The Rural Voice, 1993-12, Page 53i
Starting a business
without losing
your shirt
Some time ago I talked with a
gentleman about a business he was
considering starting.
Had he had any experience in this
type of business before? No,
nothing really, but his family farmed
and he was sure he could hire
someone who knew what to do.
Had he researched a market? He
thought it was pretty strong, after all
supermarkets sell these products so
why wouldn't they buy from him?
Did he know the economics of
production? He didn't think it was a
problem, and had heard from a
friend about some "production
secrets".
How much would he have to
invest? About $100,000.
Why? He liked the taste of this
product.
When I last met this gentleman
his business was bankrupt. There
was no secret. He had lost his
$100,000 and nearly the whole farm.
Sound familiar? Too often
companies — both large and small —
fail from inadequate planning before
starting the business. Here are some
tips:
Don't start a business just because
you like the product. Research your
potential market and determine if
they like the product.
Don't rely on "secrets".
Successful entrepreneurs are always
eager to learn from others. I've
found that those who don't allow
people on the inside soon lose track
of what is happening on the outside:
usually a fatal business mistake.
Visit your local business
development office for information
on your business.
Determine the market for the
proposed product. Consider where it
will be sold, the quantity, to whom,
in what form (fresh, processed and
packaged, for example), and the
price that is likely to be received.
Start off "lean and mean".
Advice
Keeping costs low is absolutely
essential in a new business. Lease
rather than buy. Set up alliances
with others who can help. Pay
yourself what you need and use
profits to continue to build the
business.
Prepare a written business plan.
Use it to convince yourself, and
others, that you know what you are
doing.
Your time is money. The best
initial investment you can make is to
spend your time planning your
business before investing cash in
what can turn out to be a quick way
to lose your shirt.0
Brian Cardy
Rural Development
Secretariat of OMAF
Enterprise
analysis pays
How's the Beef? Check out the
Farm Management Analysis Project.
Farmers wanting to evaluate the
health of their beef feedlot, cow -calf
or other operations can use the
Ontario Farm Management Analysis
Project as the basic tool. The project
is one-stop shopping for basic
financial and production analysis of
the farm business.
Financial Information: The
project provides both an income
statement and a balance sheet for the
business. Using these documents,
analysis is provided to show the
performance of the business. Profit
is calculated as a return to capital
and labour. Cost efficiency of the
business can be determined for each
enterprise. It is possible to look at
overhead and variable costs to
suggest the strengths and
weaknesses of the business. It is
also possible to evaluate individual
expenses and determine if they are in
line with provincial averages.
Other Information: Financial
and production information are
combined in the enterprise reports.
It is particularly useful to review
costs per unit of production like a
cow or sow and the unit of output
like a hectolitre of milk or cwt. of
beef.
A profitable farm has strong
production for both crops and
livestock. The project report will
report actual yields of crops as well
as the cost at which they are
produced.0
Dorothy Miller
Farm Business Advisor
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– Ask your dealer for more information.
We can make all the
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Tom Duizer
Plumbing & Heating
County Rd 15 across from Huller Twp. Office
523-4359 or 482-5267
DECEMBER 1993 49