Farmers are fabulous idea generators.
They’re well known for inventions of all kinds and technological advances that have revolutionized their industry.
But for every successful product and agribusiness are many others that have failed.
“Sometimes the marketplace isn’t as excited as you are,” said Clark Sullivan, a financial adviser from Regina.
Getting into the value-added business, particularly with food products, is not for the faint of heart.
It requires a set of skills that many farmers don’t have, Sullivan said.
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For example, how do they get their product on retail shelves? Listing fees, which grocery stores charge to place products on their shelves, can cost tens of thousands of dollars.
They must also contend with environmental and health regulations designed to ensure food safety.
“Most producers don’t feel part of the food industry,” said business professor and food safety expert Sylvain Charlebois, the associate dean of the Johnson-Shoyoma Graduate School of Public Policy at the universities of Regina and Saskatchewan.
“The rules of engagement are so different.”
Navigating through these rules can be bewildering.
Jonathan Small, a farm management consultant at Meyers Norris Penny, said bringing in professional help is critical.
This includes using a professional to hire management for the new business and extends to marketing and communication.
Sullivan, who works with many agricultural businesses after they’ve already run into trouble, said accounting issues are a common failing if companies don’t have the proper staff because some business structures require extra reporting and financial information.
Other businesses have trouble with the cost of governance. It takes time and money to compile reports, hold board meetings, seek consensus and hold other meetings.
“That cost is not well understood when the business plans are put together,” Sullivan said.
Farmers who are excellent producers find themselves out of their depth when it comes to administration, marketing, promotion and personnel.
“It’s really hard to predict what can go wrong.”
Regina lawyer Rick Van Beselaere, who specializes in restructuring and corporate law, said tax and legal issues are also areas that professionals might handle better.
He advocates calling in professionals quickly when troubles arise, which could offer more solution options and change creditors’ perceptions of a situation.
Small said farmer investors should also remember that they invested in a value-added business for the long run. Demanding, and receiving, higher-than-market prices for their raw products will drain the company dry.
University of Saskatchewan agricultural economist Murray Fulton said paying producers premiums to supply product is an expensive proposition that can backfire. For example, producers can always move on to another buyer once they have fulfilled their commitments to the processing plant.
