1. Handling Too Much At The Same Time:
Being a jack of all trades and a master of none can negatively affect a small farm. For instance, rushing to put out a new product without adequately marketing your existing product because you are trying to outdo your competition can be devastating for your business.
Likewise, trying to run a dairy and poultry farm simultaneously at the beginning of your small farm business might be too cumbersome, causing a divide of focus.
2. Absence of a Proper Accounting System:
The absence of a proper accounting system makes it difficult to track the income and expenses of your farm business. This could cause your business to run at a loss without your knowledge.
For instance, the fact that a farmer just recorded their highest sales of a product doesn’t necessarily mean that the business is profitable.
A proper accounting system will also help determine if your profit margin is too low for the business to survive. Small scale farmers adapt a low profit margin in order to gain customers but then fail to make enough money to keep the business afloat. Having a proper accounting system will help put things in check.
3. No Solid Business Structure:
Many small scale farmers treat small farms as subsistence endeavors. They start farming and along the way, try to make a business out of it. This often leads to failure. It is important to have a solid business model first before starting a farming business.
Treating small farming like a business will help plan for and avert certain risks. It could help the small scale farmer plan for environmental factors, financial factors and climatic factors.
It will also guide small scale farmers into producing goods people will actually buy, as opposed to goods they think people want to buy. Every business owner should understand the feasibility of his/her product. Failure to do so could cause small farms to crash.
Running a good business entails knowing what your competitors are offering, understanding the rules and regulations guiding agricultural operations, and adapting the right marketing strategies.
4. Failure to Have a Business Plan:
A business plan details a business objectives and strategies for achieving them. It serves as a guideline for making business decisions. The absence of a proper business plan could lead a small scale farmer to make poor or even worse, short-sighted decisions.
Having a business plan will make it easier to cater for other factors such as marketing and distribution. It will serve as a guideline in mapping out an efficient marketing strategy for more sales. It will also help you run your business with short term and long term goals in mind.
5. Disregard for Agricultural Marketing:
Agricultural marketing is often overlooked or treated as an afterthought when it comes to small scale farming and as a result, some small scale farming businesses do not survive
Before a small scale farmer starts planting, s(he) should carry out market research to understand his/her potential customers. This includes finding out information such as the market demand for the intended product.
Similarly, you should also find out if your target market are capable of purchasing your product. If the demographic is earning less than minimum wage and the product is a high profit product, they may not be willing to spend on it.
This means that marketing your products must start before the goods arrive. Some small scale farmers make the mistake of waiting till afterwards and they end up making poor sales and running at losses.
Setting up proper marketing channels will help you prepare for sudden changes in the market and how these changes will affect your business. If you’re not equipped and guided for this, your business could fail.