Establishing a successful small horticulture enterprise: Part 2

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Can you produce it profitably?

Know your land capability

Most horticultural crops will require certain environmental characteristics to grow well. These may include:

  • Soil type – many horticultural crops require a relatively fertile soil type and can be sensitive to salinity and sodicity. Nearly all crops require good drainage. The Wimmera-Mallee region has a diversity of soil types, which reflect differences in parent material,topography, climate and age. For agricultural purposes, many of these soils have some chemical and physical limitations (e.g. salinity and sodicity or subsoil constrains) that require careful management. It will be important to know if your soil type is suitable to the type of crop you are planning to grow and if not, how much will this affect the yielding potential of the crop and what management techniques are available to mitigate the chemical and physical limitations. Sloping or stony ground may restrict certain management actions or make them more expensive. Do you have access to inputs and machinery to deal with limitations? How much yield potential can you afford to lose?
  • Water availability/quality – Horticultural crops have greater water requirements than broadacre farming. Not only will the volume of available water be important but also the reliability of access to water (many crops will require irrigation on a regular schedule and potentially more often, if there is hot or windy weather; most crops have peak demands at certain times of the season). The quality of the water will also be important. As discussed for soil type, water that has a high salt level, may not be suitable for irrigating horticultural crops such as vegetables, herbs or fruit.
  • Climate – Many horticultural crops will only grow and reproduce under certain climatic conditions. Using a range of varieties will assist in managing production during different times of year, however some crops will have a minimum heat or chilling requirement, while others will be sensitive to frost and extreme heat. Nearly all crops need to be protected from wind. Greenhouses or other crop protection structures will be affected by wind. Slopes and exposure to north or south may limit production of certain crops.

A successful horticultural business will know what crops they can successfully manage, either by looking at the types of crops grown in the area or by investigating the soil, water and climatic requirements of their product.

Know your logistical requirements

Cooling and storage – Horticultural crops commonly have specific storage requirements and are easily perishable. Some products may need to be stored at cool temperatures and have specific airflow humidity or atmosphere requirements. Most are sensitive to ethylene and some cannot be stored together with others. Containers and packaging have to be suited to the storage environment. It will be important to know what these requirements are and if there are any existing storages in your area which can provide these, or if you will have to build them yourself.

Transport to market – As discussed above, many horticultural products will have a defined and possibly short shelf life. Ensuring your product makes it to the desired market or to consumers quickly and in good quality will be important. Certain products may not be able to be stored or transported with other products i.e. products which emit ethylene (e.g. apples) cannot be transported with products which are sensitive to ethylene (such as kiwi fruit or tomatoes) or they will ripen too quickly. Prior to establishing your business you will need to ascertain what transport is available and if it will be suitable for transporting your product.

Suppliers – Some horticultural crops will require a regular supply of products such as fertiliser, pesticides, herbicides, composts, mulches, equipment, spare parts etc. It is likely that there will be chemical re-sellers currently servicing farmers in the area and that they will be able to source products for you. Some horticultural crops such as vegetables require a regular supply of seedlings. The quality of the seedlings will have a direct impact on the final quality of the product. Having a reputable nursery close by (so that seedlings are not having to travel large distances before transplanting) will be very important for crops dependent on a regular supply of seedlings. If you are planning on operating a small-scale enterprise you may be able to produce your own seedlings but be aware that specialist skills may be required.

Do you have a good workshop close by? Often there is a need to modify or build machinery that cannot be bought ‘of the shelf’. If you need to construct greenhouses, shade structures, trellising, bird netting or sheds and cool rooms or other storage facilities, can you access expertise in the area or get advice?

Packaging – Some horticultural crops will require minimal packaging and can be sold in bulk or with minimum packaging. Make sure that packing, especially cartons or trays palletise well and are strong enough to withstand humidity and weight when stacked. However if you are looking to value add to your product (which may be desirable if you are a small enterprise) then innovative packaging may make all the difference. It may be that you possess the skills to package the product yourself but if not, investigate who else in the area may be able to provide this service for you.

Post harvest management is just as important as production in horticulture. Successful horticulturalists manage their logistics well.

Have adequate financing and time

It may take several years before you are able to generate a return from your investment, particularly with crops that have a significant establishment period such as olives, grapes and pome fruit or other perennial crops. Do you have sufficient funds or alternative sources of income while waiting for crops to mature? Some horticultural markets can be quite volatile. If there are a number of seasons with poor prices or unexpected weather and/or pest events, will you have sufficient resources to ‘weather the storm’? Allow for some degree of failures in your financial planning for the first years. Try to spread cash flow over a long period, if possible.

If finances are an issue, select a crop that has the potential to produce sales in the first year after planting. Start small so that you can learn and mistakes are not too costly. Plan expansion and diversification carefully. Investigate whether you can contract out certain activities to save time.

Financial success in horticulture is often dependent on having adequate finance to fund you until your crop is fully established and generating the profits you planned for.

Have the right business structure

A business structure is used to identify your operation as a trading business. It is important to understand the differences between each structure, and choose the one best suited to your needs. Some of the major factors to consider when choosing a structure may include:

  • Who can make important decisions?
  • The tax advantages and disadvantages.
  • If it is expensive and easy to set up, or complicated and perhaps expensive.
  • The legal obligations e.g. what records you have to keep?
  • How profits are shared (or losses)?
  • How easy it is for the business to expand or attract new investors?
  • Do you have investors / a board of directors you have to consider?
  • If your business is a family owned and operated one, have a good separation of tasks and a succession plan?

A successful horticulturalist chooses the business structure to suit their business and family, manage risk and tax liability.

Understand legal requirements and regulations

Apart from rules and regulations pertaining to each business, horticulture and food production have their own requirements. Make sure that you understand what is required in regards to record keeping, registrations, and accreditations as well associated cost for e.g. quality assurance, food safety, safe use of chemicals, environmental performance intellectual property.

Understanding legal requirements and regulations is your responsibility. Make sure you research it well when planning your business.

For more information visit Agriculture Victoria