue: The total income that is generated from selling

goods, before any costs or expenses have been deducted.
Gross margin: The total sales revenue minus the cost of
goods sold, divided by the total sales income and expressed as
a percentage.
The information can be collected using the matrices shown in

Figure 16, Figure 17 and Figure 18.
Figure 16: Production feasibility matrix
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Figure 7: Marketing characterisation matrix
Figure 18: Financial characterisation matrix
MOI Step 5: Share results with farmers and

select products
The MOI survey provides the agripreneur with information on the:
⚫ Production requirements;
⚫ Market demand; and
⚫ Financial costs and revenues for a specific product.
The survey team writes up, systematises and analyses this
information, so that they can present it to the entrepreneurs or
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farmers, who use the information to make an informed decision

about which product(s) they should invest in for their production.
As part of the analysis there are some key areas that need to be
considered
⚫ Seasonality;
⚫ Supply and demand; and
⚫ Buying conditions.
Assessing seasonal supply and demand

Market supply and demand are important concepts, because
they influence the prices that farmers and agripreneurs can get
for their produce. If farmers understand seasonal supply and
demand, they can:
⚫ Plan what crops to grow, when to plant and harvest, and
where to sell;
⚫ Plan to harvest their crops at the beginning or at the end
of the season, when prices are higher;
⚫ Grow a crop variety that is more expensive than the
standard one, for example, red potatoes may be sold for
more money than white potatoes;
⚫ Decide to grow a more nutritious crop, such as vegetables or
fruits instead of maize;
⚫ Decide what the best time would be to sell their crop,
for example, by storing it until the price goes up; and
⚫ Try to increase the quality of the crop by protecting it
from pests and diseases, so it can be sold for a
higher price.
Information on and knowledge of market supply and
demand help the agripreneur to understand the importance
of specific products and to make use of opportunities that occur
because of changes in demand and supply.
Market supply
Market supply is the quantity or amount of a product (maize,
potatoes, tomatoes, eggs, etc.) that producers can offer to the
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market for sale. The supply of a product depends partly on

its price and on local conditions. If farmers see that the price
of a product is high, they will try to sell it immediately and
they are also likely to grow more of the product next season.
If the
farmers see that the price is falling, they may keep their products
in storage, until the price recovers. Low prices will also
discourage them from planting the same crop the following
season.
The supply of a product also depends on local conditions. For
example, if there is a lot of rain in an area, farmers can harvest
a great deal of grain, but if there is drought, the harvest is
poor.
Other local conditions that may also affect the supply of a
product are:
⚫ Pests and diseases;
⚫ Availability of, and access to fertiliser, water and
quality seeds;
⚫ Poor roads and transport vehicles;
⚫ Poor farmer health and nutrition; and
⚫ Pregnancy and child rearing (in the case of
women farmers).
Market demand
Market demand refers to the amount of the product that
customers are willing and able to buy, which partly depends
on the price. If the price is low, more people will want
to buy and each person may want to buy more of the
product. If the price goes up, fewer people want to buy
and each person will probably buy a smaller amount.
The demand for a product is also affected by other factors
and customers generally want to buy more:
⚫ Staple foods (such as maize or wheat) or major vegetables
(such as onions and tomatoes) and less unfamiliar types of
food or items they use only in small quantities;
⚫ High-quality products rather than items that are low-quality or
damaged;
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⚫ Fresh products, such as vegetables harvested yesterday,

rather than produce that was harvested weeks ago; and
⚫ Scarce items, such as the first fruits of the season.
Longer-term changes in demand are caused by changes in
consumer tastes and attitudes. For example, families are buying
more maize and wheat than sorghum and millet, because
they perceive these more recent crops as more modern and
aspirational. In the same way there has been a fall in the
purchase of traditional drinks in favour of processed drinks that
people consider to be more healthy and attractive.
Seasonal supply and demand

In countries with highly identifiable seasons, supplies are low
at the start of the harvest season and, therefore, prices are
high. Prices are at their lowest level just after the crop is
harvested in the main production areas. At the end of the
season, prices
normally increase again, as supply declines. Prices are generally
highest during the off-season, when only a small percentage of
farmers are able to grow or sell the crop.
Short-term changes in supply and demand may be caused by
the weather. For example, during the colder times of the
year, a hot period increases the demand for crops like
tomatoes, cucumbers, etc., whereas vegetables for cooking
are
in higher demand during colder weather. In this way,
seasonal changes lead to short-term fluctuations in the
prices of these products.
Identifying key buying conditions

In order for an agripreneur to identify and decide upon a
potential buyer, they have to identify the key buying conditions.
The key buying conditions are outlined in the following sections.
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Crop type and variety in demand from buyers

Certain types and varieties of crops will be more in demand at
certain points in the seasonal production cycle. The agripreneur
will have to determine which crops buyers are looking for and
particularly which varieties are achieving the best prices in order
to meet the current demand. The criteria in Table 4 can be used
to determine which crop types and varieties are in demand.
Table 4: Criteria for product/crop type selection
Criteria Rationale Examples
Agri-climatic A region or country River deltas areas
conditions can only produce a have suitable
low cost and good conditions for rice
quality agricultural and fish production.
commodity to compete Many upland areas
in the are appropriate
marketplace if the for producing
natural conditions in the tree crops and
area are suited to the non-timber
production of the forest
commodity. products. In
These natural many of these
conditions include areas, the
rainfall patterns, availability of
underground water, grass may enable
soil quality and the the development of
temperature level. livestock.
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Market size Large markets have Urban markets and
a greater capacity to export markets
absorb additional supplies have much greater
than small markets. It absorption capacity.
is important to avoid The market for
a situation where most traditional
farmers are supported export commodities
to produce and sell a is saturated, e.g.
certain commodity, but there is excessive
end up facing low and supply and very
declining prices because intense competition
the market is too small in the world market
and therefore unable to for coffee, tea, and
absorb new supplies. cotton.
However, market size
alone is not enough
to ensure absorption
capacity. Some markets
may be large in size
but already
oversupplied.
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Market Growing markets are Global demand for
growth better at absorbing staples (e.g. rice)
additional supplies and and traditional
creating opportunities export commodities
for profit than markets (e.g. cotton,
that have grown stale. coffee and tea) is
Products sold in medium relatively stagnant.
to high growth markets,
Export markets
therefore, merit special
for organic and
consideration. A product
‘ethical’ products,
that has a demand that
fresh vegetables
grows at an annual rate
and fruits, flowers,
of 5% or more can be
cashew nuts,
listed in the high growth
spices, essential
category. Products that
oils, and aromatic
have a growth rate of
and medicinal
3–5% per annum
plants are
belong to an
expanding rapidly.
intermediate category,
Domestic markets
while those that have
for milk, fish, meat,
less than 3% growth are
fruit and vegetables
in the low growth
also enjoy high
category.
growth rates.
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Potential for Products that can be sold Examples of high
targeting in high value markets value markets
high value should be considered. include organic
market Even if the overall and ethical trade
opportunities demand for the product products, medicinal
has stagnated, there herbs, spices, and
may be profitable and exotic fruits and
growing opportunities in vegetables.
certain market segments,
like the organic and
ethical trade niches.
However, some high-
value markets may be
small and have very high
entry barriers. This would
include the need to
grow the right varieties
that meet stringent
quality specifications
and standards. The
product might have to be
certified and buyers and
consumers would have to
be able to trace its origin
and source down the
market chain.
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Potential Some products may Off-season
for import- enjoy good market opportunities are
substitution prospects, even more obvious
of off-season when overall demand in the case of
marketing is stagnant. For seasonal and
example, there may perishable produce,
be opportunities for provided the
substituting imports with required production
locally grown produce. technologies (e.g.
Likewise, there may be seed) are available.
opportunities for off-
season production and
marketing.
Potential for Agri-climatic conditions,
diversification the availability of labour
and skills, access to
inputs, and links to
potential markets could
enable farmers to adopt
new products that have
the potential to generate
employment and income
and contribute to poverty
reduction.
However, diversification
into new commodities
is generally riskier and
more challenging than
developing existing
production, especially
as far as the poor are
concerned.
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Potential In some cases, an Milk production,
for agricultural commodity cassava starch
value is produced locally but or coffee
addition processed in other processing, and
regions. There could the development of
be potential for local honey brands
income generation are all examples
through the of local processing
development of local activities that add
processing. value.
Potential Sustainability and Live barriers of
contribution environmental forage grasses may
to the conservation issues be economically
conservation should also be feasible due to
of natural considered. Products strong demand
resources directly or indirectly for livestock and
related to conservation animal products.
may have good market
potential and economic
feasibility.
Prices being offered by buyers

The price of product has a big influence on how well a
farmer’s business performs in the market. Buyers will
almost always go for a cheaper product or one they
believe brings them value for their money. A well-priced
product can give your client’s business an advantage over
other farming enterprises in the market. If your client can offer
a good quality product at a lower price than their competitors,
then buyers are more likely to choose their products over the
other businesses.
The price should never be so high that buyers cannot afford
them; otherwise your client will not generate sales. At the
same time, the price should not be too low so that the business
can
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meet the cost of producing its products. In other words,

products should be priced so that the business can make a
profit by selling them.
The market price of a product refers to the unique price that
buyers and sellers agree on to trade in a particular market.
Prices may be controlled by rules and government regulations.
These regulations often set maximum prices for certain products,
in order to protect customers from being overcharged when
buying these products.
When entering the market with a new product, there are two
main pricing strategies that you can apply, namely market
skimming and market penetration.
Profit: A financial gain that is expressed as the difference

between the money earned (by sales) and the money spent in
buying, producing or manufacturing a product.
Market price: The unique price on which buyers and sellers
agree to trade in a particular market.
Market skimming pricing: Setting a high price on a new
product for a start, in order to ‘skim’ the market, and lowering
the price as product demand increases.
Market penetration pricing: Setting a low price on a new
product, in order to penetrate the market quickly and
attract large numbers of buyers from the start.
Quality criteria
The quality of products in the agricultural market is
regulated by production and food safety standards and
product
grading and, therefore, quality would be one of the buying
conditions. One of the internationally recognised standards that
govern food production and safety is the Codex Alimentarius.
The buyer may insist on the product meeting these food
production and safety standards.
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Buyers who are aware of the risks of unregulated agricultural

markets tend to seek out markets that offer them standardised
goods. The most important driver in improving production and
food safety enforcement is based on trade agreements. If your
client wants to sell their products to buyers operating in
regulated markets, they must meet international conditions and
trade agreements.
Product grading: The process of sorting units of a product into

defined classes or grades of quality according to specified standards.
Codex Alimentarius: A collection of internationally recognised
standards, codes of practice, guidelines and other recommendations
relating to food, food production, and food safety.
Trade agreement: An agreement between two or more countries
that stipulate the terms according to which goods and services can
be exchanged.
Volume of sales by buyers

The agripreneur/farmer has to identify how much of a particular
product the buyer is prepared to buy for a particular period.
The volume of sales is influenced by factors such:
⚫ The quality and grading of the product;
⚫ Product price (e.g. the buyer may choose to buy more
products from a competitor whose products are
selling at a lower price);
⚫ Distribution channels and market access: if a product
is not easily accessible, it will not be sold; and
⚫ Conditions and purchasing power in the
economic environment.
Frequency of purchase
Frequency of purchase refers to the number of times that a buyer
makes a purchase from a supplier. Apart from the nature and
quality of the product, frequency of purchase is influenced by
factors such as consumer needs and requirements, market supply
and demand.
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Interviewing buyers
Once the agripreneur has spotted the gaps in the market,
conducted a market visit, assessed seasonal supply and demand
and identified the buying conditions, they have to approach
potential buyers for their products. One way of interacting with
buyers is by conducting interviews.
An interview involves an interaction between the agripreneur (the
interviewer) and the buyer (the interviewee). The agripreneur
asks questions about the market, products and customer needs
and preferences and the buyer replies.
Based on the type of questions that are asked, interviews may be
conducted in the following three ways:
⚫ Structured interview with set questions;
⚫ Casual and open interview with unstructured questions
asked in an informal setup; and
⚫ Semi-structured interview, which is a combination of
structured and unstructured questions.
Due to the fact that most agri-businesses are informal in nature,
your extension client will most likely use a casual and open
interview in an informal setup.
As an extension agent, you can teach your agripreneur
clients that the following steps are usually followed when
conducting an interview:
⚫ Always start with a greeting;
⚫ Explain to the respondent what the information will
be used for and point out the value of the interview;
⚫ Keep the atmosphere relaxed, even if you
are conducting a structured interview;
⚫ Try to adopt the language of the interviewees;
⚫ Make your questions clear, so that the
respondent understands exactly what is being
asked; and
⚫ It is important to keep the interview short.
If the respondent asks you not to reveal their identity then you
need to be able to assure them that their identity will not be
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revealed. Conduct the interview and keep to matters that are

relevant to the research topic. Once the interview is done, you
can close it off by thanking the respondent for their time and
information. In Table 5 you will find guidelines on what to do
and what to avoid during interviews.
Table 5: Interview guidelines
Do Do not
Be courteous; Continue an interview
unnecessarily;
Listen carefully;
Assume that an answer is finished
Maintain control;
or is leading nowhere;
Probe;
Use jargon;
Observe signals of
Reveal your personal biases;
nonverbal communication,
such as body language; Talk instead of listening;
Be patient; Assume anything about the topic
and the interviewee;
Keep the interviewee at
ease; and Influence the respondent; and
Maintain self-control. Use a tape recorder: it is an
indication of poor listening skills.
Creating the sales agreement
Once the buyer has been identified and interviewed, the
farmer and the buyer will have to enter into some type of
sales agreement. The sales agreement with the farmer or
agripreneur and the buyer—which can be a formal contract
or a simple handshake—serves as the basis of the
transaction between the seller and the buyer. It provides a
framework for
the way in which the transaction is to proceed and what is to be
included in and/or excluded from the sale.
The sales agreement has to include terms for the following
elements:
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⚫ Scope and duration of the agreement;

⚫ The obligations of each party to the agreement;
⚫ Consequences of failing to fulfil obligations;
⚫ Quality and grading of the product;
⚫ Prices and taxes;
⚫ Invoicing and terms of payment;
⚫ Delivery, risk of loss, handling and packaging terms; and
⚫ Terms of product return, if necessary.
Study the following example of a sales agreement between a
sample farmer and an enterprise for the cultivation of green
beans.
Sample farmer to enterprise contract for the cultivation of

green beans
1. General:
(1) Farmers of Village----------(the Farmers) wish to grow
green beans and enterprise---------------(the enterprise)
wishes to promote and buy their production and market it
overseas.
(2) This contract specifies the terms and conditions under
which the Farmers will grow green beans and the
enterprise will promote, purchase, process and market the
product.
2. The enterprise agrees to:
(1) Measure and assess the suitability of the plot proposed
by the Farmer for planting green beans.
(2) Provide high quality seed to the Farmer in good time
for planting, in the quantity required for planting the
accepted area of land.
(3) Supply on cash payment (or on credit once the Farmer
has qualified as an established and reliable contract
grower) the type and quantity of fertilisers and agri-
chemicals required for the area of green beans planted by
the Farmer.
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(4) Advise the Farmer on all technical aspects of

growing green beans.
(5) Buy all green beans of acceptable quality grown by
the Farmer, for a price announced at the start of each
growing season. The quality requirements will be as
described in Schedule 1.
(6) Pay the Farmer his/her dues as described in Paragraph
4 below.
3. The Farmer agrees to:
(1) Use the part of his/her farm that has been surveyed and
approved by the enterprise, for the purpose of growing
green beans for the duration of this agreement.
(2) Plant the bean seeds supplied by the enterprise on this
land, on the dates and following the procedures advised
by the enterprise.
(3) Follow all technical recommendations made by the
enterprise with regard to planting, irrigating, weeding,
fertilising, controlling pests and diseases, picking, sorting and
packing green beans.
(4) Sell all green beans of acceptable quality grown on
the farm to the enterprise, for the price and following
the procedure outlined in paragraph 4 below.
(5) Become a member of--------------------Farmers’ Group,
and to contribute to the maintenance of common facilities for
irrigation, input distribution, sorting, packing, etc., as agreed
by the group.
4. Payment for green beans and production inputs shall
be determined as follows:
(1) The base price at which each grade of green beans will
be bought will be announced by the enterprise at least
one month before the start of each planting season.
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(2) The prices at which fertilisers and agro-chemicals will

be sold will be announced at the same time, but may
fluctuate during the year in line with exchange rate
fluctuations.
(3) Payment for green beans delivered each month, less
the cost of fertilisers and agri-chemicals taken on credit,
will be made before the 15th of the following month.
5. Penalties and bonuses:
(1) If the Farmer delivers green beans which do not meet
the agreed quality standards, the enterprise will reject them.
The Farmer may re-submit them after sorting, but the
enterprise is under no obligation to accept beans which do
not meet the agreed quality standards.
(2) If the Farmer fails to follow the procedures detailed in
this agreement, he/she will be warned verbally and in
writing. After three written warnings the enterprise has the
right to terminate the agreement.
(3) If the enterprise fails to fulfil its commitments as detailed
in paragraph 2 above, the Farmer has the right to claim
compensation to the value of the services foregone or to the
value of the crop lost, at rates agreed between the
enterprise and the Farmers’ Group.
(4) If the Farmer delivers green beans which exceed
the required quality standards or the expected level
of
production, he/she shall be eligible for a bonus payment at a
level agreed between the enterprise and the Farmers’ Group.
6. Duration of the agreement:
(1) This agreement will last for one growing season from
the date of signing to the end of the economic harvest of
the green bean crop.
(2) If both parties are satisfied with the outcome of the
agreement it may be renewed for a further season, but
there is no obligation on either party to renew the
agreement.
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7. Dispute settlement:
(1) Any dispute arising as result of this agreement will
be settled wherever possible by discussion between
the enterprise, the Farmers’ Group and the Farmer.
(2) Any dispute which cannot be settled by this process
will be referred to an independent arbiter acceptable to all
the parties involved.
8. Signature:
I have read and understood the contents of this agreement
and I sign it of my own free will.
(Farmer)
(Enterprise)
(Witness)
(Date)
Schedule 1: Grades and quality requirements of green beans
1. Grade specifications:
(1) Grade 1 beans (extra fine) are from 6,5 - 9,5 cm in
length.
(2) Grade 2 beans (fine) are from 9,5 - 11,0 cm in length.
(3) No other sizes will be accepted.
2. Quality requirements: Acceptable beans must be:
(1) Free from pests, wounds, scars, bruises;
(2) Free from mud, dust or other debris;
(3) Not broken or damaged in any manner;
(4) Not bent;
(5) Picked with the remains of the calyx intact;
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(6) Fresh and not pre-wilted by sunburn or other sources

of heat;
(7) Naturally green, not tainted by disease, smoke, etc.
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Session 3.2: Managing key activities and

partners in a business
Session outcomes
⚫ Map out the key activities in the production
or development of a product;
⚫ Identify key partners;
⚫ Design an implementation plan; and
⚫ Monitor progress.
Introduction
Once the agripreneur/farmer is familiar with the process of
identifying market opportunities and interviewing buyers and
understands the key buying conditions, they should map out
the key production activities and key partners involved in their
business. In this session, you will learn how to manage key
partners and key activities involved in the agripreneur and
design and implement a strategy to monitor the progress of
the enterprise.
Mapping key activities in the production

cycle
The key activities involved in production or development
includes all the activities or tasks that are performed from
the point of selecting a product to the point of selling it to a
suitable buyer. These key activities may include:
⚫ Land preparation;
⚫ Planting;
⚫ Crop production and management;
⚫ Pest and disease management;
⚫ Soil and water management;
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⚫ Harvesting and drying; and

⚫ Sales management.
Once you and your client have identified the key activities
involved in their business, you can map them onto a calendar,
to know who does what, where and when. This information can
then be placed into an implementation plan.
Identifying key partners

Key partners in an agripreneur include:
⚫ Local agricultural research stations which can
give ideas and help with new technologies;
⚫ Farmers, lead farmers, farmer groups
and cooperatives;
⚫ Input suppliers who provide the products
necessary for agricultural input, such as seeds,
fertiliser, pesticides, etc.;
⚫ Collectors, who are small, local traders, who buy
directly from individual farmers;
⚫ Processors, who transform the product, e.g. feed
manufacturers and companies that package
frozen food, etc.;
⚫ Companies and retailers that buy the product, e.g.
wholesalers (such as supermarket chains), which sell
products to consumers;
⚫ Financial institutions, e.g. commercial banks,
microfinance institutions (MFIs), agricultural
banks and savings and credit cooperatives
(SACCOs);
⚫ Extension and business development services;
⚫ Regulatory agencies who are responsible for the
application of policies, regulations and standards
in the market; and
⚫ Customers who buy the final products.
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Microfinance institution: A financial institution that is

designed to work with households with smaller borrowing capacity
than clients of commercial banks.
Agricultural bank: A bank that started as a government-owned
institution that provides credit for investments in agriculture and
other production activities.
Savings and credit cooperative: A member-owned and
member-governed savings and credit institution that was developed
to empower poor communities to manage their own financial
resources.
Designing an implementation plan

The implementation plan can be designed according to the
template in Table 6.
Table 6: Implementation plan template
Area Activities People Timeframe Costs
responsible
Production
Post-harvest
processing
Marketing
Sales
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Monitoring progress
It is important to measure the progress of the agripreneur to
establish whether production, financial and sales objectives
and targets have been met and to plan for the next season.
Monitoring and recording progress provides the following
information:
⚫ Whether production targets were met;
⚫ If cost and price targets were met;
⚫ Whether the enterprise made the expected income and profits;
and
⚫ If anything should be done differently.
Table 7 shows a template that you can use to monitor progress.
Table 7: Progress monitoring template
What needs
What went well?
improvement?
Business plan
Pre-production
Production
Post-harvest
Marketing
Profit analysis
Recommended
changes
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Session 3.3: Business planning: From

canvas to business plan
Session outcomes
⚫ Use the business canvas to help design your
client’s business;
⚫ Define the value proposition;
⚫ Define your client’s customers;
⚫ Use calculators and digital applications in cost and
revenue calculations; and
⚫ Identify your client’s investment needs.
Introduction
The focus area in this session is the business plan. You will learn
how to use the business canvas to help your agripreneur clients
design a business plan, after which the definition of the value
proposition and how to identify customers will be discussed.
The session is concluded with a discussion on how to identify
investment needs and how to use calculators and digital
applications to help with costs and revenue calculations.
Using the business canvas to design your

business plan
A typical business plan consists of three parts, each with
several subsections:
Part 1: An outline of the business:
1. Introduction;
2. Business organisation;
3. Product;
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4. Marketing strategy;
5. Risks; and
6. Business operation plan;
Part 2: Financial data and analysis:
1. Marketing costs;
2. Income streams; and
3. Profit and loss analysis; and
Part 3: A loan analysis (if the group wants to borrow money):
1. Financial requirements.
Purpose of the business plan

The main purpose of a business plan is to:
Guide the enterprise over the long-term
A business plan brings ideas and decisions together and puts

them in concrete form in one document to guide the direction of
the agripreneur or farmer group.
Facilitate understanding and agreement
Despite intensive discussions, members of the farmers

group may have different understandings of what the
group aims to do. A business model canvas session helps
farmers to identify how their ideas fit together and this
first organization of information helps them to prepare a
business plan which will clarify the strategy and remove any
misunderstandings.
Improve organisation and decision making
Because a business plan follows a certain structure, it helps

the group to make sure it has collected and organised all the
information that it needs in a suitable way, which makes
decision- making easier.
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Test and strengthen financial feasibility
The business plan requires the farmer group to compare its

resources and income to its costs and expenditures and it shows
whether the enterprise can make a profit.
Measure performance
The business plan gives the group clear targets and group
members can use these targets to monitor their performance and
make changes in the production season, if the original plan needs
to be amended.
Ensure continuity
Farmer groups elect their officials every year or two. A business

plan ensures that a new group of managers can take over
operations smoothly, reducing the risk of disruptions and
abrupt changes in direction.
Sell the enterprise
Business partners, such as major suppliers, contract

partners, big customers and business services, may want
evidence that the group has thought its business plan
through and that the business will be a viable concern. A
business plan gives
them the information and assurance they need.
Convince lenders and donors
Banks and microfinance institutions want evidence that

the group’s enterprise will be profitable before they will
agree to lend it money. They usually require a business plan
as a condition for a loan. Donors also want to be confident that
the group is viable, and a business plan can be evidence of this.
Guide implementation
The business plan shows what the group needs to do to achieve

its goals. It keeps the members and the management focused on
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what has been agreed upon and it acts as a framework for

the group’s implementation plan (i.e. the list of tasks and
activities the group members have to do each year or
production cycle).
Visualising a business plan

Before asking farmers to design and compile a formal business
plan, it is helpful to give them some tools to visualise their
business plan and to define the different parts of a business
plan. This will help them to understand how a business plan is
built from basic parts and to understand how the
components/parts of a business plan fit together. This visual
method to help design a business plan is the model canvas,
shown in Figure 19.
Value proposition
Key activities Customer relations
Key partners
Customer segments
Channels
Key resources
Costs
Revenue streams
Figure 19: The business
canvas
This method has been adapted to fit the situation of
small-scale farmers in developing countries and is shown
in Table 8.
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Table 8: The nine areas of the model canvas
1. Customers – These are the buyers of

the product, such as traders or consumers.
For most products, there is more than one
type of customer. For example, a
supermarket may buy the highest grade
output, but the lower grades will have to
be sold in a local wholesale market and
lowest quality used to feed animals.
2. Value proposition (product) – This is
a statement that clearly and concisely
describes the unique value of a firm or
group’s products. It states the
firm/group’s core objectives, which set it
apart from the competition. In most
cases, the value proposition focuses on a
specific product that the farmers plan to
produce. Products may include things like
maize or milk.
3. Channels – These are indications of the
way in which the group plans to deliver
the product to the buyer, e.g. by having
members deliver to a village collection
center ready for pick-up.
4. Customer relationships – These indicate
how the group plans to identify buyers
and create and maintain relationships
with them, through basic agreements,
alliances and or contracts.
5. Income – This is the money the group
earns from selling the product.
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6. Key resources – These are the inputs

and resources that the group uses to
produce the product and they include land,
equipment, seed, fertiliser and labour, as
well as the group’s internal organisation.
7. Key activities – These are the activities
that the group plans to do to produce the
product, e.g. planting, crop management,
harvesting and drying.
8. Business services and partners – These
are the services and partners that the
group uses to produce and market its
product, such as input suppliers, the
agricultural extension service and a
microfinance institution.
9. Costs – These are the costs that the
group incurs in order to produce and
market the product.
How to use the business model canvas

The canvas consists of a large sheet of paper divided into
nine areas, shown in Figure 20. Each section represents
one aspect of the enterprise, as defined in Table 8. Using
the canvas with their business advisor is a helpful way for
farmers to think about and plan their enterprise. The
farmers can debate ideas and then using sticky notes
farmers can write down their ideas and fill this information
into the corresponding section on the canvas. For example, the
first area to fill is the customer section. Who are the customers
and where are they located? Then the team will fill in their
definition of their value proposition, this information goes into the
centre of the canvas. Following this process, the farmers can fill
in the canvas and then make decisions about how to improve the
parts of the business plan, to make their best strategy.
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8 7 2 Value proposition 4 1
Business Key activities describes the unique Customer Customers
services value of products/services relationships (buyers)
and being offered (promotion)
partners 6 3
Key Channels
resources (place)
9 5
Costs Income
(price)
Figure 20: A model canvas

A partially completed example is shown in Figure 21 below
from an example in the LINKS methodology book. For many
farmer groups, this level of information along with a strong
implementation plan is sufficient to launch their agripreneur.
Figure 21: Example of a partially completed business model

canvas
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If, in preparing the business canvas, the team finds that there
are gaps in their knowledge, they may have to find a way to fill
in the gaps, by collecting missing information from additional
interviews or seeking advice from other people with knowledge
and experience in this market.
There are also situations in which the group finds that they
need additional financial resources to start the business. In this
case, a more formal business plan is required, as this will be
used to make an application for a loan from a financial
organization. See next section on writing a business plan.
Writing a business plan

Once your clients have collected all the information they need,
for example, using the information gathered in the market
survey and the information from the business canvas, the next
step is to write a business plan. Having prepared the business
canvas, all the teams needs to do is to put the right pieces of
information in the right place. The business plan is more
detailed than the canvas and if in the process of writing a
business plan, the team identifies questions that the group has
not yet thought through, they may have to stop writing in order
to discuss these
issues and either collect missing information and/or make the
necessary decisions.
Table 9 provides the basic sections of a business plan with
the basic information and explanatory questions that are
associated with each section. If your clients have used
the business canvas to organise the information, they
can
now write down the information into the standard format,
as outlined in Table 9.
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Table 9: Content of the business plan
Subsections Key questions

Introduction Project Name Name of the agri-enterprise
team and goal of the
business
Address What is your contact
address?
Phone number What is your phone number?
Business Vision and sales What is the vision of the
goal enterprise?
Goal = Sales targets
Describe the How long has this group
business been in existence?
Is the group registered?
Name the key Chair person;
positions in the
Treasurer;
business
Secretary;
Lead farmer; and
Market agent, etc.
Number of What is the number of men
members by and number of women in the
gender group?
Current savings/ Latest financial statement
bank statement and savings levels (if any).
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Value Product name What product will you sell?
proposition
Existing/new Is this an existing product
(Product) or a new product being
offered by your group?
Benefits to Why is the buyer(s)
buyer interested in product?
What is unique: Is it cheaper,
better quality, local, or are
there other benefits, or
advantages?
Marketing Define target Who is your target market
strategy market (local, district, national or
introduction supermarket)?
Location How far is this market from
the production site (km)?
Market type Is this an existing
market or a new market
for your group?
Describe Who is your buyer—type of
customers trader, or processor?
Product Describe the Explain attributes of the
key product product (variety, quality,
attributes packaging, etc.)
Price Describe price How will the price be
setting established?
What is the offer price,
contract price?
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Place How will you Sales team;
get product to
Street vending;
market?
Carry;
Pick up;
Cycle; and
Lorry, etc.
Promotion How will you Voice;
promote your
Phone;
product?
Through a trader; and
Person-to-person contacts,
etc.
Market risks Identify key What are the key risks to the
risks to plan action plan?
How can the risks be
overcome?
Risk mitigation Are there ways of minimising
plans the risks?
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Business Describe your Describe the step-by-step
operation business flow activities from production to
plan sale.
Pre-production Input procurement and
activities nursery.
Production Ploughing, sowing, and
activities weeding.
Post-harvest Drying;
activities
Sorting; and
Storage, etc.
Marketing Buyer linkage;
activities
Negotiation; and
Transport, etc.
Key partners Partners may include
extension agents, input
supplier, transporter, etc.
Key resources Land;
Labour and staff;
Crops; and
Processing methods, etc.
Production Total material Calculate costs per season/
costs costs year
Total labour Calculate costs per season/
costs year
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Income Projected sales Planned sales volumes: Give
streams volumes clear units of sale, e.g. 100
kg bag.
Projected sales Selling price of product.
price Give dollar conversion: 250
shillings/bag = $1/bag.
Estimate season Estimate seasonal sales.
income
Profitability Gross margin Calculate gross margin and
net income.
Fine tuning Strategies to What changes can be made
increase profit to increase gross margin?
Financial Startup capital How much capital do you
requirements requirements need to start the business?
Capital funds How much capital do you
available and your members/partners
have?
Capital funds How much capital are you
required lacking?
Method to raise How can you raise the funds
funds that you are lacking?
Using calculators and digital applications

in cost and revenue calculations
Financial calculations such as costs of production and sales
revenues can all be calculated by hand using basic mathematics.
However, to speed up the calculations and help the farmers, in
terms of accuracy, an extension worker should show farmers how
to do basic calculations using a calculator. Most mobile phones
have a basic calculator that will perform functions such as adding,
subtracting, multiplication, division and percentages. These
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functions are normally all that is needed to add up all the costs
and subtract the total from the total revenue figures to arrive at a
gross margin.
There are also some financial applications that will allow farmers
or field agents to make calculations using mobile financial
applications. If farmers use this type of application, they can
share the information with others and their extension agents by
saving their calculations and sharing them, using their phone.
Identifying investment needs

When starting a business, one of the key decisions that an
entrepreneur has to make is deciding whether they would need
external financial assistance of some sort, such as investments. In
terms of investment needs, an agripreneur needs to determine:
⚫ How much money is required to start the enterprise?
⚫ How much money does the enterprise team have?
⚫ How much does it need?
⚫ When will it see its first revenue?
⚫ When will it break even?
⚫ When does it see profit?
The key concepts in determining investment needs are income
and expenses. Your clients need to determine how much
money they earn in a typical season from a specific product
(i.e. income) and how much they need to spend on a
product during the season (i.e. expenses).
See Session 4.1 for more information on investors.
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Study unit 4: Financial management,

sales and risk management
Study unit outcomes

⚫ Identify sources of finance, including:
◦ Savings;
◦ Self-help groups;
◦ SACCOs;
◦ Family lending;
◦ Local money lenders;
◦ Micro-finance institutes;
◦ Banks; and
◦ E-money/e-credit;
⚫ Manage financial resources and insurance;
⚫ Perform sales operations; and
⚫ Conduct a risk assessment.
Study unit overview

This study unit is designed to provide extensionists
with knowledge about sources of finance and how to
match specific types of finance with required levels of
investment, explore sales strategies and help farmers to
assess risks in managing their financial resources.

Completing this module will allow you to identify and match
farmers with specific types of financial services, manage financial
resources and link these ideas to sales. The module will also
provide you with a basic guide to risk assessment. These
skills will enable you, as an extensionist, to identify the most
appropriate types of financial services and service providers to
support investments for farmers and farmer groups.
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Session 4.1: Identifying sources of

finance
Session outcomes
After completing this session, you should be able to
identify the main sources of finance, including:
⚫ Savings;
⚫ Self-help groups;
⚫ SACCOs;
⚫ Family lending;
⚫ Local money lenders;
⚫ Micro-finance institutes;
⚫ Banks; and
⚫ E-money/e-credit.
Introduction
The agripreneur has access to a number of finance sources,
which will be discussed in this session.
Savings
Saving involves putting money aside or spending less
money today, so that you can use it in the future. There
are different saving services available from which your
client can choose, depending on their financial goals.
Criteria for evaluating savings options

Your client should keep the following criteria in mind when
evaluating and selecting savings options:
⚫ Liquidity is how easy it is to turn an asset into cash, e.g.
liquid assets (such as cash kept by the individual), can be
used immediately, whereas less liquid assets (e.g. animals)
first have to be sold, before they can be turned into cash and
used to make a purchase;
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⚫ The risks associated with savings

indicate potential of savings losing Liquidity:
their value, based on varying market A measure of
prices; how easy it is to
⚫ The cost associated with savings is convert assets into
the price of the savings service, e.g. cash.
banking fees charged on savings Asset: An
accounts; economic resource
⚫ The profit associated with savings is with economic
how much a person earns from their value.
savings in the form of interest; and
⚫ Accumulating assets is how easy it is to
increase a person’s savings, e.g. by making deposits to add to
an existing savings account.
You can distinguish between informal and formal savings services,
with formal services (such as commercial banks) being regulated
by government.
Savings options and services

The informal saving options that the agripreneur can use
involve money being saved and kept at home (although this
savings method has risks), or savings being kept as goods
(assets), such as animals, grain or a house, which is a safer
option than saving in cash.
Self-help savings groups
The best-known examples of self-help savings groups

(which are also informal savings options) include
Rotating Savings and Credit Associations (ROSCAs) and
Accumulating Savings and Credit Associations (ASCAs)
or Savings and Internal Lending Communities (SILC).
Note:
⚫ ROSCAs are groups in which the members contribute a
particular amount of money at regular intervals (e.g. monthly)
and every member gets a turn to take the contributions of all
the members;
⚫ ASCAs, also known as savings groups, consist of 15–30 self-
selected members who make savings contributions at regular
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meetings (e.g. weekly) and members may request loans from

these contributions; and
⚫ SILC groups save on a weekly basis and can also take loans
from the group savings, which they repay at an agreed
interest rate, for example 10%. The SILC has an annual
share out, where each member receives the amount they
saved, plus a share of the interest that group has received
based on the internal lending rate. Farmers who are in a
SILC group can time their annual share out to coincide with
the planting season so that they can pay for part of their
inputs, such as seeds and fertiliser, from their savings and
thus avoid borrowing to buy these essential resources.
Savings and credit cooperatives (SACCOs)
SACCOs provide financial services and savings options to millions

of people in many countries; particularly to people in low-income
groups. SACCOs are user-owned financial institutions in which
members, who have equal voting rights, are from the same
geographic area, community, or the same employer. The main
services of SACCOs are savings and credit.
Choosing a SACCO as a savings option has the following
benefits:
⚫ SACCOs reach clients and areas that are of little
interest to commercial banks, e.g. low income
clients in rural areas;
⚫ SACCOs often start locally, without any external
support;
⚫ The small savings accounts provide a stable and
low cost funding source; and
⚫ They have lower administrative costs than other
financial services providers.
The main disadvantage of SACCOs is inadequate regulation and
supervision, which may result in instability.
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Family lending
Family lending is a private loan option in Interest:

which family members (e.g. parents and Money paid
children) make loans to one another— regularly (at a
often without a formal agreement or particular rate
interest being paid on the loan. It is that is expressed
important that the family members agree as an annual
on a repayment plan for these loans. Many percentage) for
farmers take advantage of this to support loans or paying
part of the farming business. debts.
Local money lenders and traders
A local money lender is a non-institutional individual (i.e. non-

bank) or a small enterprise that loans money to individuals. Local
money lenders are known for granting loans to any individual or
small enterprise, if the risk is reasonable, but their loans involve
extremely high interest rates.
Many input suppliers and traders double up as money lenders.
Farmers often develop long-term relationships with their
trader/ input supplier to lend them inputs on credit. This credit
is generally given on the condition that the farmers sell their
produce back to the same trader at the time of harvest and
part of the revenue will be withheld to cover the input
costs.
On the one hand, this system is a vital source of credit
for millions of farmers, but it is also a cause of chronic
and persistent poverty as farmers do not receive good
prices when they sell back through their lending agents.
Micro-finance institutes
Micro-finance institutes provide financial services and loan

options to households and small enterprises with smaller
borrowing capacity than clients of commercial banks. Micro-
finance systems have made a significant difference to many small
business owners in urban situations; probably more so for
women than for
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men. Many organisations working with farmers have elected to

work with savings schemes as micro-finance institutes have
not invested in the agricultural sector.
Using micro-credit has the following disadvantages:
⚫ At present very few micro-finance institutions lend in rural
areas, and it is rare that they lend to farmers;
⚫ The costs involved in microcredit is high, partly because one
is dealing with a large number of small loans;
⚫ The lending conditions are limited, in that the loans are
short- term and for small amounts only, which makes micro-
credit a less suitable option for agri-business management;
farmers need multi-disbursement loans, which few MFIs
offer;
⚫ Some micro-credit systems offer loans only and the
importance of local savings is sometimes underestimated; and
⚫ Some people (particularly the poorest people) are excluded
from micro-financing.
Commercial banks
Commercial banks are profit-based, financial institutions that are

legally authorised to offer various financial services, to receive
money from, and to lend money to individuals and businesses.
Commercial banks are authorised to provide the following
financial services:
⚫ Accept deposits from customers into savings and
cheque accounts (current accounts), as well as
fixed deposits in which an amount of money is
deposited with the bank for a fixed period;
⚫ Grant different types of loans to customers, e.g.
short- term loans and demand loans, which the bank
can recall on demand at any time;
⚫ Grant overdrafts on current accounts; and
⚫ Provide bonds, which help clients buy property.
Overdraft: A short-term loan that allows a client to draw

more money than what is available in his/her current account
up to a certain limit.
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There are some banks that lend to farmers, but these are mostly
specialised banks who lend to more commercial farmers and
often need collateral to cover the loan payment. Few smallholder
farmers access credit through commercial banks. Their loans are
too small to be viable for most banks and the risks are too high.
E-money/e-credit
E-money—also referred to as electronic

money, electronic cash and digital cash— Remittance:
is electronic money that is exchanged Transfer of
electronically using a mobile phone. money across
M-Pesa (e-cash) and m-Kopa (e-credit) national borders
are examples of e-money systems. by migrant
The M-Pesa financial service (M for workers.
mobile, Migrant worker:
pesa is the Swahili word for money) A person who
was first introduced in Kenya in 2007, moves from place
where the service has become the to place to find
main way of sending millions of small work, e.g. farm
cash transfers from urban centres to labourers who
rural communities. The service allows harvest crops
users seasonally.
to deposit money into an account stored
on their cell phones and send balances
by using SMS technology to other users,
who could redeem these deposits for regular money
at payment kiosks across the country. In its first two
years of operation, M-Pesa reached nearly 40% of
the adult Kenyan population. The M-Pesa service
currently
operates in several countries and supports more than 9
million users. By facilitating the safe storage and transfer
of money, it supports mass remittance flows and helps local
trade, by making it easier to pay people with security, and to
receive secure and rapid payment for goods and services.
Digital wallets: several companies are now offering farmers an
opportunity to save electronic money in e-wallets. In some cases
these savings schemes are linked to the procurement and delivery
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of goods and services. For example agencies such as MyAGro,

One Acre and Esoko now offer input supply based on savings in
electronic wallets.
Established in 2011, m-Kopa provides loans to buy products such
as solar lights and solar mobile phone charging stations. This
service allows customers to build a credit history and, over time,
take out larger loans to buy a high efficiency cooking stove or a
solar home system, for example. The new solar home systems
also contain machine-to-machine technology with an e-money
payment solution. The system includes embedded Global System
for Mobile Communication (GSM) technology for monitoring
and metering usage, while its pay-as-you-go service carries the
advantage of no large initial cash outlay. After an initial deposit,
customers pay daily instalments via M-Pesa, until they have paid
off the balance. The m-Kopa system is currently available in 750
outlets nationwide in Kenya.
Investors
An investor is an individual or an institution who places money
into a particular business in return for an ownership, partner
stake or share of the profits in the business.
Investors in the agricultural sector

The agricultural sector plays an important role in
economic growth and development and investment
in this sector has been proven to be an effective
way of addressing poverty and improving food
security.
The following factors contribute to the increase in the
demand for agricultural products and, therefore, investment
opportunities in the sector:
⚫ The increasing demand for food produce, which can
partly be seen as the result of population growth and
longer life expectancies; and
⚫ Increases in the purchasing power of populations in emerging
economies as countries urbanise.
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These combined factors have caused increases in food demand

and changes in food consumption towards higher value products.
Agriculture and rural development investments come from a
variety of sources, including governments, financing institutions,
donors, foundations and the farmers themselves. Extension
agents may be able to find investors in your local community,
business and trade organisations and increasingly from richer
urban people who want to invest in farming operations and
enterprises. The local Chamber of Commerce and regional and
state economic development agencies can provide resources. If
you have a Small Business Development Centre in your area,
they may be able to help you find investors
You can find more information on agricultural investment on
the United Nations Food and Agriculture Organisation (FAO)
Investment Centre website via this link:
http://www.fao.org/ investment/investmentcentrestaff/en
KIVA: is a company which offers agripreneurs the opportunity
to offer their business plans onto an online investment platform.
If people like the plan, they will offer parts of the required
amount needed to the company. Once the desired figure is met,
through multiple online investors, then the agripreneur will
receive
the funds. These funds may be offered in tranches and the
agripreneur will receive these through a local financial
service provider such as an MFI. https://www.kiva.org/
Impact investors
In addition to the traditional types of investors,
there is now a new class of investors, who want to
focus
on impact in their investments. The new type of ‘social
investor’ is looking to invest funds in social businesses or socially
minded enterprises that show clear social benefits in terms of
environmental gains, helping under-privileged people, but also
gaining an economic profit. Due to the nature of these types of
investments, the investors typically seek a social rate of return,
rather than a market rate of return. This distinction is sometimes
difficult to determine, but it could be that a social rate of return is
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set at 1–3% as compared to an expected market rate of return of 5–

15%.
For the agricultural sector, impact investing is of interest, as it
may offer a new source of investment in both short-term trade
finance and longer-term infrastructure investment. The aim of the
investment is to find new ways of capitalising a sector to
accelerate and scale growth, in comparison with the failure of
traditional investment and banking support in smallholder/
development agriculture.
Impact investing: Investments made into companies,

organisations and funds with the intention to generate a
measurable, beneficial social or environmental impact alongside a
financial return.
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Session 4.2: Managing financial

resources
Session outcomes
⚫ Separate household and business finances;
⚫ Identify a seasonal calendar for financing needs;
⚫ Calculate the production costs of a product/service;
⚫ Price a product;
⚫ Work on mark-up levels;
⚫ Forecast money needs;
⚫ Explain the concepts of revenue and profit; and
⚫ Manage cash flow.
Introduction
This session focuses on financial management and the tools that
the farmer or agripreneur can use to improve their financial
management skills. Methods include the seasonal calendar, the
budget and money needs forecasting. The concept of pricing
products and mark-up levels are also addressed, as well as
how to calculate production costs and manage cash flow.
Separating household and business

finances
Expenses are money that is spent. It is important that you
show your clients how to plan their expenses for a particular
period, in order to cover all major expenses and achieve financial
goals. The agripreneur also has to separate their household
expenses from their business expenses.
The money that is spent on running and managing a household
is called household expenses, e.g. housing, food, transportation,
school fees, medical needs, telephone accounts, electricity
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services, etc. All the costs associated with your client’s livelihood
are business expenses.
For smallholder farmers, the difference between business and
household expenses is not always clear, because they pay all
their expenses from the same pool of money. For example, a
farmer may have transportation expenses both for his business
(to
bring the goods to the market) and for personal needs (to visit a
relative).
You can show your extension clients how to keep household and
business expenses separate in the following ways:
⚫ For individuals, ask them to keep separate records for business
and household needs, or, in the rare cases where they have a
bank account, keep separate bank accounts for the household
and the business, so that the client has two sets of financial
statements;
⚫ Keep financial documents for the business and the household
in separate filing systems or folders;
⚫ Give themselves a salary from the income that they earn
and do not exceed that when incurring household expenses;
and
⚫ Set a budget for the business using the following steps:
◦ Step 1: Keep track of their daily income and all
their expenses;
◦ Step 2: Determine sources of income and
estimate their total income; and
◦ Step 3: Select expenses and estimate their costs.
Where possible, a farmer group or cooperative should
set up a bank account so that all the financial records are
kept in a secure location. The farmer organisation should
also elect one of its members to be the financial secretary.
This is an important role within the organisation and this person
should keep all financial documentation and statements and share
this information on a regular basis with the members.
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Create a seasonal calendar for financing needs

Farmers and agripreneurs do not usually
have a steady income, because they Seasonal
make most of their money after the income: Cyclical
harvest, which means that they have a income patterns
seasonal income. Farmers should try to involving earning
save as much as possible after receiving money only during
their harvest income and plan their some parts of the
income and expenses ahead of time. year.
A seasonal calendar makes it possible

for farmers to identify when they will have little work, scarce
resources and low income levels. As you learned in Study Unit 2,
a seasonal calendar is a record of the expenses and income of a
business over a year. The seasonal calendar provides the farmer
with a helpful (and visual) overview of their financial situation for
an entire year.
A seasonal calendar helps farmers link the specific seasonal
trends in their income and expenses throughout the year.
Recording and comparing expenses to income will give the
farmer a good idea of their personal financial patterns throughout
the year. Making a financial seasonal calendar will help them plan
their finances throughout the entire year, which, in turn,
helps them to save more during months when they have
extra income to cover expenses for months when they
expect to have a shortage.
Categories in the seasonal calendar

The seasonal calendar can be seen as a rough budget for a
year that covers the six key categories discussed below.
Season
A season is a specific period in the year that is characterised

by particular weather conditions and temperatures, such as
summer, winter, or hot and dry and rainy seasons. The
annual
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weather is also linked to specific agricultural activities such as

planting season, harvest season and growing season, as shown in
Figure 22. Farmers who grow many different types of crops and
raise animals on their farms need to plan for the production of
different products throughout the year.
To improve their financial management, farmers need to plan
both their farming activities and record the finances for each of
their individual enterprises on the farm. This may include costs
for production of coffee in some fields, costs for maize and
beans produced in another field and the costs of vegetable
production in other parts of the farm. Animal production will also
be a part of the overall costs. There will be revenue streams and
profit for each of these separate products.
When starting a financial calendar, it may be more practical for
a farmer to start with gathering records for the most important
cash crop, such as maize, coffee, or cotton. This will enable the
farmer and extension agent to gather information carefully on
one product before thinking about multiple cost and revenue
streams.
For farmer groups, the financial calendar may be less
complicated, as farmer organisations tend to specialise in
a limited number of products. The farmer organisation,
however, has to plan their seasonal calendar several
months in advance of the activities, as they may need to
pre- order inputs such as seeds, fertiliser and agro-
chemicals several weeks ahead of the time that farmers
need them.
Loans
There are times when it is not possible to earn and save

enough money to cover all expenses during low income periods
or periods of high expenses. During these times, the farmer may
need to take a loan to cover all their expenses. By recording
these borrowing patterns, the farmer can foresee their needs in
advance and find the most suitable loan for their particular
situation.
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Figure 22: Example of a crop calendar for rice production

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Income
Income refers to the money that flows into an enterprise as the

result of selling goods and products or providing services. By
writing down how much money comes in during each season,
farmers and farmer groups can see when they receive the most
money and identify the times when there is little or no money
coming in.
Household expenses
Household expenses are the money that the farmer spends

on running and managing their households. Similar to
income, household expenses also fluctuate throughout the
year. For example, during the dry season, food costs go up.
Business expenses
Business expenses refer to all the costs involved in the farmer’s

livelihood. During harvest time there are more costs, but there
also is more work and, therefore, higher income. Planting season
also has additional costs.
Savings
In periods when income is high, farming families should

try to save money that can be used during low income
periods. If farmers are in a savings and loans group or
SACCO, they may commit to a more regular
savings approach.
Arranging finances when working as a

group
As with households, groups also need to undertake the same
types of analysis for their costs, revenue and profits for a specific
product. The key difference between recording financial data for
a group versus an individual household is the structure. The
group is an aggregation of information across the group
members.
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Farmer group costs and revenue

For a farmer group, there are group costs as well as individual
costs. When an extension agent works with a farmer group, the
financial records will be based on an aggregate set of figures.
For example, if there are 20 farmers in a group, the costs for
the farmer group will be based on the sum of the 20 farmers.
Revenue for the group will be based on the sale of all the produce
that the 20 farmers in the group sell. This aggregate figure
may not include all the sales of an individual farmer, as most
farmers sell part of their production through a group and part as
individuals.
The income for the group will be the aggregate value of all the
produce sold through the farmer organisation. Generally, the
group will get higher unit prices for its sales per unit of product,
because it is selling a bulked, cleaned and sorted product,
whereas farmers tend to sell small amounts as individuals and
small lots generally attract low prices.
One of the other key differences for groups and individuals is
the timing of payments. Although individual farmers sell small
lots at lower prices, they usually get paid on delivery by small
traders.
That timely payment has considerable value to farmers
who owe debt after a long production season.
When selling through a group, farmers get paid at the
end of the season, when the main sales have taken place.
It may take several weeks between farmers delivering
their goods to a group store and the time they
receive payment.
The role of the extension agent is to help farmers fully
understand the value of collective marketing and how this
approach can help them to increase their revenue. However,
this gain in price comes at the opportunity cost of being paid
later in the season.
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Inventory credit
To overcome the frustration that farmers have with collective
marketing and the delay in time between delivery and payment,
many organisations with access to external credit, set up systems
such as an inventory credit scheme. This
system is similar to, although less complex
Warehouse
than, a warehouse receipt scheme. For
receipt: A
inventory credit, the farmer agrees to a
document that
part payment for their goods on delivery
provides proof
to the store, e.g. 60% of the market
of ownership of
value. This sum is paid to the farmers, so
goods or products
that they can make good on their debts
stored in a
and prepare for other farm enterprises.
warehouse.
The farmer organisation provides the
farmer with a document that indicates the
amount delivered and the partial price
paid.
When the group sells their inventory at the end of the season,
the difference between the sales price and the part payment is
made up to the farmers. In this way, farmers are able to continue
with their multiple agripreneurs and the farmer organisation
avoids loss of product through side selling.
Side selling is a common practice when farmers, who

agree to sell their produce through an organisation that
then forms an agreement or contract with a buyer, feel
they can get a better price as an individual. Rather than
selling through the farmer organisation, they side sell to a
second buyer. This can mean that the farmer organisation
does not have sufficient produce to meet their
agreements and so they must default.
Farmer group profit

The profit from a group is more complicated than
household calculations and it typically means that one of
the members of the group is responsible for maintaining
financial records.
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The profitability of the farmer group is calculated from revenue

received from sales of the farmer production, minus the group
costs incurred. These may include:
⚫ Costs of any inputs that are procured and offered to members;
⚫ Partial payments made to farmers prior to the main
group sales;
⚫ Costs of conditioning the produce, such as drying, cleaning,
destoning, bagging, fumigation;
⚫ Storage costs;
⚫ Marketing costs; and
⚫ Organisation costs.
Group profit statements

The profit statements for the group can be calculated on a
monthly basis, with the end of season/year profit statement being
of most interest to the members. The profit will be calculated at
the group level, with revenue and stock statements for members.
There are times when it is not possible to earn and save enough
money to cover all expenses during low income periods or
periods of high expenses. During these times, the farmer may
need
to take a loan to cover all their expenses. By recording these
borrowing patterns, the farmer can foresee their needs in
advance and find the most suitable loan for their particular
situation.
Calculating the production costs of a

product/service
Production costs are all the costs involved in producing or
manufacturing a product or delivering a service. Knowing the
production costs of your client’s products or crops is important, in
order to:
⚫ Determine how well their business is doing;
⚫ Evaluate how efficiently resources are being used in their farm
operations;
⚫ Predict how their business will respond to specific changes;
and
⚫ Make decisions for attaining their goals.
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It is important to note that production costs refer to direct

costs only. Direct costs relate to the production process. An
indirect cost may be necessary to make or produce a product,
but it cannot be traced directly to the specific product, e.g.
property taxes, rent, electricity services, insurance, etc.
Examples of direct costs are:
⚫ Costs of the materials needed to produce the product (e.g.
crop), which may include seed, fertiliser, irrigation water,
etc.; and
⚫ Labour costs are the total costs involved in paying workers,
who are directly responsible for the production process,
e.g. salaries or wages, payroll taxes and pension fund
contributions.
You calculate the total production costs of a product by adding all
the direct costs involved in the production process.
Pricing a product
There are several factors to consider when pricing a product:
⚫ Market prices: find out what customers are paying
for a product in the market, (traders, consumers,
etc), some countries have regular market price
information services;
⚫ When making decisions on the price, it must cover
the production costs and the marketing costs of
the product;
⚫ The product has to be priced at a price that the buyer
is willing to pay;
⚫ Pricing is influenced by government regulations, as
well as the price offered by competitors; and
⚫ Market perceptions play a role in agricultural pricing,
e.g. crop failure because of drought may result in
traders buying as much as they can store,
anticipating scarcity and an increase in price, thereby
making the shortage worse and cause further price
increases.
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There are three main pricing strategies that are used in the
agricultural sector: cost-based pricing, value-based pricing
and competition-based pricing.
Cost-based pricing
In cost-based pricing, the product price includes the operating,
manufacturing or production costs of the business. Once the
production costs have been calculated, add the profit level that
needs to be achieved to the production sub-total to determine
the price. The amount of profit added to the production sub-total
is set according to the following three methods:
⚫ Include a profit percentage with product cost (mark-up
pricing);
⚫ Add a percentage to an unknown product cost (cost-
plus pricing); and
⚫ Price is a blend of total profit and product cost (planned-profit
pricing).
Value-based pricing
Value-based pricing is based on the customers’
perception of the value of the product. This involves
customer preferences, convenience, product quality and
benefits, as well as alternative products offered by
competitors. The agripreneur has to try to establish the
maximum price that the customer or buyer is prepared to
pay for the perceived quality and benefits of the product.
In order
to determine the attitude of the target customers, the
agripreneur may ask the following questions:
⚫ Does my customer assume that price indicates product
quality?
⚫ Will customers think that they are getting their money’s
worth from my product?
⚫ What are my target customers prepared to pay for
my product?
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Customer-based pricing methods include:

⚫ Using price to support product image;
⚫ Setting price to increase product sales;
⚫ Designing a price range to attract many buyer groups;
⚫ Setting price to increase the number of sales; and
⚫ Pricing a bundle of products to reduce stock or to
excite customers.
Competition-based pricing
In competition-based pricing, the farmer or agripreneur focuses
on their product and, therefore, on their existing and emerging
competition. Once they know what their competitors are doing,
they can decide how to price their products.
Understanding the competition to an agripreneur involves
knowing:
⚫ What your clients are buying and selling;
⚫ The types of sellers or companies that your clients
compete with (i.e. their direct competition);
⚫ The number and types of substitutes (i.e. their
indirect competition); and
⚫ How companies operate in the agricultural industry.
Your client can use the following three strategies
in competition-based pricing:
⚫ Pricing their product the same as that of their
competition, if they want to make it comparable to
the products of the competition;
⚫ Set their price to increase their customer base (i.e.
penetration pricing); and
⚫ Set their price to obtain a larger market share by
attracting and holding as many customers as
possible.
Working on mark-up levels

The selling price has to cover the cost of the product as well as
the profit and, therefore, mark-up is calculated when the price is
determined. Mark-up is the amount added to the cost price of a
product to determine the selling price.
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The mark-up value, which is expressed as a percentage, is

calculated as follows:
Mark-up = (Total profit ÷ Total cost) x 100
It costs a farmer $245.00 to produce a product and

he sells the product at $286.00.
=
Total profit Selling price – Total costs
=
$41.00
=
Markup Total profit ÷ Total cost
=
41÷ 245
=
0,167
=
Percentage 0,167 x 100
=
16,7%
The mark-up has to be enough to cover all business expenses

and keep the business profitable and realistic enough for
increased sales and profit. Mark-up range differs from
enterprise to enterprise, but it is generally influenced by the
following factors:
⚫ The price that customers are willing to pay for a
product;
⚫ Expected sales volume: high sales volume with a
lower mark-up can still generate the required
profit; and
⚫ Brand strength: a strong brand requires a higher price and,
therefore, a higher mark-up.
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A brand is a distinguishing name, symbol or logo that identifies a

product and distinguishes it from other products on the market, e.g.
Ceres Fruit Growers and Huletts Sugar.
Managing cash flow

Cash flow is the movement of funds or cash in and out of a
business. Cash is the lifeline of any business. There are two types
of cash flow, namely, positive and negative cash flow.
⚫ Positive cash flow occurs when the cash moving into a
business from sales is more than the amount of the
cash leaving a business through accounts, monthly
expenses, salaries, etc.; and
⚫ Negative cash flow occurs when the outflow of cash is greater
than the incoming cash.
Cash flow should not be confused with profit. A

business cannot simply look at profit and losses to identify
cash flow. Cash flow involves several other financial figures,
such as:
⚫ Accounts receivable (i.e. what customers owe the
agripreneur); and
⚫ Accounts payable (i.e. what the agripreneur owes
its suppliers), stock, expenses and debts.
These figures have to be studied in order to determine the
cash flow.
Managing cash flow properly, ensures that an agripreneur:

⚫ Does not run out of cash;
⚫ Improves its relationships with suppliers as invoices are
paid immediately; and
⚫ Spots cash flow problems before they happen.
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Use the following strategies to enable your clients to manage

their cash flow properly:
⚫ Keep in mind that cash is what keeps a business alive: no cash
= no business. Your clients must manage their cash carefully
and make sure that they never run out of cash. They must
make sure that they know what their cash balance is at all
times;
⚫ Determine the breakeven point (i.e. the income needed to
cover the total amount of the expenses during a particular
period), so that your clients know when their business
becomes profitable—not because it affects their cash flow, but
because it give them a goal to work towards;
⚫ Your clients should try to negotiate payment terms with their
suppliers: if they can settle their accounts in 60 days or
even 90 days, rather than 30 days, they get to keep their
cash for longer, which makes it easier to regulate their cash
flow; and
⚫ Your clients should encourage their customers to pay as soon
as possible.
Figure 23 is an example of a template that your agripreneur
clients can use to record their cash flow transactions.
Figure 23: Example of a template for cash flow management
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Working with revenue and profit

Revenue is the total income that is generated by an agripreneur,
before any costs or expenses have been deducted. It is
important to note that revenue can be generated by all operating
activities (e.g. the sales of products), as well as non-operating
activities (e.g. the sales of assets or money received for interest).
Profit is a financial gain that is expressed as the difference
between the money earned (by sales) and the money spent in
buying, producing or manufacturing a product. In other words,
profit represents the earning of agripreneurship or farming
enterprise during a particular period. It is important to distinguish
between gross profit, operating profit and net profit.
Gross profit
Gross profit simply refers to revenue minus
Inventory
inventory expenses:
expenses: The
GP = Revenue – Inventory expenses. cost of holding
goods or products
Gross profit can be a useful tool to
in stock.
examine the finances of a farming
operation to see how profitable it would
be if all other expenses were excluded.
Operating profit
Operating profit is similar to gross profit, but it takes
other costs into account. In order to determine operating
profit, the gross profit is calculated first and then
operating
costs—like rent, labour, transport, storage, utilities such as
lighting and phones and other fixed costs—are subtracted.
This leaves the total operating profit.
Net profit
Net profit is the amount of money that is left in the account at
the end of the year or season, after subtracting all business-
related costs from the revenue. In order to work out net profit,
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calculate the operating profit and then subtract any one-time

expenses (e.g. advertising costs, legal fees and other irregular
expenses).
Forecasting money needs

Financial forecasts are used to predict future business finances.
Regular forecasts allow an entrepreneur to monitor their
finances and develop strategies to fix problems before they
become major issues. Financial forecasts are particularly useful
when starting an agripreneurship or when an existing farming
operation is experiencing a period of rapid growth or financial
difficulty.
There are different types of financial forecasts, including sales
forecasts (which will be discussed in the next session), expenses
forecasts and cost of goods sold. For the purposes of agripreneur
you will learn about cash flow forecasting, because it reflects the
future money needs of a business.
A cash flow forecast is basically an estimate of the amounts
and the timing of receipts (cash inflows) and payments (cash
outflows) that a farmer expects over a particular period
(usually a season or year), broken down by month. It is an
important business tool that enables an entrepreneur or a
farmer to estimate income and expenses of their business.
Cash flow forecasts can help identify when an
agripreneurship has extra cash available or when there
may be shortages, so that the farmer can make the right
decisions for their operation. It is important that the
cash flow forecast is reviewed regularly against the actual
results.
How useful cash flow forecasts are depend on how accurate and
up-to-date they are. It is important to update them against
actual performance on a weekly or monthly basis. This will
ensure that the information is accurate and that the farmer can
adjust future forecast figures as soon as soon as they can see
that the figures are likely to differ from their initial expectations.
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The following steps are involved to create a cash flow forecast.
Step 1: Estimate potential sales

The first step is to estimate the expected sales for each week or
month in the marketing season:
⚫ Use the sales history from the last few years (if any) to
get an idea of the level of weekly or monthly sales that
can be expected;
⚫ Remember to consider current conditions and trends in the
market;
⚫ If a new market opportunity is planned or a new product is
launched, include the expected increased sales in the
forecast; and
⚫ Remember to plan for seasonality, which is particularly
important in the agricultural business, because most sales
occur at a particular time of year.
Step 2: Estimate payment timing

Estimate when payment for sales is expected. If a product is
sold on credit, include the likely delay in payment into cash
flow forecasts, e.g. if the payment terms are 30 days, payment
will
be received within one or two months after the sale has been
made.
Step 3: Estimate costs and loss

Once the expected sales and payment information is in
place, the costs involved in running the business must
be estimated. These costs may include agricultural
input
costs (soil testing, seed, fertiliser, pesticides), vehicle and
equipment costs, worker costs, loan repayments, bank costs and
interest on loans, and marketing and promotion costs.
Step 4: Apply the forecasts

Once the entrepreneur knows their weekly or monthly income
and expenses, they are ready to record them in a cash flow
forecast template.
176
Figure 24 is an example of a cash flow forecast.
Figure 24: Example of a cash flow forecast
177
You can find templates for cash flow forecasts at the following
links:
https://www.startuploans.co.uk/cash-flow-forecast/
http://www.accaglobal.com/za/en/business-finance/business-plans/
example-cashflow.html
https://bizconnect.standardbank.co.za/manage/financial-
management-solutions/tools/cash-flow-forecast-spreadsheets.aspx
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Session 4.3: The basics of sales
Session outcomes
⚫ Identify different types of agreements for sales;
⚫ Describe the contract for sales;
⚫ Apply sales forecasting methods;
⚫ Monitor actual sales versus forecasting;
⚫ Review the quality and volume of sales; and
⚫ Identify opportunities for growing sales.
Introduction
In this session, you will learn about different aspects involved
in sales. The legal aspects involved in sales will be discussed
first. Then different types of sales agreements are identified
and the nature and content of sales contracts are looked at.
Sales forecasting and assessing actual sales are also explored.
The session is concluded with a discussion of sales growth
opportunities.
Identifying different types of agreements

for sales
A buyer and a seller enter into a sales agreement. In
most cases, farmers and farmer groups meet with
buyers and make a verbal agreement to sell. Generally,
farmers
know their buyers, since they have a sales history with them
and so they work on a handshake agreement and trust. In
most cases, farmers do not clearly identify the terms of sale
when
it comes to the number of bags or tonnes, quality criteria and,
especially, price.
However, as farmers make the transition from selling as
individuals to selling in larger groups, the volume of sale does go
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up significantly and the farmer organisation will be working with

a larger type of buyer. In this case, the agreement may stipulate
the size of the transaction and the buyer may require that
certain standards are met.
As trading becomes more standardised and larger transactions
take place, there is a movement towards sales being recorded in
a sales agreement. This is rarely a binding contractual
arrangement with penalties, but it is a step towards a more
formal agreement. In this case, the sales agreement may
indicate target volumes, basic quality criteria, such as the size of
produce, cleanliness, type of bagging by weight, and, in some
cases, a moisture content level.
Floor price:
There are different types of sales
The lowest price
agreements, including:
at which a
⚫ Cash forward agreement, which is product can be
based on an exchange of produce sold.
at a specified time in the future.
The
agreement specifies the price, quantity and quality of produce
to be delivered at an agreed upon post-harvest date;
⚫Deferred pricing agreement where the product price is
determined at a later, specified date;
⚫ Deferred payment agreement where the current price
and delivery of the produce are set, but there is a
delay in the receipt of payment: it transfers
ownership to the buyer at delivery, while allowing the
seller to set the price later; and
⚫ Minimum price agreement, which provides the farmer
with a floor price for the duration of the agreement,
as well as protection against a drop in price below a
minimum level, while leaving the final pricing until a
later date.
As you can see, the terms in all these sales agreements are
based on price. In the case of smallholder farmers and farmer
groups, most traders make agreements based on volume and
product quality and set prices at the time of the actual sale.
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Profiling clients and sales obligations

Table 10 outlines the different types of clients and their sales
obligations.
Table 10: Client profiles and sales obligations
Type of Scale of Market Financial Weights, Legal Type of
client operation type lending measures, situation sales
grades agreement
and
standards
Small-scale 2 acres: Highly No access None None: no Hand-shake
individual rarely informal or local legally promise to
farmer: mechanised local market access binding deliver, not
Rural conditions binding
world 1
Individual 2–10 acres: Transitioning Possibly Some level Limited: Hand-shake
famer either from some of premium not promise to
medium partially informal to bank loan, on graded generally deliver, not
scale: mechanised formal mostly goods enforced binding
or able to informal
Rural
hire power
world 2
equipment
Large 10 acres Formal and Line of Critical Contracts Contract
individual plus: commercial credit from and will be with banks, with legally
farmer: mechanised formal enforced insurance binding
bank with clear and buyer: agreements

Rural
price legally
world 3
premiums binding
related to with sales
grades and bonds
measures
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Type of Scale of Market Financial Weights, Legal Type of
client operation type lending measures, situation sales
grades agreement
and
standards
Farmer 20–50 Highly None None None Promise to
group farmers informal deliver, not
starting a binding
collective
marketing
business
Farmer 50–200 Transitional Line of Use of Limited: Basic written
cooperative farmers with level credit from grades and not agreement
local of formality mix of standards generally but mainly
dependent formal and on part of enforced based on
on buyer informal the sales trust
sources
Farmer 500–10,000 Highly Credit from Will use Formal and Sales
association farmers formalised bank grades and in some agreement
standards cases with local
set by legally buyers,
buyers, binding, contract with
goods particularly international
will be with or formal
packaged lending buyers
and agencies
weighed
Understanding the contract for sales

A contract is an oral or a written agreement where two (or more)
parties bind themselves to certain obligations that they agree to
fulfil, in some cases these contracts are legally binding.
Given that most smallholder farmers work in a highly informal
world, the idea of a legally binding contract with a buyer is
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somewhat alien. For the most part sales agreements are more of
a promise to sell and a willingness to buy.
As transactions become more formalised, such as selling
produce into an international market, the legal nature of sales
agreements and contracts becomes clearer and there are more
legal obligations. Legal sales contracts only work if there are
legal systems in place that are able to quickly make decisions
on
liabilities in a trade case and can enforce a legal decision. If these
legal structures are not in place, then any written contract has
little weight.
Farmers often fail to meet the terms of their sales agreements.
This may be because they were not organised enough to follow
their implantation plan, because they were unable to buy the
right combination of seed and fertiliser, or crops failed due to
drought or pests and disease problems. Hence, they were willing
but not able to meet their targets. For the most part, buyers are
also at pains not to take legal action against the farmers, as
these people are typically poor and if they don’t sell their goods,
it is often because they don’t have them. Taking legal action
against them would not help.
A contract usually contains the rights and obligations of the
parties involved, as well as the rules that the parties must
follow. There are different types of agricultural contracts,
such as:
⚫ Production contracts;
⚫ Marketing contracts;
⚫ Financing contracts; and
⚫ Personal services contracts.
In this section, you will learn about the sales contract. A sales
contract is a legal agreement to accept or deliver a specified
quantity of a product (e.g. grain) with a specified minimum
physical or chemical content and that is produced according to a
specified method.
A term is a provision in the contract that states an obligation or
set of obligations imposed on one or more of the parties. Failure
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to fulfil a term of a contract results in a breach of the contract.

A condition is a contractual term. If a condition or contract
is breached, it gives the injured party the right to cancel
the contract and claim damages.
Interpreting the elements in a sales contract

When your client is considering or negotiating a sales
contract, you should be able to help them interpret the
content of the contract. Therefore, you should be familiar with
the elements involved the contract. These essential elements
are outlined in the following sections.
Purpose
The purpose of the contract generally involves securing

income for the agripreneur and delivering the product to the
customer. You should take note of the following, more
specific considerations.
⚫ Economic considerations and advantages: You and the
agripreneur need to consider the following economic elements:
◦ Is there a set quantity requirement?
◦ Is there a penalty if the set requirement is not met?
◦ Is the producer (farmer) responsible for
unforeseen events?
◦ Can the location and quantity be adjusted
to accommodate bad planting weather?
◦ Could the requirements of the contract have an
effect on the cost of production?
◦ Is there an input restriction, does the contract
require that inputs are bought from a certain source?
and
◦ Are the production inputs or techniques required
by the contract more expensive than those that
are currently being used?
⚫ Financial considerations in contracts: Use the farmer’s cash
flow budgets to determine the financial feasibility of the
contract arrangement. A contract is feasible if it produces
enough cash inflow to meet all input costs;
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⚫ Payment terms need to clarify the following:

◦ How will payments be made?
◦ Is there a schedule of payments?
◦ When should a party be paid?
◦ Are there penalties for late payments?
◦ Will payments be made before delivery? and
◦ Are there provisions for minimum or maximum payments?
⚫ Crop conditions: Consider the following in terms of
crop conditions:
◦ What are the condition requirements?
◦ Are the crop conditions reasonable?
◦ Who conducts quality tests and when are tests conducted?
◦ How are quality disagreements resolved?
◦ If a portion of the crop does not achieve quality rating, is
the entire crop penalised? and
◦ If the specialty grain is rejected, can it be sold on the
open market?
Delivery site and date
You and your client will have to look at the contract and see if it
specifies:
⚫ Where the delivery must be made;
⚫ Any special handling procedures;
⚫ Who will pay for delivery to the site;
⚫ When the delivery must happen;
⚫ A date for delivery in the contract and, if not,
who sets the date; and
⚫ Any penalties for early or late delivery.
Facilities and equipment
You will also need to consider if the contract:

⚫ Requires an investment in equipment or facilities;
⚫ Requires specialised equipment, additional labour or
additional management;
⚫ Will last long enough to recover the cost of the investment
in new facilities;
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⚫ Can be terminated before the investment is fully recovered;

⚫ Requires facilities or equipment that need approval or
certification; and
⚫ Needs buildings and facilities to be standardised.
Production requirements
When you look at the production requirements, must the farmer

follow any special health care practices and procedures and
standards of husbandry practices? You will also need to look at
whether there are any limitations on the producer’s management
control. The contract needs to state who will provide the labour
for the production process, if production records are needed
and who will be responsible for keeping these records. The
contract must outline who determines the feed requirements
and rationing, sourcing, pricing, processing and handling of the
feed. Lastly, the contract must state who bears the risk of loss
in the production and who pays for liability and other types of
insurance.
Interpreting the legal elements in a contract

A contract must include a number of key legal elements in order
for it to be enforceable by law. These elements are addressed
in the following sections.
Acceptance
Once they have accepted the terms, conditions and

obligations set out in a contract, the farmer organisation
should aim to fulfill its obligations. If it becomes a binding
contract, it ends any negotiation over the terms of the
contract. Important legal considerations in terms of acceptance
are:
⚫ Acceptance must be communicated to the party making the
offer; and
⚫ Acceptance of the offer in the contract must correspond to
the contract.
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Consideration
The promises exchanged in the contract must have some value in

the eyes of the law. Therefore, in order to be binding, a contract
must show consideration, meaning that each party exchanges
something of value. Given the informal nature of most trading
environments in smallholder agriculture, there are few ways to
enforce agreements or contracts. However, when trading coffee
into an international market, for example, the situation changes,
as the farmer organisation then shifts from the informal into the
formal world. In this case, contracts may require that sellers
place a 10% sales stake into an account that is forfeit if the
contract is not honoured. The same is done by the buyer.
Some issues relating to consideration include:
⚫ A promise to perform an existing obligation is not
adequate consideration for entering into a contract; and
⚫ Past consideration is not considered for a promise and
so a promise that relates to past consideration is not
legally binding.
Terms of the contract
The terms of a contract define the rights and obligations of

each party. In order for a contract to be binding, certain
fundamental terms must be identifiable. If terms that
are significant to the deal are missing, then there is no
valid contract. You and your extension client need to
ensure that a sales contract covers all the items that it
is supposed to and that the terms in the contract are
clearly understood. Parties to a sales contract must be
satisfied with the specific terms relating to:
⚫ Contract length;
⚫ Conditions for contract renewal;
⚫ Pricing arrangements;
⚫ Quality agreements and grades or premiums for quality;
⚫ Payment schedules;
⚫ Delivery and marketing terms;
⚫ Production requirements;
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⚫ Facility requirements;
⚫ Management requirements;
⚫ Default provisions; and
⚫ Conflict resolution.
The following link will give you an example of a sales contract:

http://www.sagis.org.za/SAGOS_CONTRACT_1_VERSION_9.pdf
Conduct sales forecasting

The sales forecast is a month by month forecast of the expected
level of sales. Accurately forecasting sales gives a business
direction and helps to avoid unforeseen cash flow problems. A
sales forecast can also help manage production, staff and money
needs.
Advantages of sales forecasting

Apart from enhancing cash flow, sales forecasting can give the
agripreneur in-depth knowledge of their customers and the
products that the customers buy. It also enables the agripreneur
or the farmer to plan for production and gives them accurate
information to identify sales patterns and trends. Most
importantly, sales forecasts enable the farmer to work out
their expected return on investment.
Return on investment: A measure of the profit of

an investment, expressed as a percentage of the original
cost.
Factors influencing the sales forecast

Although it is possible to forecast sales to a certain degree of
precision, there are internal and external elements that
affect sales. These should be considered when doing a
forecast.
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The following internal factors related to sales may impact the

sales forecast:
⚫ Seasonality: most crops and animals are only sold at a
particularly time of the year;
⚫ Labour problems;
⚫ Stock or product shortages;
⚫ Working capital shortage;
⚫ Changes in the product price;
⚫ Production capability shortage; and
⚫ Introduction of new products.
The following external market and economic factors, which are
beyond your clients’ control, may also affect sales:
⚫ Relative state of the economy;
⚫ Political events and changes in legislation and
regulations governing the industry;
⚫ Weather conditions, patterns and changes;
⚫ Pests and disease; and
⚫ Changes in productivity.
Sales forecasting technique

In order to get started on sales forecasting, the extension agent
and their client may consider asking the following questions:
⚫ How much can you realistically sell next year?
⚫ How much will it cost to produce your product?
⚫ What are your operating expenses?
⚫ Do you need to hire workers and, if so, how
many and how much will you pay them?
⚫ How much will you pay yourself?
⚫ Do you need to pay tax?
⚫ How much money do you need to borrow and how much
will your monthly loan payments be?
The following steps are involved in making a sales forecast:
⚫ Divide the products into categories or groups of
similar products;
⚫ Determine the major internal and external factors affecting
the sales of each product group and their relative importance;
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⚫ Collect and analyse all necessary data;

⚫ Make assumptions regarding any effects of the various
factors that cannot be measured or forecast;
⚫ Convert assumptions into specific product forecasts and
portions;
⚫ Apply the forecasts to business operations; and
⚫ Periodically review performance and revise forecasts.
For example, if your client does an annual sales forecast

for their business, they can base their calculations on the
following financial data:
Financial data Amount

Last year’s sales
Total value of additional contracts
expected during the next year
Total value of sales contracts that may
not be renewed during the next year
Projected sales subtotal
Percentage of increase in industry
growth as projected by industry experts
Percentage of decrease in industry
growth as projected by industry experts
Sales forecast for current year
Monitoring actual sales versus forecasting

At its most basic level, farmers and farmer groups should set a
target for their sales, e.g. 10 metric tonnes (mt), and then, at the
end of the season, assess whether they achieved their targets
in terms of volume and price. The group needs to carefully think
about issues such as links between their production plan and
the sales or marketing plan and whether the profit was
acceptable.
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Having good records on production areas, production yields

and sales through the group are important to measure
their performance.
For the more formal agripreneurs, having reliable data for the
sales forecast reduces the amount of guesswork and the
accuracy of the sales forecast will increase. However, any sales
forecast holds an element of uncertainty and, therefore, it is not
possible to predict sales with 100% accuracy.
Variance is the key factor in monitoring actual sales versus the
sales forecast. This is determined by comparing the value of the
actual sales quantity to the value of the forecast quantity. A non-
compliant variance means that the actual sales quantity is lower
than the planned sales quantity. A compliant variance means
that the actual sales are higher than the planned sales value.
Problems may occur if the variance is too high or too low. If the
variance is too high, cash is often tied up in slow-moving stock
and profit is reduced due to wasted overhead costs. On the other
hand, if the variance is too low, the agripreneur or farmer runs
the risk of poor delivery performance, dissatisfied customers and
shortfalls in income because of limited product availability. In
order to correct future forecasting, the agripreneur must look
at the trends in past forecasts and actual sales performance.
There are a number of reasons why there would be slight
differences between the projections and the actual sales
performance. These include:
⚫ Viewing the forecasting process as separate from the
rest of the business; or
⚫ Not taking external factors into consideration.
If there are significant differences between the forecast and the
actual sales, the agripreneur must do a more detailed analysis.
Reviewing the quality and volume of sales

In order to understand the links between production, marketing,
sales and income, your clients will need to establish clear
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targets for each part of their business process and then collect
information around targets and actual performance. Unless they
understand their current position, it is difficult to develop plans to
improve and optimise their approach. This means that they will
have to review their sales statistics, like the quality and volume
of sales.
Methods to analyse and review sales data involve the following
steps:
⚫ Calculate the values (sales or profit) of each product of a
particular period (e.g. a year) and add the values to get a
total;
⚫ Calculate the value of each product as a percentage of the
total sales value for the period;
⚫ Arrange the calculated values and
Variable:
percentage of the products from high
A characteristic
to low; and
or a number
⚫ Analyse the results and try to determine
that increases
the variables that distinguish the
or decreases
products with high sales volume from
and, therefore,
those with low sales volume.
takes different
The analysis can be repeated with the values in
sales information for customers, instead different
of the products. In this way, the situations and
agripreneur should be able to tell times.
which customers are involved in
their highest sales volumes, so that they can decide what
to do to find more customers in that category.
Identifying opportunities for growing sales

As outlined earlier, there are four main strategies to identify
opportunities for growing sales:
⚫ Producing more of the same product in the same market;
⚫ Producing the same product in a different market;
⚫ Producing a new product in an existing market; and
⚫ Producing a new product in a new market.
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Pipeline analysis and customer-spend analysis can help the

agripreneur find opportunities to grow their sales. With the help
of the extensionist, the agripreneur or farmer can also use the
pipeline analysis to determine which sales resources hold the
potential for the largest revenue. The farmer needs to
determine which geographical area, market and product
represent their short-term wins and opportunities.
In order to find new opportunities, the agripreneur needs to
know if there is someone with a need for their product. This
means finding the right customer for their product. This involves
finding out:
⚫ If the target is other businesses or individual buyers;
⚫ What the customer is trying to achieve by buying the product;
⚫ Where the new customer is located; and
⚫ What concerns they have about price, quality and after-
sales service before they buy the product.
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Session 4.4: Assessing risk
Session outcomes
⚫ Identify the key risks a particular business will face;
⚫ Mitigate the identified risks; and
⚫ Conduct risk planning/risk management.
Introduction
Every business owner faces risks, such as financial risks,
production risks and market-related risks. It is important to
conduct risk assessment in order to
identify the key risks in a business, decide Mitigate:
how to mitigate the risk and know how Minimise.
to conduct risk management.
Identifying key risks in agriculture

The agricultural sector and particularly smallholder rain-fed
agriculture is known as a high-risk business environment,
mainly because agripreneurs are faced with uncontrolled
elements, such as irregular weather conditions and pests
and diseases and also major economic constraints. These
economic constraints often mean that activities such as
planting and weeding are not done on time which has
a major effect on yield and also farmers buy low quality
inputs with further reduces productivity. Table 11 outlines
a
number of the risks that may occur in the agricultural industry.
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Table 11: Risks in agriculture
Type of Risk Risk Risks

risk affecting affecting affecting
individuals groups or regions or
or communities nations
households
Market/ Access to Changes in Changes in
prices quality inputs availability input/output
and labour at and price of price, due to
the right time; inputs. Rapid trade policy or
and changes in new markets.
market prices;
Volatile
market Access to
conditions labour and
such as credit.
under- and
oversupply.
Production Poor quality Low quality Floods;
seed, low inputs. Lack droughts; and
quality inputs, of access pests and
drought, to labour diseases.
flooding, pests affecting date
and diseases; of planting
and weeding
Personal
on time;
hazards; and
assets risks. Drought,
erratic rainfall;
and
Pests and
diseases.
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Type of Risk Risk Risks

risk affecting affecting affecting
individuals groups or regions or
or communities nations
households
Financial In debt to Access to Changes in
trader which credit on time; interest rates
reduces and access to
Lack of
negotiating credit.
insurance; and
power.
Accepting low
Lack of cash
prices at time
to pay for
of sale due to
inputs and
need for cash.
labour on
time.
Changes in
income from
other sources.
Institutional/ Access Changes Changes
legal to water in local in regional
and land policies and or national
depending regulations; policies and
on market and regulations;
formality; and
Changes Environmental
Liability risk. in good law; and
agricultural
Agricultural
practices to
payments.
meet market
needs such as
pesticide use.
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Categories of risk
Agricultural risks are often classified into the following four
categories: production risks, market-related risks, financial risks
and institutional risks.
Production risks
Climatic and environmental risks that are not predictable—

such as delays in rain, droughts, floods and diseases— have a
major influence on the amount and the quality of agricultural
production. Farmers often use low quality seeds and inputs
and they have limited access to labour at the critical periods in
the farming calendar, which further reduces production.
Therefore,
agricultural production is often characterised by low and varying
production outcomes. Climatic factors may lead to a total
or partial loss of crops or herds, which may have long-term
implications for the farmer.
Farm equipment may also hold a production risk. For example,
if a farmer’s tractor breaks down during the production
season, they may not be able to harvest in time, which may
affect their output, profit and income.
Financial risks
Many farmers are poor and, therefore, they cannot

afford to access high quality inputs or labour at the right
times. Farmers who sell to traders who have provided
them with credit for their inputs are unable to negotiate
good prices for their produce and this traps them in a
cycle of
financial debt and low income. Production risks often result
in financial risks. Possible cash flow problems may come
from
the fact that agricultural production cycles are characterised by
long periods of low sales income. In addition, problems may
arise from limited access to financial sources.
Market-related risks
Smallholder farmers often face difficult choices, particularly

about which markets to serve. When advising farmers on
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market opportunities, it is important that they are matched with

appropriate types of markets and risk is a key factor in making
decisions on the suitable market. Extension agents should not try
to link the most vulnerable farmers with the highest risk, highest
return markets.
The use of the Ansoff matrix in risk analysis

The use of the Ansoff matrix is a helpful guide to matching risk
with farmer skills, aspirations and capacity to take on risk.
The Ansoff matrix is a tool that is used to help a business

determine its product and market growth strategy. The matrix
is based on the assumption that growth possibilities depend on
whether it is an existing or a new product in new or existing
markets.
In extension services, the Ansoff matrix is used to help the

farmer think about and identify the risks involved in each growth
opportunity. By placing products into the Ansoff matrix, farmers
and field agents can gain an idea of the type of marketing
strategy they need to develop to be successful with the target
product, as well as the level of risk involved in each strategy.
The risk increases from 1 to 4, with 1 being the least risky
market option and four being the highest risk option.
Table 12 outlines the Ansoff matrix with risk levels. Table 12: The
Ansoff matrix with risk levels
Existing product New product
Existing 1. Market penetration 3. Product development
market
New 2. Market development 4. Diversification
market
Markets—whether they are local markets, national markets or

international export markets— represent a range of risks. All
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markets suffer from high levels of volatility in prices, particularly

during peak periods of harvest, when prices for goods fall rapidly.
Many farmers face problems in international markets when world
market prices suddenly fall, perhaps due to overproduction
in another country. However, this problem also exists in local
markets, which can often be over supplied, which results in low
prices and, therefore, low profits.
Institutional risks
The agricultural sector is characterised by strong government
interventions and regulations, e.g. subsidies and price control.
Changes in government regulation may affect agricultural
producers unexpectedly and may, for example, lead to
changes in import/export conditions. Export bans are a
commonly used
government policy when production falls within their own
borders, or in a neighbouring country. This type of decision can
have drastic effects in the marketplace and may lead to
considerable loss of income for farmers. Cooperatives that do not
manage their resources carefully can also have dire consequences
on farmers who have invested in the cooperative for either inputs
or market access. There are many cases where farmers have lost
their investments because of poor management in cooperatives.
Conducting risk mitigation and risk

management
Understanding the basic costs and potential for loss
with any market needs to be very clear to farmers. A
general rule is that higher profits means higher risk, for
example selling a known product into a known market
is
less rewarding but also has less risk than selling a new product
into a new market. Risk management involves the following two
aspects:
⚫ Anticipating when an unfavourable event may occur and, if
possible, acting to reduce the chances of it happening; and
⚫ Taking actions that will reduce the unfavourable
consequences should the event occur.
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Steps in the risk management process
The agricultural risk management process has five steps, which

are discussed below:
⚫ Step 1: Identify possible sources of risk, such as
environmental factors, unstable market conditions and price
changes;
⚫ Step 2: Identify possible outcomes resulting from the sources
of risk, including low production and low income periods in
the production cycle;
⚫ Step 3: Decide on alternative strategies;
⚫ Step 4: Assess the consequences of each possible outcome
of each strategy; and
⚫ Step 5: Evaluate the results between the cost of risk and
the gains that can be made.
As you can see, decision making is at the core of the risk
management process.
Example of decision making in agricultural risk

management
A farmer needs to decide how to cope with a possible
infestation of pests. Should he spray early as an
‘insurance’ against the infestation occurring, or should
he wait for indications of infestation before deciding
when to spray? When market prices are low and the
cost of pesticides is high, the benefit of using pesticides
during years of high pest infestation will be lower. In this
case, the farmer will be hesitant to buy expensive
inputs, such as pesticides.
Risk management approaches and strategies

There are a number of strategies that farmers and agri-
enterprises may consider to minimise risk. It is important to note
that whatever strategy you choose, it is not possible to avoid
the risk entirely and there are always direct or indirect costs
involved in implementing a risk management strategy. The risk
management strategies are outlined in the following sections.
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See Table 10, where the use of the Ansoff matrix in risk analysis
is outlined, as well.
Production risks
Production risk may be managed by implementing:

⚫ Risk reducing inputs: Farmers can improve the chances of
better yields if they buy higher quality inputs such as quality
seed, fertilisers, pesticides, compost and make investments
in water management such as irrigation;
⚫ Risk-reducing technologies; such as drought-resistant
varieties and disease and pest-resistant varieties for crops,
irrigation technology for high value crops and breeding
livestock specifically for the market;
⚫ Low risk operations, e.g. smallholder farmers planting a
drought-resistant sorghum, rather than other varieties
that may fail in a drought;
⚫ System flexibility: Makes it possible to make quick and short-
term decisions and changes to production and sales; and
⚫ Production diversification techniques such as:
◦ Managing multiple farm enterprises together at the
same time or in the same season;
◦ Engaging in the same farm enterprise in
different locations;
◦ Engaging in the same farm enterprise over
successive periods or seasons; and
◦ Generating income from off-farm activities.
Marketing risk
Marketing risk is a result of the variability of product prices

and the uncertainty of future market prices. It can be addressed
by using the following risk management strategies:
⚫ Spreading sales by storing a crop after harvest until it can be
sold at different times and for better prices;
⚫ Enhancing profitability by selling directly to the final
consumers;
⚫ Making contractual agreements with buyers in advance,
thereby ensuring a fixed product price;
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⚫ Developing trust with the buyers in order to obtain the best

deal and maximise profits; and
⚫ Keeping track of market prices relevant to their products.
Financial risk
Financial risk is caused by uncertainty and borrowing money to

finance farming operations. It can be addressed by using the
following strategies:
⚫ Farmers who save for future investments are able to buy
inputs with less need to borrow capital, this reduces their
exposure to debt.
⚫ Increasing the capital available to farmers through loans,
which enables them to expand their operations, bearing in
mind that they have to meet the financial obligations of
paying back the loan;
⚫ Improve liquidity by selling assets that are most easily
converted into cash;
⚫ Generate additional income by leasing assets (e.g. land,
machinery and equipment), which allows the farmer to
use equipment that might not have been profitable to buy;
⚫ Managing the timing of investments, e.g. by spreading
purchases over several months, rather than buying all
equipment at the same time; and
⚫ Where possible, farmers should insure operations against
major risks, such as death, accidents and sickness, as well
as fire and loss of crops by storms or floods.
Institutional risk
Institutional risk can be minimised

and managed by: Credit
⚫ Forming farmer producer groups that mobilisation:
work together in terms of saving, Pooling the capital
credit mobilisation, service delivery or savings of a
and bulk buying and marketing; and group together in
⚫ Establishing cooperatives, which provide one common fund.
the benefits of:
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◦ Buying inputs and supplies in bulk;

◦ Sharing transport to reduce costs;
◦ Negotiating collecting with buyers; and
◦ Mobilising savings and credit with members.
Managing insurance
Another means of reducing risk is through Weather
insurance. At present very few farmers in indexed
the developing world, and especially those insurance: An
who work in rain-fed farming, have access insurance system
to insurance. This means that farmers are in which the
reluctant to invest too much in any one payout is linked
business due to the risks of failure and to measured
loss. The financial sector is making an environmental
effort to invest in weather indexed conditions by
insurance systems, but to date, the using indices
premiums are typically high and the (closely related
payout systems have limitations based on to agricultural
the resolution of the data available. production losses),
Despite these challenges, the use of such as rainfall,
insurance will be an important part of the wind speed,
risk reduction approach for farmers in temperature and
future. vegetation levels.
You may find additional resources and the latest

information on agricultural risk management on the
Forum for Agricultural Risk Management in
Development’s (FARM) website, which is available via the
following link: http://www.agriskmanagementforum.org/
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Concluding remarks
In this study unit, you learned the main sources of finance
that are available to the farmer or agripreneur include
savings, self-help groups, SACCOs, family lending, local
money lenders, micro-finance institutes, commercial banks
and e-money. You also learned the essential practices that the
farmer can use to manage their financial resources. In
extension services, the most important practices of managing
financial resources are
separating household (personal) finances and business finances,
creating a seasonal calendar to plan for financial needs, arranging
finances when working as a farmer group, calculating production
costs of a product, pricing a product (including working with
mark-up levels), managing cash flow and forecasting money
needs.
You also learned the basic principles and practices of sales
operations and different types of sales agreements. You were
familiarised with the basic sales forecasting methods, as well as
the way in which to monitor actual sales versus forecasting and
to review the quality and volume of sales.
Finally, you learned about the main risks involved in smallholder
farming, which are rain-fed and, therefore, high-risk
operations, including production risks, financial risks and
market-related risks. You also learned how to apply the
Ansoff matrix in risk analysis and the steps involved in the
risk management process.
Complete the summative assessment in your

workbook.
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Study unit 5: Record keeping
Study unit outcomes

perform the following record keeping:
⚫ Operations record keeping; and
⚫ Financial record keeping.
Study unit overview

This unit is designed to introduce extensionists to basic methods
of record keeping for both production operations and finances,
which can be used to facilitate the smooth running of a business.
Completing this module should allow you to strengthen your
extension tool kit by becoming familiar with methods of record
keeping and helping your clients to maintain reliable records as
their businesses develop.

An agripreneur will need a complete and accurate records
system in order to make informed decisions that will
support the maintenance, growth and expansion of their
business. An agripreneur can also use reliable records to
determine the efficiencies and the inefficiencies in their
business, measure the progress of the business and plan
for the future.
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Session 5.1: Operations record keeping
Session outcomes
After completing this session, you should be able to keep
different types of production records, including a:
⚫ Soil conditioning record;
⚫ Seed-starting record;
⚫ Planting record; and
⚫ Harvesting schedule record.
Introduction
A record is basically a document that systematically records
all activities and aspects of daily farm operations. In
extension services, these operations include the following four
areas:
⚫ Pre-production (soil, tillage seed);
⚫ Production (activities to produce);
⚫ Post-harvest (harvest, store, clean); and
⚫Marketing (transport, sales).
Keeping operations records makes it possible for an
agripreneur or a farmer to evaluate the performance of
their operation during a particular period and to check
that their operation is running according to plans and
schedules. There are different types of operations
records, which are outlined in the following sections.
Production records
Production records are records of quantities of inputs used
in the farm and outputs obtained from it. The different types
of production records are outlined in the following sections.
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Soil conditioning record

Whether your clients are working with a new piece of land or
reviving a spent plot, it is always advised to do regular soil tests
to understand the condition of the soil. If they record the results
of these soil tests, they can use this information to track the
changes made, which should assist them in future decisions and
purchases.
Seed-starting record
Not all seeds are started at the same time and, therefore,
keeping seed-starting records is helpful, particularly if your
extension clients are experimenting with new crop varieties or if
they are managing a large amount of seeds. It is also a good idea
to record seed sources.
Planting record
Use the planting record to record plot location and planting
date. This information will help make future plot-rotation plans
and to plan for coming harvests. Make sure that your clients
also take note of plant traits, so you can determine what
land-management actions to take, such as weeding and
implementing pest control.
Figure 25 is an example of a planting record, which
includes information on seeds and seed sources.
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Figure 25: Example of a planting record
Harvesting scheduling record

The harvesting scheduling record gives you and your client the
following information:
⚫ The crops and varieties harvested, and the amounts
harvested;
⚫ The harvesting techniques used;
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⚫ The crop that is ready for harvest during every month of

the year, which is particularly helpful if they are running a
larger scale operation;
⚫ Post-harvesting handling methods (e.g. washing, packaging,
etc.); and
The harvesting record also helps your client to determine if and
when they should hire extra labour in the fields for a particular
harvesting period.
Figure 26 is an example of a harvest schedule. You will notice
that the scheduling record also includes information on planting.
Figure 26: Example of a harvesting schedule

209
In the same way, you can create production records for:

⚫ Weeding;
⚫ Pest management;
⚫ Irrigation scheduling;
⚫ Delivery scheduling; and
⚫ Equipment cleaning scheduling.
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Session 5.2: Financial record keeping
Session outcomes
After completing this session, you should be able to keep
different types of financial records, including:
⚫ Invoices;
⚫ Receipts;
⚫ Cash book;
⚫ Sales book;
⚫ Payments;
⚫ Costs;
⚫ Employment records; and
⚫ Accounts and investments.
Introduction
Financial record keeping is a key element in efficient farm and
agripreneurship management. Without reliable financial records,
it is impossible to determine the financial condition or profitability
of a business. Using financial records helps your client
understand how and where their business is going, identify
the weak links in their business and enable them to take
corrective actions to address the weak links. In the
following sections, the different types of financial records
are discussed.
Invoices
An invoice is evidence of a particular business transaction.
The invoice helps in recording expenses and the payment of
expenses. Figure 27 is an example of the information that should
be recorded in an invoice.
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Figure 27: Example of the information that appears on an

invoice
212
Receipts
A receipt is a document that records the following information:
⚫ The date and time of a particular purchase;
⚫ Item(s) purchased and the number of items purchased;
⚫ Purchase price and totals;
⚫ Method of payment; and
⚫ The name of location of the store or supplier where
the purchase was made.
Figure 28 is an example of a receipt.
Figure 28: Example of a receipt
Cash book
The cash book, which is one of the main financial records
in any business, reports on the cash that comes into the
business (e.g. by means of product sales) and the cash that is
used to pay for daily items during a particular period. The cash
flow statement organises and reports the cash generated and
used in the following four categories. Table 13 shows an example.
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Table 13: Example of the entries in a cash book
Date Item Cash in Cash out Balance

[Description or
invoice number]
Sales book
The sales book records all credit sales made by a business, while
the cash sales are recorded in a cash book. Table 14 shows an
example of a page in a sales book.
Table 14: Example of a page in a sales book
Product
name
Date Customer Amount Value Invoice Payment
sold date date
Employment records
Employment records usually contain the following
information on staff members in your employment:
⚫ Name, address and identification number;
⚫ Dates of employment;
⚫ Amounts of salaries or wages and benefits;
⚫ Pension payments; and
⚫ Income tax information or records.
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Accounts and investment records

Farmers need to keep all their monthly bank account
statements—at least until the next monthly statement has come
in. The account statements are records of all the debits and
credits. Investment records that should be kept include bank
investment account records, and any other investment records
that show how much your client has paid for an investment and
how much they have earned selling it (if they have sold it).
Bank account statement: A record or list of all the items that

have been processed through a bank account during a particular
period (usually a month).
Debit: Any transaction that lowers the balance on the bank account,
e.g. cash withdrawals, account payments and any other expenses.
Credit: Any transaction that increases the balance on the bank
account, e.g. cash deposits, account payments to you, etc.
Selecting a record keeping system

There are numerous kinds of farm record keeping systems
available on the market. Before your client chooses
a record keeping system, they should research the
different options. As an extension agent, you can help
your clients look for record keeping systems that fit their
specific farm operations. Keep in mind that an effective
record keeping system is one that will provide the necessary
information when it is needed. You clients can use paper-based
records, Excel spreadsheets or other computer software and
systems.
215
Paper-based records
Small farms and agripreneurships just starting out often find
that paper-based records meet their needs. The paper-based
records are kept in different folders in a filing system, with
categories of related records being kept in separate folders. The
advantage of this system is that it is simple and easy to use. The
disadvantage is that the information is not always easy to find
especially if it not well organised and it may be difficult to access
the relevant records when your client needs them.
Excel spreadsheets
Using a basic Excel spreadsheet is essentially a compromise
between paper systems and more sophisticated record keeping
software. If your clients are running a small and relatively simple
operation, Excel spreadsheets may serve their needs well for
many years.
Computer programs and systems

Computer programs and software that are being used at scale in
developing country value chains are Farmforce and SourceTrace,
but there are many other companies and start-ups offering
new farming services. The following are examples of
computer programs and systems that can be used for
record keeping in agricultural businesses:
AgSquared
AgSquared is an online program that includes a set

of planning, management, record keeping, and analysis
tools that work together to help farmers run their farms more
smoothly. It allows farmers to turn their seasonal crop plan into a
daily task list, which serves as the starting point for their records.
These records become the foundation for the next year’s crop
plan. AgSquared is available at the following link:
http://www.agsquared.com/en/about
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Agroptima
Agroptima is a simple farm management program that allows

farmers to record their tasks and have an overview of their
business. Agroptima is available at the following link:
https://www.agroptima.com/en/
Farmforce
Farmforce has been created to help smallholders gain access

to formal markets and improve the effectiveness of outgrower
schemes. Formal markets can increase the number of
potential buyers for smallholder produce but these markets
require
traceability and compliance to food safety standards; something
which has traditionally been challenging and time consuming.
Farmforce is helping to change the game by using mobile
technology to make traceability and compliance an integral part of
smallholder production and to redefine the relationship between
growers, manufacturers and markets. Farmforce is available via
http://www.farmforce.com/
MapShots AgStudio
AgStudio is agricultural software that farmers can use for:

⚫ Crop record keeping
⚫ Creating field planting maps;
⚫ Tracking and analysing income and harvest inventories;
⚫ Performing in-depth data analysis
⚫ Generating customised reports; and
⚫ Tracking and logging harvest data anywhere.
AgStudio is available at:
https://www.mapshots.com/products/
LandMagic
LandMagic offers different web-based agriculture software

products that enable farmers to perform crop production
management, land management and harvest management.
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LandMagic is available at the following link:

http://www.landmagic.com/
Quicken
Quicken is an online personal finance management tool that is

widely used to keep financial records. You can access Quicken
products and services at the following link:
https://www.quicken.com/
SourceTrace
SourceTrace systems specialises in agricultural software mobile

applications for developing countries with a primary focus
on sustainable agriculture and empowerment for smallholder
farmers. SourceTrace farmer-centric mobile applications help
manage the agricultural value chain all the way along the chain
to enable smallholder farmers to participate in local and global
markets. SourceTrace mobile applications are scalable from
small co-operatives, farmer producer companies to large
agribusiness corporations and government agencies in the
sustainable development sector. SourceTrade is available here:
http://www. sourcetrace.com/. You may find valuable
information on the
different computer packages at the following website, which
reviews the top farm management software products:
http://
www.capterra.com/farm-management-software/
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Concluding remarks
In this study unit, you have learned about the record keeping
involved in a farming operation or agripreneur. You learned that
your clients should be able to maintain the following two types
of record keeping: operations record keeping, which includes
soil conditioning records, seed-starting records, planting records
and harvesting schedule records, and financial record keeping,
which involves the following records: invoices, receipts, the
cash book and the sales book, costs, accounts and investments
and employment records.
219
Study unit 6: Building a business and

managing relationships
Study unit outcomes

⚫ Put plans into action and monitor progress; and
⚫ Manage relationships.
Study unit overview

This study unit is designed to help extensionists support farmers
and farmer groups when they have started their business
ventures, using a set of tools to help assess the performance of
the business and for planning the next steps. Completing this
module should allow you to:
⚫ Help farmers plan their business strategies;
⚫ Monitor performance; and
⚫ Manage relationships with their team, service providers,
value chain partners and customers.

Once you and your extension clients have identified their
market opportunities, compiled a business plan, put
measures for financial management, sales and risk
management in place and designed a record keeping
system, you can move forward. Next, you need to put
plans into action to launch, run and grow the business,
monitor progress, manage change and manage relationships with
all the stakeholders involved in the business.
Stakeholder: Any individual, enterprise or organisation that is

directly or indirectly involved in a business, e.g. customers, suppliers
and distributors, government organisations and departments, etc.
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Session 6.1: Putting plans into action and

monitoring progress
Session outcomes
⚫ Put plans into action to launch, run and grow
a business;
⚫ Put plans into action to monitor progress; and
⚫ Introduce innovations to manage change.
Introduction
Launching a business involves presenting it to the public for the
first time. In this session, the business launch, as well as the
plans for running and growing the business will be addressed.
Launching and growing business

The following steps are involved in launching a new
agripreneurship:
Step 1: Conduct proper planning

Although the business plan is a valuable tool in any
business, planning the launch of a business is not limited
to the business plan. It is important to include the
following four levels in enterprise planning: marketing,
business planning, production and post-harvest planning.
On the production and implementation level of planning, you and
your client have to consider the following:
⚫ All the requirements that may be needed, e.g. land
preparation, seeds, production schedule, labour and capital;
⚫ Potential problems, such as the effects of rain being earlier
or later than normal;
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⚫ Post-harvest handling, which includes sorting, grading,

packing, storing and transporting the crop to the
market;
⚫ Getting the product to market, at the right time, place
and price; and
⚫ Cost and quality.
Step 2: Test your business idea

It has been established that approximately 60% of all new
businesses face major problems or fail during the first three
years—this mainly happens because the business owners rush
into action without properly checking that there actually is a
demand for the idea in the market and they can be competitive.
Therefore, it is essential to do proper research about the
feasibility of the business idea and to consult with experts and
advisors, if necessary.
To help with the final preparation, your clients should present
their plan to you and, if possible, consider asking others to
listen to the presentation. You may also ask the farmers to
seek
additional advice from other experts in the sector, who may have
an in-depth knowledge and experience about their product,
target markets and buyers, in order to refine the business plan
and
model.
The three most important aspects to present for feedback
will be the:
⚫ Business canvas;
⚫ Implementation plan; and
⚫ Financial plan.
The farmers need to present their business ideas, after
which you, as the extension advisor, and other experts, can ask
questions about:
⚫ How logical the business is;
⚫ The credibility of the ideas and figures;
⚫ Any major gaps in the business idea;
⚫ Whether the farmers can afford to enter into this
business; and
⚫ The appropriateness and acceptability of the risk.
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This type of session may help to identify where improvements

can be made and also clarify who is leading the process, who
is responsible for the various parts of the plan and the level
of motivation and energy to put this plan into action.
Step 3: Make sure that you know the market

In order to gain enough information on the market that your
clients are about to enter, both you and your client may consider
whether they have:
⚫ Completed all the research about the market; and
⚫ Consulted the key suppliers, distributors, competitors and
customers to obtain different perspectives about the
market.
Your clients should also respond to feedback from these
stakeholders in order to refine their business idea and business
model.
Step 4: Make sure that you know the customer

It is essential to understand the characteristics and buying
behaviour of your clients’ potential customers: they are one of
the key determinants of a business’ success. You and the
agripreneur need to determine:
⚫ The level of commitment to their supplier;
⚫ Level of reliability;
⚫ What drives their buying decisions;
⚫ How they can differentiate their products from that
of their competitors; and
⚫ How the farmer can convince the supplier of the
value of their product.
Step 5: Establish cash and other financial resources

During the first few months, and perhaps years of a business,
your clients will experience great uncertainty. They have to take
steps to ensure they have enough capital for their business and
to secure sources of cash for growth. They should determine
how much they can do with existing resources of funding and
how
223
much funding they will be able to obtain from savings, partners

and external sources.
Step 6: Select an appropriate business structure

It is important that your clients select the
appropriate business structure from the Business
start. It is advisable to focus on a simple structure: The
business structure during the early years of arrangement of
the business. authority lines,
communication
Step 7: Build the right team lines, roles and
responsibilities
One of the most critical steps in launching
within a business.
a business is to build a team that has clear
roles, works well together and that can
deliver the goods. Your clients’ team members should share
their ideas about how the business should be run and they
should agree on common values that will be applied in
conducting business and making decisions. It is important to
clarify who is in charge of the key positions in the business or
group. The most common positions are outlined in Table 15.
Table 15: Common positions in a business or group
Position Role
Chairperson/Manager ⚫ Sets strategy and puts plans
into action; and
⚫ Makes final decisions.
Secretary ⚫ Keeps all records of meetings; and
⚫ Reports to the manager.
Finance/Accountant ⚫ Keeps records of all financial
transactions; and
⚫ Manages relations with payments
from suppliers, income from
buyers and credit lines from
lenders.
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Position Role
Production Manager ⚫ Keeps records of all planting,
production and harvesting plans;
and
⚫ Links production schedule to sales
targets.
Marketing Manager ⚫ Maintains links with buyers
and suppliers; and
⚫ Manages links between production
and markets, records inventory
and sales.
Member/Employee ⚫ Supports the production of product;
and
⚫ Manages key aspects of the
business operations.
This team will need to meet on a regular basis to monitor
progress and deal with any challenges or problems that arise.
Step 8: Be prepared for problems and change

In all business ventures, there are issues that arise and
problems to face. One of the most important skills any
business team can have is the ability to deal with
problems as they arise and to make changes to their
plan accordingly. Identifying and managing problems
will require the team to meet and discuss issues
regularly and these meetings need to be planned.
As many businesses go through periods of problems or even
failure, a key trait of a strong entrepreneur is the ability to learn
from mistakes quickly and to find ways to overcome them. It
is common to find that a first business attempt will fail, but the
learning that occurs during this work is invaluable to the success
of future business ventures and plans.
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The business team needs to go into their investment with a

clear understanding that they will inevitably face problems and
must be ready to make changes constantly, in order to launch
and maintain their business successfully. As the extension
agent, you may want to consider the following key aspects,
which are involved in the evaluation of change:
⚫ How can the agripreneurship approach be expanded?
⚫ How can decision-making support tools be integrated
to develop improved market linkage for farmers?
⚫ What information and technical support do agripreneurs
need to make well-informed decisions?
⚫ What enabling institutional and policy arrangements
are needed for a more productive and market-
orientated agriculture?
Running and growing a business

Once the enterprise plan is place, your clients can use a business
checklist in order to ensure the proper running and growing
of the enterprise. Table 11 gives an example of the business
checklist.
Table 16: The business checklist
Marketing
Who is the buyer?
Sales targets
Define the product:
⚫ What is the quality class:
A, B or C?
⚫ What are the
alternative markets?
⚫ Packaging
requirements; and
⚫ Labelling of farm produce.
226
Price:
⚫ How will farmers be paid?
⚫ Promotion (What will be
attractive to the
buyer?); and
⚫ Distribution needs.
Production target
Production target to match
sales target:
⚫ Schedule of delivery (weekly,
monthly, etc.);
⚫ Production inputs needed;
and
⚫ Technology requirements:
◦ Upgrading of
production; and
◦ Needs in post-harvest.
Financial targets
Capital requirements for
production target
What needs to be available
for start-up?
Operational requirements
Sources of capital:
⚫ Local sources;
⚫ External sources
(Grants, loans, etc.)
Management
Who is responsible for what?
How are they paid?
What are their incentives?
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Review process
Review the system every 3–6
months.
Compare targets and determine
if they are well linked.
Identify changes that may be
needed.
Conduct more regular reviews
as the product increases in
value.
Growing the business is determined by the following four key
elements:
⚫ Past performance;
⚫ Partners;
⚫ Resources; and
⚫ The numbers involved from the outset.
Business processes should only be scaled up when there is
something tangible and positive to scale up. Additional training
may be more profitable once the agripreneur or farmer group
understands their strengths and weaknesses.
Monitoring progress against targets

The final step for the extension agent is to evaluate the
business process. This can be done with the agripreneur
or group at the end of the first season or year. The
purpose of this overall monitoring is to draw lessons from
the experience and compare the level of progress with other
approaches being undertaken in the project area and other areas.
Progress monitoring or evaluation should be conducted on the
following levels:
⚫ Business performance;
⚫ Process performance;
228
⚫ Equity and wealth; and

⚫ Institutional change.
Business performance
The following elements are relevant to the evaluation of process
performance:
⚫ Did the target business formulate a strong business case?
⚫ How well organised was the agripreneur/business team?
⚫ How many people were involved in the business?
⚫ Did the production team meet their targets?
⚫ Define and explain any positive or negative variance.
⚫ Did the financial plan meet the needs of the agripreneur?
⚫ Define and explain any positive or negative variance
⚫ Did the marketing/sales team meet their targets?
⚫ Did the business make a profit and, if so, how much?
⚫ Will the agripreneur continue in the next season?
⚫ Are there any major changes that need to be made to
improve performance?
⚫ Does the agripreneur need any additional capacity building?
Process performance
For the extension agent/the agency supporting the extension
agent, the following elements are relevant to the evaluation
of process performance:
⚫ Is the agripreneurship development an effective
mechanism for empowering resource-poor rural
communities to link with markets?
⚫ What was the level of community participation
and empowerment in the process of evaluating the
market, designing the entrepreneurship and monitoring the
outcomes?
⚫ What type of product value or market type combinations work
best with the selected communities?
⚫ Does agripreneurship development create new market
or business entrances?
⚫ What are the minimum resources and capacities required
to participate in agripreneurship projects?
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⚫ How do capacity, organisational levels and competence

affect process performance?
⚫ Does agripreneurship development facilitate better working
relationships across development agencies and between
public and private-sector agents?
⚫ How does agripreneurship development contribute to changes
in rural livelihood strategies on community and administrative
levels?
Equity and wealth

Monitoring equity and wealth involves the following criteria and
considerations:
⚫ Does agripreneurship improve the livelihoods of vulnerable
groups such as women and the poorer social segment?
⚫ Does agripreneurship stimulate innovation cycles and streams?
⚫ Does agripreneurship stimulate greater investment
in sustainable natural resource management?
230
Session 6.2: Managing relationships
Session outcomes
After studying this session, you should be able to explain
how you will work with:
⚫ Customers;
⚫ Labourers;
⚫ Service providers;
⚫ Key partners; and
⚫ Financial partners.
Introduction
One way to help the agripreneur support business in the
challenging and changing market environment of smallholder
agriculture is to ensure that all stakeholders are engaged in ways
that enhances their cooperation with the agripreneur.
There is a difference between internal and external stakeholders.
Internal stakeholders include employees, customers,
suppliers and service providers and financial partners,
whereas external stakeholders include the general public,
communities and groups and the media. Working with
stakeholders refers to your ability to build long-term or
ongoing relationships with stakeholders.
In this session, the difference between internal and
external stakeholders will be highlighted and the focus will
be on two concepts regarding relationships in the agripreneur
field, namely business relationship management and customer
relationship management.
Managing business relationships

The term business relationship management refers to the
strategies, processes and behaviours involved in creating and
231
maintaining value-producing relationships between an

agripreneur and all its stakeholders, including: employees
(labour), service providers, key partners and financial partners.
Principles of business relationship management

Business relationship management is based on the following,
underlying principles:
⚫ Acknowledge and actively monitor the concerns of all your
stakeholders and take their interests into account when
making business decisions;
⚫ Listen to, and communicate openly with your stakeholders
about their concerns and contributions;
⚫ Implement processes and modes of behaviour that are
sensitive to the concerns, opinions and contributions of
each stakeholder;
⚫ Recognise the interdependence of the stakeholders’ efforts and
try to achieve a fair distribution of the benefits among them;
⚫ Cooperate with all stakeholders to ensure that your
business risks are minimised; and
⚫ Acknowledge the potential of conflicts between
stakeholders and address such conflict (if it does occur)
through open communication.
Steps involved in business relationship

management
The agripreneur should manage their business
relationships by taking the following steps:
Step 1: Identify all stakeholders
Be specific and make sure that all stakeholders are identified,

including suppliers, employees, distributors, financial partners
(e.g. commercial banks) and government agencies and non-
government organisations
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Step 2: Define the impact of each relationship
As the agripreneur you need to determine how a relationship

affects your ability to achieve your goals. By collaborating
with role players and stakeholders, you can make significant
improvements in operations, production, product quality and
financial results.
Step 3: Identify common ground
As you begin the relationship management process, try to

identify what the common interests and shared goals are
between you and the other stakeholder(s).
Step 4: Develop action plans
Once you have identified all your stakeholders and you are aware
of the impact of each of these relationships, you need to prioritise
the stakeholders and develop a specific game plan for the most
important relationships to start the process. Identify three or
four specific steps that you can take to implement strategies
for managing the relationship. Communication strategies are
particularly important and you should consider communication
methods such as regular face-to-face meetings, e-mail updates,
or other ways of sharing information with stakeholders.
Step 5: Identify measurable results
Identify indicators that you can use to measure the

results and success of your business relationship
management effort.
Managing customer relationships

At this point, the agripreneur should be fully aware of the
importance of the customer in the agripreneur and they would
understand that the management of customer relationships
is a key element in the growth and business success of their
enterprise or operation. The main purpose of managing customer
233
relationships is to analyse customer-related information in

order to:
⚫ Understand customer needs (buyer needs) and buying
patterns, based on reliable information;
⚫ Identify buying patterns and the high-value customers who
produce the greatest profit for a business;
⚫ Retain existing customers or buyers by improving their
overall experience with the agripreneur;
⚫ Improve the customer’s experience with the agripreneur
and ensure customer satisfaction and customer loyalty;
⚫ Attract new customers and buyers and enter into new
sales contracts;
⚫ Drive the sales effort; and
⚫ Increase sales growth and profitability.
Customer relationship management in agriculture

Customer relationship management (CRM) involves the application
of practices, strategies and technologies to analyse and manage
the interactions and relationships between a business and its
customers. One of the main issues that new agripreneurs face
is how to increase their sales in a risky and highly competitive
market environment, which leads to the focus on customers,
retaining existing customers and obtaining new customers.
CRM as a way of improving the performance of agricultural
organisations and businesses has been receiving a great
deal attention.
Successfully implementing CRM in agricultural enterprises
has the following benefits:
⚫ Increase in sales and profitability;
⚫ Improved placement of products;
⚫ Increased customer satisfaction;
⚫ Increased retention of the existing customer base,
particularly during the times of economic uncertainty;
and
⚫ Increased chance for attracting new customers.
A CRM system should include a series of activities that will offer
agricultural businesses the opportunity to obtain or maintain
234
the advantage over their competitors. Agri-businesses have to

create a knowledge base about their customers, so that their
products can meet the current needs and requirements of their
customers. Agri-businesses should also consider the potential and
unidentified customer needs, in order to obtain information about
them and use the information to adapt its product offerings, so
as improve customer satisfaction.
The following six key elements and activities should be
included in CRM programmes for agricultural business and
entrepreneurships.
CRM goals
It is important to align CRM goals to the essential goals of the

agricultural enterprise, which directly affect their
performance. These goals include:
⚫ Increasing customer satisfaction with products or services;
⚫ Providing value to customers and increasing customer loyalty;
⚫ Maintaining long-term relationships with customers/buyers
and retaining existing customers;
⚫ Gaining a reputation of fairness among customers; and
⚫ Achieving mutual trust with customers.
Customer information
One of the key elements in the success of both the

agripreneur and the CRM programme is to collect,
analyse and use reliable customer-related information
and customer behaviour during the customer
lifecycle.
It is important to use this information in different business
areas, from production to marketing.
Customer lifecycle: Customer life cycle: The different stages

through which a customer goes, from considering a product to the
point of actually buying it.
235
Market approach
When approaching the market, agricultural Product

business should use strategies such as: differentiation:
⚫ Superior product quality; The process of
⚫ Superior customer service; distinguishing
⚫ Lower prices; a particular
⚫ Product differentiation; and product from that
⚫ Customised offering of products as of competitors,
well as lower prices. making it more
attractive to a
Maintaining and developing particular target
customer relationships market.
One advantage that agricultural

businesses have over other business models is that they can gain
complete trust of their targeted group.
Assessment of technological infrastructure
CRM solutions are designed to provide the information that

is needed to develop and implement a strategy to maximise
customer profit, and, thereby, provide the business with a
competitive advantage. Analysis of CRM technology can help
businesses to understand the customer and find hidden
opportunities for meeting the increasing customer
demands.
236
Concluding remarks
In this study unit, you learned how agripreneurs should launch
and grow their enterprises or operations by conducting proper
planning, testing their business idea, making sure that they know
the market and their customers, establishing financial resources,
selecting a proper business structure and building the right team.
You also learned how you, as the extension agent, can assist the
farmer run and grow their business and how to use the business
checklist to do so. Once an agripreneur is running and growing,
the progress should be monitored. In this study unit, you learned
how to support the farmer in monitoring progress on the levels
of process performance, equity and wealth and institutional
change.
Finally, you learned the principles and practices involved in
managing business and customer relationships in an agripreneur.
Complete the post-assessment in your

workbook.
237
Glossary
Definitions
Word Definition
Active listening A structured form of listening and
responding in which the listener focuses
attention on the speaker, thereby
improving mutual understanding.
Agripreneurship Entrepreneurship that relates to the
marketing and production of various
agricultural products, as well as agricultural
inputs.
Agricultural bank A bank that started as a government-
owned institution that provides credit
for investments in agriculture and other
production activities.
Agricultural See: Agripreneurship.
entrepreneurship
Agricultural Products or resources that farmers use in
inputs farm production, e.g. seed, fertilisers
and agri-chemicals.
Agronomic Thinking related to agronomy, which is a
thinking branch of agriculture that deals with
crop production and soil management.
Asset An economic resource with economic value.
Balance sheet A financial statement that presents the
financial position of a business at the end
of a particular period.
238
Word Definition
Bank account A record or list of all the items that have
statement been processed through a bank account
during a particular period (usually a
month).
Barriers to entry Factors that may prevent a new business
owner from entering a particular market.
Board of A group of individuals, who are elected
Directors (chosen) as representatives of the
shareholders and who oversee the activities
and operations of an enterprise.
Bookkeeping The process of recording, classifying and
maintaining the financial transactions and
activities of a business.
Brainstorm A group discussion that is conducted in
order to produce solutions to problems or
develop new ideas.
Brand A distinguishing name, symbol or logo that
identifies a product and distinguishes it
from other products on the market.
Breakeven point The income that is needed to cover the
total amount of the expenses of a business
during a particular period.
Budget A financial document that gives the
estimated future income, costs, expenses
and resources of a business for a particular
period, e.g. year.
Bulking Storage of a large quantity or volume of a
product.
Business See: Enterprise.
enterprise
239
Word Definition
Business plan A document that outlines the financial and
operational goals of a business enterprise
or unit for the near future.
Business process A visual representation of the activities
map involved in the operations and processes
in a particular business.
Business The strategies, processes and behaviours
relationship involved in creating and maintaining
management value-producing relationships between
an agripreneur and all its stakeholders.
Business The arrangement of authority lines,
structure communication lines, roles and
responsibilities within a business.
Capital Money or other assets that farmers
have available and that they can use to
contribute to a particular cause or invest in
a business effort.
Cash flow The movement of funds in and out of a
business.
Cash flow An estimate of the amounts and the timing
forecast of cash inflows and outflows that you
expect over a particular period (usually a
year), broken down by month.
Cash flow A financial report that gives information
statement on the cash generated and used in
the following categories: operations,
investments, financing and supplementary
activities, such as income tax and interest.
Chief executive The highest-ranking executive manager
officer (general manager) in an enterprise.
240
Word Definition
Codex A collection of internationally recognised
Alimentarius standards, codes of practice, guidelines and
other recommendations relating to foods,
food production, and food safety.
Collective A marketing approach in which a number
marketing of farmers, producers or growers work
together to sell their combined crops.
Commercial Activity that involves trade and trading.
activity
Commercial bank A profit-based, financial institution that is
legally authorised to offer various financial
services.
Commodity A raw material (e.g. copper) or an
agricultural product (e.g. coffee) that can
be bought and sold.
Competitive The factors that allow a business to
advantage differentiate its product(s) or service(s)
from those of its competitors, in order to
increase its market share.
Competitor A tool that is used to evaluate the strengths
analysis and weaknesses of the competitors of a
business in a particular market.
Condition A contractual term and if breached, it gives
the injured party the right to cancel the
contract and claim damages.
Conflict A strong disagreement between individuals
or groups regarding ideas or interests that
may result in an argument.
Conflict resolution The method of finding a solution to a
disagreement between two or more parties.
241
Word Definition
Contract An oral or a written agreement according
to which two (or more) parties bind
themselves to certain obligations of which
the fulfilment is legally binding.
Contractual A marketing approach in which companies
marketing at different levels of the value chain (e.g.
production and distribution) work together
to achieve greater financial advantages
than they would have on their own.
Credit Any transaction that increases the balance
on the bank account, e.g. cash deposits,
account payments to you, etc.
Customer life cyle The different stages through which a
customer goes, from considering a product
to the point of actually buying it.
Credit Pooling the capital or savings of a group
mobilisation together in one common fund.
Customer The application of practices, strategies and
relationship technologies to analyse and manage the
management interactions and relationships between a
business and its customers.
Customer The process by means of which a business
relations interacts with and develops, establishes
and maintains relations with its customers.
Customer A term that is often used in marketing
satisfaction and that points to the extent to which the
products or services of a business meet
or exceed customers’ expectations.
242
Word Definition
Customer service The process of ensuring customer
satisfaction with a product or service
by taking care of customer needs
and providing professional and
helpful assistance to the customer.
Debit Any transaction that lowers the balance on
the bank account, e.g. cash withdrawals,
account payments and any other expenses.
Decision making The thought process of making a sensible
choice from available options.
Demonstration A field or a small area of land that is used
plot to teach farmers, teach, experiment and
share ideas about agricultural practices, so
that farmer groups can learn, practice and
track the cost of new crops and improved
techniques.
Discount Customers who seek products from
customers the business when it is offering price
reductions.
Diversification The strategy of entering a new market or a
new industry, in order to increase sales
and profitability.
E-money Electronic money that is exchanged
electronically by means of a computer or a
mobile phone.
Economies of The cost advantage resulting from an
scale increased output of a product.
Electronic money See: E-money.
243
Word Definition
Employee The extent to which employees are
satisfaction happy and content in their jobs or in their
positions in a particular business.
Endemic A condition that is regularly found in a
particular area or among particular people.
Enterprise Any business operation or organisation that
provides goods or services with the primary
motive of making a profit, rather than
employment.
Entrepreneur An individual who starts, organises and
manages a business venture, taking
financial risks to do so.
Executive Someone that has the power to put plans
into action.
Expense Money that is spent.
Firmographics A method that is used to identify
customers, based on the qualities that
apply to profitable businesses.
Floor price The lowest legal price at which a product
can be sold.
Fraction A quantity that is not a whole number, e.g.
¾.
Gross margin The total sales revenue (income) minus
the cost of goods sold, divided by the
total sales income and expressed as a
percentage.
Human resource The process by means of which the
planning agripreneur ensures that he has the right
workers, who are capable of completing
specific tasks.
244
Word Definition
Impact investing Investments made into companies,
organisations and funds with the intention
to generate a measurable, beneficial
social or environmental impact alongside
a financial return.
Income A financial statement that shows the
statement profitability of a business during a
particular period.
Industrial market Market that involves the sales of goods and
products between businesses.
Information and The integration of communication devices,
communications applications and services, including
technology computers and computer networks, mobile
phones and television to enable users to
access, store, transfer and manipulate
information.
Innovative Capable of creating thinking and
introducing new and original ideas.
Innovator An individual who is known for creative
thinking and for introducing new methods
to original processes.
Interest Money paid regularly (at a particular rate
that is expressed as an annual percentage)
for loans or paying debts.
Interview A purposeful conversation between an
interviewer (the agripreneur) and an
interviewee (the buyer) that requires
the interviewer to ask concise, market-
related questions to which the interviewee
responds.
245
Word Definition
Investor An individual or an institution who places
money into a particular business in return
for an ownership or partner stake in the
business.
Knowledge An intermediary (an organisation or
broker a person) develops relationships
and
networks between or among the creators
(producers) and users of knowledge
by providing linkages, information
or knowledge sources, e.g. technical
knowledge, market insights and research
results and findings.
Lead An individual who has provided contact
information that may point to a potential
sales opportunity.
Lead farmers Farmers who lead farmer-to-farmer
extension services, based on their
agricultural expertise.
Liquidity A measure of how easy it is to convert
assets into cash.
Loyal customers Customers who regularly seek services
or products from a specific business and
remain loyal to that business.
Market analysis The study of a market, in order to
determine the attractiveness of the market
in a particular industry and to understand
the opportunities and threats in the
market, as they relate to the strengths
and weaknesses of an enterprise.
246
Word Definition
Market A favourable condition in the market that
opportunity a business can use to its advantage, e.g.
a changing trend, or an increased
demand
for a product that competitors have not yet
recognised.
Market A systematic, participatory method for
opportunity collecting market information to identify
identification and select products and services for
investment and agripreneur development.
Market Setting a low price on a new product, in
penetration order to penetrate the market quickly and
pricing attract large numbers of buyers from the
start.
Market price The unique price on which buyers and
sellers agree to trade in a particular
market.
Market research The process of collecting and analysing
information about the market into which an
enterprise or a new business is entering, in
order to evaluate (assess) the viability of
the new product or service.
Market share The portion of the market that is controlled
by a particular business or enterprise.
Market skimming Setting a high price on a new product for
pricing a start, in order to “skim” the market, and
lowering the price as product demand
increases.
Market survey The systematic collection of market-related
data (e.g. data on target markets and
customers) from a population or part of a
population to determine the present status
of a situation, event or process.
247
Word Definition
Marketing The process responsible for identifying,
anticipating and satisfying customer
requirements profitably.
Marketing The specific blend of advertising, sales
communication promotions, public relations (PR), personal
mix selling and direct marketing tools that an
enterprise uses to communicate product
value it its customers.
Marketing mix A set of tactics and strategies that an
enterprise uses to promote its product in
a particular market and that is made up
of
the so-called four Ps of marketing: product,
price, place and promotion.
Marketing A model that directs the way in which a
strategy producer will focus limited resources on
the best opportunities, in order to
increase sales.
Memorandum of The founding document of an enterprise
Incorporation that sets out the structure and the
governing rules of an enterprise.
Microfinance A financial institution that is designed to
institute work with households and enterprises with
smaller borrowing capacity than clients of
commercial banks.
Migrant worker A person who moves from place-to-place to
find work, e.g. farm labourers who harvest
crops seasonally.
Mitigate Minimise.
Need-based Customers who only buy a product when a
customers particular need for it arises.
248
Word Definition
Negotiation A discussion method by means of which
differences between individuals and groups
are settled.
Niche market A profitable portion of a particular market
on which business efforts are focused.
Opportunistic Sales that are based on responding to
sales whatever sales opportunity becomes
available.
Organisational See: Business structure.
structure
Overdraft A short-term loan that allows a client to
draw more money than what is available
on his/her current account up to a certain
limit.
Para-vet A local service provider that provides basic
extension agent frontline medical services for farm
animals, in most cases diagnosis for
common
pests and diseases and sales of medical/
veterinary products.
Payroll The record of the salaries, wages, bonuses
and taxes or the workers employed in a
company.
Persuasion The process of changing an individual or a
group’s attitude or behaviour towards an
idea, event or issue by means of written
and verbal communication.
Pluralistic Extension that is characterised by the
extension inclusion, interaction and coordination of
multiple providers and services, funding
options and multiple information sources.
249
Word Definition
Positioning A marketing strategy that aims at
strategy placing a product or brand in a
particular
position—relative to competing brands and
products—in the mind of the customer.
Primary data Written or oral information obtained from
source a direct witness of, or a participant in, an
event or a process, e.g. direct accounts,
correspondence and speeches.
Private enterprise An association of one or more persons,
governed by the Companies Act and the
Memorandum of Incorporation, that is not
allowed to offer its shares to the public.
Product The process of distinguishing a particular
differentiation product from that of competitors, making
it more attractive to a particular target
market.
Product grading The process of sorting units of a product
into defined classes or grades of quality
according to specified standards.
Profit A financial gain that is expressed as the
difference between the money earned (by
sales) and the money spent in buying,
producing or manufacturing a product.
Profit and loss A financial statement that summarises the
statement income, costs and expenses of a business
during a particular period, in order to
provide information on the ability of the
business to generate profit by increasing
income or by reducing costs.
250
Word Definition
Promotion The process of creating customer
awareness of a particular product, in order
to generate sales and increase customer
loyalty.
Promotion mix See: Marketing communication mix.
Prospect Potential customer.
Prospecting The sales process of recruiting or searching
for new customers for a business.
Public enterprise An association of one or more persons who
is/are allowed to trade its shares on the
open market.
Questionnaire A list of questions that are asked to
respondents (e.g. consumers of a particular
product) to obtain specific information.
Rating scale A tool that is used for assessing the
performance level of tasks or the skill level
involved in performing a particular task.
Reconciliation The process that explains the difference
between the bank balance shown in the
bank statements of the agripreneur (as
supplied by the bank) and the balance
shown in the financial records of the
enterprise.
Recruitment The process of finding workers to fill vacant
positions in the agri-business.
Remittance Transfer of money across national borders
by migrant workers.
Reputation The beliefs or opinions that customers
generally hold about a business, its
products and services.
251
Word Definition
Resources Any physical entity that is required to carry
out a particular task, activity or project,
e.g. materials, money, people, equipment
or facilities.
Retailer A business that sells goods directly to
individual consumers.
Return on A measure of the profit of an
investment investment, expressed as a percentage
of the original cost.
Revenue The total income that is generated before
any costs or expenses have been deducted.
Risk A situation that may lead to loss, damage,
danger or injury.
Sales contract A legal agreement to accept or deliver a
specified quantity of a product (e.g. grain)
with a specified minimum physical or
chemical content and produced according
to a specified method.
Sales forecast A month-to-month forecast of the expected
level of sales of a business.
Sales The detailed presentation of information
presentation (which may include a demonstration) on
a particular product, for the purpose of
closing a sale.
Savings and A member-owned and member-governed
credit savings and credit institution that was
cooperative developed to empower poor communities
to manage their own financial resources.
Seasonal A record of the expenses and income of a
calendar business over a year.
252
Word Definition
Seasonal income Cyclical income patterns involving earning
money only during some parts of the year.
Secondary data Primary data that has been analysed and or
source processed, thereby providing second-hand
information about an event or a process,
e.g. books, journal articles, newspapers
and collected consumer information
made available by consumer research
organisations.
Share A unit of investment in an individual
enterprise.
Shareholder An individual who legally owns at least one
share in a enterprise.
Smallholder A farmer who owns a small plot of land, on
which he/she grows self-sustaining crops,
and relies mainly on family labour.
SMART skills Skills for Marketing and Rural
Transformation.
Single ownership A business that is owned and controlled by
one person (producer or trader).
Staff turnover The number of permanent employees
who leaves a business within a reported
period, versus the number of actual
active permanent employees on the last
day of the previous reported period.
Stakeholder Any individual, enterprise or organisation
that is directly or indirectly involved in a
business, e.g. customers, suppliers and
distributors, government organisations and
departments, etc.
253
Word Definition
Stock exchange A financial market in which the shares of
public companies are traded (bought
and sold).
Supplier A company or a business that supplies
goods or services to another business, in
this case a farming operation or an agri-
entrepreneurship.
Term A provision in the contract that states an
obligation or set of obligations imposed
(forced) on one or more of the parties.
Tillage The preparation of soil or land for growing
crops.
Trade agreement An agreement between two or more
countries that stipulate the terms according
to which goods and services can be
exchanged.
Trade association An organisation that operates in a
particular industry or sector and focuses on
the collaboration between businesses in
the industry.
Urbanise Become more industrial or city-like.
Value-added A product that has been produced or
product processed in a way that increases its value,
e.g. processing wheat into flour.
Value capture The process of maintaining a percentage of
the value provided in every transaction.
254
Word Definition
Value proposition A (marketing) statement that identifies
and briefly describes the unique value
or benefits that a product would offer
your customers that the products of your
competitors do not offer.
Variable A characteristic or a number that increases
or decreases and, therefore, takes
different values in different situations and
times.
Warehouse A document that provides proof of
receipt ownership of goods or products stored in a
warehouse.
Weather indexed An insurance system in which the payout
insurance is linked to measured environmental
conditions by using indices (closely
related to agricultural production losses),
such
as rainfall, wind speed, temperature and
vegetation levels.
Wet market A market that sells fresh meat and
produce.
Wholesaler A company that buys large quantities of
products or goods from different producers
or farmers, stores them and sells them to
retailers.
255
Abbreviations
Abbreviation Description
ASCA Accumulating Savings and Credit
Associations
CEO Chief Executive Officer
CIAT International Center for Tropical Agriculture
CRM Customer Relationship Management
CRS Catholic Relief Services
FAO Food and Agriculture Organization of the
United Nations
GSM Global System for Mobile Communication
ICT Information and Communications
Technology
MEAS Modernizing Extension and Advisory
Services
MFI Microfinance Institution
MOI Market Opportunity Identification
mt Metric tonne
ROCSA Rotating Savings and Credit Association
SACCO Savings and Credit Cooperative
TOPS Technical and Operational
Performance Support
USAID United States Agency for International
Development
256
Resources
The following resources were used in writing this manual:
Lundy, M.; Gottret, M.V.; Best, R. & Ferris, S. 2007. A participatory
guide to developing partnerships, area resource assessment and
planning together. Baltimore: Catholic Relief Services.
http://blogs.worldbank.org/dmblog/agriculture-enterprise-
evolution-thought-and-perspective-increase-outcomes-indias-
farmers
http://siteresources.worldbank.org/INTARD/
Resources/335807-1330620492317/8478371-1330712142266/
Module3-TN1.pdf
http://www.earlytorise.com/defining-entrepreneurship/
https://www.researchgate.net/publication/260985365_
Agricultural_Entrepreneurship
http://www.fao.org/docrep/W6882e/w6882e02.htm#P498_72605
http://www.daff.gov.za/doaDev/AgricDevFinance/
BusinessPlanGuidelines(VIS).pdf
http://www.fao.org/uploads/media/5-
EntrepreneurshipInternLores.pdf
http://www.fao.org/docrep/W5830E/w5830e0n. htm#farmer
%20organizations
https://ncsu.edu/ffci/publications/1999/v4-n3-1999-
winter/expanding-role.php
https://www.google.com/ AhWFJ8AKHSM3Cfo4ChAWCD8wBA&url=http%3A
%2F%2Frepub. eur.nl%2Fpub%2F25550%2FJSBM_49_297_AAM.
pdf&usg=AFQjCNEb8GW0KA-1j-5cXbv7dwGyjJGXqA&sig2=FjX2S
d2UY2Ttrvlvt2C5ag
http://www.cim.co.uk/more/getin2marketing/what-is-marketing/
257
http://knowledgenet.carmichaelcentre.ie/articles/defining-your-
organisations-purpose-importance-vision-mission-and-values
http://www.netmba.com/strategy/competitor-analysis/
https://www.academia.edu/2918009/A_framework_for_
competitor_analysis
http://edwardlowe.org/how-to-conduct-and-prepare-a-
competitive-analysis/
https://www.entrepreneur.com/encyclopedia/competitive-analysis
http://www.netmba.com/strategy/competitor-analysis/
http://edwardlowe.org/how-to-conduct-and-prepare-a-
competitive-analysis/
http://repiica.iica.int/docs/b2032i/b2032i.pdf
http://planningskills.com/askdan/4.php
http://www.ruralfinanceandinvestment.org/sites/default/
files/1163528668803_Basic_calculations_en.pdf
http://www.crs.org/sites/default/files/tools-research/guide-to-
strengthening-business-development.pdf
https://www.academia.edu/1748871/INTRODUCTION_OF_
PRODUCTION_AND_OPERATION_MANAGEMENT
http://extension.psu.edu/business/ag-alternatives/farm-
management/managing-machinery-and-equipment
https://nature.berkeley.edu/ucce50/ag-labor/7labor/19.
pdf
https://nature.berkeley.edu/ucce50/ag-labor/7labor/01.pdf
https://www.kent.ac.uk/careers/sk/persuading.htm
http://www.fao.org/docrep/008/a0185e/a0185e04.htm
http://www.crs.org/sites/default/files/tools-research/market-
facilitators-guide-to-participatory-agroenterprise-development.pdf
258
http://www.daff.gov.za/doaDev/AgricDevFinance/
BusinessPlanGuidelines(VIS).pdf
http://seaf.com/wp-content/uploads/2014/10/FAO-Report_
Feb20101.pdf
http://www.dochas.ie/Shared/Files/4/dochas-agricultural-
investment.pdf
http://www.agriculturesnetwork.org/resources/learning
EntrepreneurshipInternLores.pdf
https://www.google.com/tt3OAhWBL8AKHWuyBCsQFghQMA c&url=http%3A
%2F%2Fwww.fao.
2Ffileadmin%2Ftemplates%2Fess%2Fdocuments%
2Fmeetings_and_workshops%2Fcop2015%2FHandbook_on_
Agricultural_Cost_of_Production_Statistics_preEGM2015.
sg=AFQjCNGJ52nQ7mbtzUOwF_1GrViFugY5lA&sig2=bor9HBYR8_
L59NRvj0kaAQ
http://www1.agric.gov.ab.ca/$department/deptdocs.nsf/all/ agdex1133?
opendocument
http://www.agmrc.org/business-development/operating-a-
business/marketing/pricing/
http://www1.agric.gov.ab.ca/$department/deptdocs.nsf/ all/agdex1133?
opendocument
http://www.oecd-ilibrary.org/agriculture-and-food/
managing-risk-in-agriculture_9789264075313-en
ManagingRiskInternLores.pdf
http://www.financialaccountancy.org/
http://www.inc.com/encyclopedia/cashflow.html
http://www1.agric.gov.ab.ca/$department/deptdocs.nsf/all/
agdex4334
259
http://www.iberglobal.com/files/International_trade_contracts.pdf
http://pubstorage.sdstate.edu/agbio_publications/articles/
exex5054.pdf
http://documents.worldbank.org/curated/
en/800061468779679086/pdf/multi-page.pdf
http://academeresearchjournals.org/download. php?
id=584033206024156763.pdf&type=application/pdf&op=1
http://facta.junis.ni.ac.rs/eao/eao201203/eao201203-05.pdf
http://www.crs.org/sites/default/files/tools-research/guide-to-
strengthening-business-development.pdf
https://agrilinks.org/sites/default/files/resource/files/MEAS%20
Discussion%20Paper%204%20-%20Linking%20Farmers%20
To%20Markets%20-%20May%202014.pdf
260
Other modules of the New Extensionist modules are:

1. Introduction to the New Extensionist
2. Extension Methods and Tools
3. Extension Programme Management
4. Professional Ethics
5. Adult Education for Behavioural Change
6. Knowledge Management for RAS
7. Introduction to Facilitation for Development
8. Community Mobilisation
9. Farmer Organisational Development
10. Value Chain Extension
11. Agricultural Entrepreneurship
12. Gender in Extension and Advisory Services
13. Risk Mitigation and Adaptation
Other related modules developed by GFRAS are on:

• Evaluation of Extension Programmes
• Policy Advocacy for RAS
261

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Module 11: Agricultural

The Learning Kit contains 13 modules designed for self-directed, face-

The Agricultural Entrepreneurship module is developed as part of the

We acknowledge the generous support of the European Union contributions

Lead author: Shaun Ferris

Study unit 1: Introduction to agripreneurship..................4

Study unit overview................................................................4

Study unit introduction............................................................5

Session 1.1: The role of the extensionist in agripreneur

The importance of agripreneur development.............................7

The role of extension agents working on agripreneur

Pluralistic extension and extension agents working with other

Identifying the clients of agripreneurship.................................19

Who are the agribusiness service providers?............................30

Matching clients with market opportunities..............................34

Type of agripreneur clients....................................................36

Session 1.2: Criteria for a successful business...............43

Elements to consider when starting a business........................45

Free service methods and fee-for-service methods for business

Identifying reasons and motivation for becoming an entrepreneur

Assess client readiness to take on a business approach............57

Identifying the market opportunities in your location................58

Designing individual plans for farmers.....................................61

Designing group plans for farmers and cooperatives................67

Session 1.4: Defining the business idea................................74

Assist clients in defining their business idea...................................74

Identify the business gap.......................................................76

Defining the value proposition...........................................................78

Identify and describe your client’s customers...........................79

Outlining the key activities involved in an agri-business............83

Testing the viability of the business idea.................................85

Study unit 2: Evaluating the key skills involved in running

Study unit overview...............................................................89

Study unit introduction..........................................................90

Session 2.1: Evaluating the key skills involved in running

Making decisions on market opportunities...............................93

Managing equipment and labour............................................94

Marketing and sales..............................................................96

Developing a training programme...........................................97

Basic and advanced bookkeeping...........................................98

Basic financial skills.............................................................................99

Using rating scales to assess skills........................................100

Study unit 3: Identifying markets, mapping resources and

Study unit overview.............................................................103

Study unit introduction.........................................................104

Session 3.1: Identifying market opportunities.............105

Spotting the market gap......................................................105

Assessing seasonal supply and demand.................................113

Identifying key buying conditions..........................................115

Creating the sales agreement...............................................125

Session 3.2: Managing key activities and partners in a

Mapping key activities in the production cycle........................131

Identifying key partners.......................................................132

Designing an implementation plan........................................133

Session 3.3: Business planning: From canvas to business

Using the business canvas to design your business plan.........135

Using calculators and digital applications in cost and revenue

Identifying investment needs...............................................148

Study unit 4: Financial management, sales and risk

Study unit overview.............................................................149