Optimistic, yes, but realistic is a better word to characterize how the proponents of Blue Hills Processors went about establishing their pulse processing business.
The farmers and business owners in Avonlea, Sask., took a look at a business plan they commissioned, decided it was too “rosy” and proceeded to create their own. Several of the proponents were running their own successful businesses.
“Ours was a lot less flattering,” said board secretary-treasurer Bill Nelson of the business plan.
At the time, many communities, including Avonlea, were trying to save their grain elevators, and while Nelson said that’s an admirable goal, it doesn’t always make good business sense.
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“We needed to have a project that would work,” he said.
About 75 farmers and investors took the Blue Hills proponents up on the offer to invest in a $5 million, 140,000 tonne per year capacity facility using the former elevator. Construction began in 2002, even as other pulse plants were failing.
The industry was struggling because pulse volumes had dropped drastically and crop quality was poor because of weather problems.
The company’s first three years featured two short crops and an early frost.
“We struggled through and the shareholders stuck with us,” said board chair Cam Petruic.
By the fourth year, the crop was big and there was less competition.
Blue Hills, which acts as a toll processor for major exporters, had survived when others hadn’t. It employs about 20 people, or 10 times as many as the elevator did, and has paid dividends for three years.
Nelson called it a farmer-led success story that has likely set the stage for other successful projects.
His advice to others who want to enter the world of value-added agribusiness is simple.
“Look at all the negatives,” he said. “Make your business plan as tough as you can.”
Added Petruic: “Don’t undercapitalize.”
They advocate planning for two or three years of operation before realizing a profit. Lack of cash flow has been the undoing of many companies.
While some might be reluctant to invest in intangibles such as operating funds, Petruic said they have to if they want to succeed. At one point, the Blue Hills board went back to shareholders to ask for more money.
“If it’s too hard a sell, then you’re talking to the wrong people,” Petruic said.
Two companies and boards are involved with Blue Hills. One is a holding company for the shareholders and the other is the operating company. Two directors from the holding company sit on the operating board.
Nelson said this ensures more eyes are watching the operation.
Semi-annual and annual board meetings also ensure accountability.
The company has had transportation challenges and initial difficulty finding the right staff. Otherwise, it has been able to make improvements at the facility every year, including more storage capacity.
“There are times when we sit down and look back at our assumptions,” Petruic said.
“We’ve surprised ourselves that we weren’t that far off. The numbers in our business plan were really close.”
