For entrepreneurs working in the avocado industry, the pressures of a growing market mean that a well-structured avocado business plan is no longer just a nice thing to have, but a necessity.
Rising demand for the fresh avocado fruit, particularly the Hass avocado, in major western markets has led the Organization for Economic Cooperation and Development (OECD) to forecast avocados to be the world’s second-most traded tropical fruit by 2030, after bananas.
To put it into numbers, the global avocado production volume is set to exceed 12 million tonnes, triple that of a decade ago. That’s a lot more avocado trees.
Anyone searching for reasons why only has to look at the modern focus on health, wellness, and weight loss.
A recent US survey found that 76% consumers believed avocados to be healthy, while their cosmetic and pharmaceutical benefits, including avocado oil as a treatment for skin conditions, has also boosted their appeal.
This has led to a clamor in the fruit farming industry as a growing number of firms compete to meet demand, particularly in direct competition with nations rich with avocado growers, such as Kenya, South Africa, and Mexico.As a result, small-and-medium enterprises (SMEs) are finding the need to sharpen their approach in a competitive agribusiness market, and avocado SME leaders have several issues on their plate, including:
Whether you’re the owner or executive of an SME in this sector or are just getting started learning how to start an avocado farm, the good news is that planning, organization and a touch of foresight can help you steal a march on your rivals, and a sensible business plan will embody these three important attributes.
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Across many of today’s industries, companies with an excellent business plan frequently outperform their competitors. A study by Burke, A., Fraser, S., & Greene, F. J. (2010) found that companies that plan grow 30 percent faster than those that don’t plan, which syncs up well with the old adage ‘fail to prepare, prepare to fail’.The reasons why are clear when we look at it.A business plan introduces clarity within your enterprise, from how you’ll raise capital to identifying critical priorities, and embodies the following:
Marketing strategies are a broad topic for any company, but a business plan helps you to narrow your focus to the markets and customers that matter.Working out how to start an avocado farm is one thing, but where and how you place and promote your product is crucial, so putting out a solid course of action in black and white will keep it at the forefront of the company’s collective mindset.
Just as a successful business is only interested in the most talented professionals available, skilled workers only want to work for a company that can demonstrate to them that it’s going places.A well-constructed plan makes it clear that you know what you want and how you’re going to get it. In a competitive field like the avocado industry, this is a must if you want to attract experienced professionals ahead of your rivals.
As we’ll discuss later on, a good business plan helps identify how much funding you’ll need.A lender will need to see that you know the solutions to questions about avocado production, profitability and income streams, and a business plan is the answer sheet they’re looking for.
If there’s one thing that everyone likes — from investors to employees — it’s structure.Your business plan will embody this, acting as a reference tool for sales targets and operational milestones that’s in plain sight of every stakeholder associated with your company.Not only that, it provides an overview that helps you to spot and strike out issues before they get the chance to take root, something every manager knows is invaluable.Here’s how you can make the most of this essential business power tool and get your avocado business on the right track.
If we view the avocado industry as a network of busy highways, each of which lead to different outcomes, then a business plan is the roadmap to the most effective route to take.Yet, just creating any old document doesn’t guarantee faster growth. The kind of plan you have and how you use it counts for a lot.Here’s a step-by-step guide as to how to go about it.
To set your stall out in the avocado industry, you need to know it inside-out.
While you’ll likely already know most of the population by virtue of owning a business in the sector, there’s always more you can learn by deeping studying what other companies are doing through a thorough competitor analysis.
High quality marketing research into economic trends and consumer behaviors will also show you what’s happening in the avocado marketplace, while analyzing your competitors performance will give you clues as to which market niches to aim for.
When done correctly, your research will provide the backbone for a business plan framework that encapsulates your company mission.
The first part of your plan needs to strike out what your business brings to the table, as well as how it plans to go about it.
An executive summary will be the first thing the reader sees, so it should include bold, eye-catching information.
A clear value proposition, a brief yet impactful mission statement, and an outline of how you intend to grow are great items to include.
A value proposition, in particular, sets the stage for the company’s strategy. It should be a declaration of intent that tells the reader what you stand for, how you operate, what makes you different from all the rest, and why your business is worthy of customers or funding.
A purposeful business strategy informs how you’ll bring your company’s mission to life; it will also show potential investors that you’re prepared to use their money wisely.
Let’s say your mission is to become the number one avocado seller in your region. Your strategy shows how you’ll do it, including establishing your economy of scale, which export markets you’ll enter, and how you’ll allocate funds.
It’s almost always better for the reader (and you) to break the company’s mission down into smaller objectives, perhaps categorized into areas like marketing, purchasing and sales, and talk about the specific strategy for each one.
A well thought-out strategy is crucial for reaching the desired future state that you envision, and will help you make better decisions going forward, which is good news for financiers.
Business planning and financing go hand-in-hand: it’s difficult to have one without another.
In today’s tough economic climate, securing any type of finance is difficult, especially business loans with no guarantee. However, a lack of capital is one of the most common reasons why startups fail, making the outlining of financing options a vital springboard for many small businesses.
A good starting point to win over investors is setting out a financial projection based on the strategy you have in place. If done well, this will convince them that your business will generate enough profit to repay the loan – avoiding this common reason for business loan denials.
Sales, expenses and profit estimates for the next three years — bold yet realistic — are the best way of achieving this.
For many lenders, the bottom line is you plan to use the capital to not only continue as a going concern, but to prosper. Many won’t have the time to read through a 40- or 50-page document, so an annex to the main plan outlining how the funds will facilitate the strategies you’ve set out works extremely well.
Lenders are also impressed by SMEs with an ambitious vision, knowing that success not only reduces the possibility of default, but opens up future lending opportunities.
Stating how the capital will help to grow your startup, then, is another surefire way to impress.
In an expanding avocado industry, convincing lenders of an optimistic vision for your company is relatively easy compared to other F&D industries that have been negatively impacted by the pandemic.
But that doesn’t mean that, as an entrepreneur in this field, you won’t be affected by the strict conditions that traditional lenders impose on loan applications.
After all, according to Forbes, US banks and financiers approved only a quarter of SMB loan requests at the end of 2021, making it a major source of frustration for scores of startups.
SMBs, then, are turning to resourceful ways to raise money outside of the scope of traditional finance and the growing world of digital funding is opening up many different avenues. Being aware of all possible lending streams open to you is important, as is weighing up whether asset-based or cash flow lending is preferable.
Here are four prominent examples that can give your business a financial lift, whether you’re starting out or looking to scale upward.
As you may have worked out, microloans are geared around lending small amounts of money to SMBs looking to cover operating costs rather than start or revamp a business.
Typically ranging from $500 to $50,000 loans, microlending helps to grease the wheels of day-to-day operations. For avocado farmers, this could be making sure energy bills get paid or that there’s no hold-up in purchasing seedlings for avocado cultivation.
Governments sometimes launch microlending initiatives to encourage small enterprise. In the US, for example, the Small Business Administration (SBA) loan is almost synonymous with microloans, approving 14 million applications in 2020 alone including a COVID-19 Economic Injury Disaster Loan (EIDL).
Pros
Quick and needing little collateral, microloans also often come with low interest rates. A typical SBA microloan, for example, carries a rate of between six and nine percent.
Cons
You can’t fund or fully scale upward with a microloan, and it’s more likely to be subject to a short repayment term
Got a business idea that you think will be a hit with the general public? Initially the reserve of artists, loan-based crowdfunding has evolved into a viable form of business financing where niche ideas can receive funding from the pockets of online users.
This might seem fanciful with an avocado farm, but there are creative ways to build an engaging online brand. This might include a blog sharing information such as avocado-based recipes, insights into day-to-day farm living, or giving away valuable content in exchange for a donation.
The purpose is to garner enough online attention to make crowdfunding a real possibility, and public interest in healthy living and sustainability makes it more possible than ever for organic farms to be an internet hit.
Pros
It costs next to nothing to start a crowdfunding campaign, save minor hosting fees, and the potential exposure to an online audience is huge.
Cons
It’s difficult to make your voice heard in a crowded digital space, and coming up with a niche idea to stand out might be hard. Donations may also be taxable.
Peer-to-peer (P2P) lending uses the power of the web to put SMBs in touch with remote lenders.
Normally conducted via dedicated online platforms which act as the intermediary, borrowers can search for specific loan types and lenders can vet applicants with specialist scoring models.
Artificial Intelligence (AI) is helping to make these models quicker and more accurate, often giving applicants a decision in seconds, rather than the hours or days of yesteryear.
Future Marketing Insights forecast the global P2P market to more than triple in size to $1.3 trillion over the next decade, making it a major player in the online finance industry.
Pros
P2P opens up the whole world to SMBs, who can secure funding from outside their domestic borders and restrictions. A growing industry means that there will be even more options over the next decade.
Cons
Scoring models can be strict, sometimes using similar criteria to traditional banks. Speaking of which, institutional P2P lending is now prominent, something that financial analysts believe defeats the original objective.
If your avocado business is up and running and you have an idea of your future sales, merchant cash advances are a way of accessing the money you’ll earn six months or a year down the line.
These are often very quick and easy to acquire, especially if you have solid proof that you’ll earn a certain amount of revenue. It can also be great for cash flow purposes, giving you that cash injection to grease the wheels of your business.
Pros
Cash advances come without many strict loan conditions simply because they aren’t loans. They take into account future rather than past performance and can be in your account very quickly.
Cons
A business that relies on them too heavily can end up chasing its tail, lending too much from the future and falling into a financial black hole as a result. Sensible planning is a must.
