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Cost Control For Agricultural Startups: Make Or Break Your Business

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If you want to make it in the agricultural industry, you need to focus more on controlling your costs than any other area of your business. Regardless of whether you own a large livestock farm or just run a small organic farm shop, it’s what you save that will often make the difference to your success than the amount of money you turn over. Let’s take a look at some of the elements of cost control; your agricultural startup needs to consider. Read on to find out more.

Developing the right mindset

Tracking and managing your costs is essential to the survival of your agricultural business let alone its success. And your expenses should be on your mind right from the off – there is no room for manoeuvring even at the earliest stages of starting your new company. The farming and agriculture industry is notoriously volatile, and only a focus on cost control will help you keep your finances in the black, and recognise new opportunities. It’s vital to develop the mindset of an accountant when starting an agricultural company – or, at the very least, be prepared to hire one.

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Investing for disaster

A bad season for crops, an illness to your herd of cows, and machines and equipment breaking down – you can’t say for certain that none of these events will take place in any given year. It’s vital, then, to ensure you know precisely where every last penny is going, and that you are spreading your risk by investing in appropriate insurance coverage, as well as sound marketing practices.

Fuel, fertilisers and changing costs

Farmers and agricultural businesses are at continual risk from the changing prices of raw materials. The cost of fuel to run farming equipment and vehicles, for example, can vary wildly from one end of the year to the other. Farming business owners should take advantage of fuel allowances as much as possible – as New Era Fuels point out, you may be eligible to use Red Diesel on your farm rather than normal petrol or diesel fuel. Changing costs of fertilisers and pesticides can often have a huge impact on your profits. Whether it’s priced changes from suppliers or just the need to increase pesticide use because of diseased soil, it’s something you need to plan for.

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Don’t be fooled by economies of size

There’s a common misconception amongst agricultural startups that increasing the size of an operation will lead to better profits and help correct any problems. But this idea couldn’t be further from the truth. It’s vital for farming and agricultural businesses to reduce their cost of sale as much as possible before growing into higher rates of production. Creating more produce will not solve your efficiency problems, and, in fact, there is plenty of evidence in the form of failed businesses that suggests it will just make it worse. Look after your margins first, before considering any ideas of growth.

Conclusion

The goal of all agricultural businesses should be to cut costs without reducing yields or increasing risks. It can be tough, but with a little work on minimising your cash outflows, it should be possible to make your new business a success.

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