This blog is about the act of enterprise creation. It serves as editorial for the iZindaba Zokudla of 29 July. It is focused on building a retail outlet or presence at an urban farm. Farmers should consider themselves as retailers. This means they should develop a retail presence on the farm, or they should partner with a retailer at their places of trade and production to develop this retail presence. This is necessary to counter the workings of the global marketing system. This system aggregates production from farmers and sells it in bulk at the lowest possible cost on the market, and this favours only large farmers. Urban farmers must never sell through this system, but will use the price point for producer as a means to subvert it. Below I make a lot of concrete suggestions that may or may not work, but these needs to be taken up as business development possibilities. However, they follow a process of engaging and re-engaging with the design of your enterprise, and it is this engagement with your won enterprise that is important. The journey to enterprise development never ends, and it is an organisation that needs constant adjustment.
The whole process however starts with the farmer, and the way the first transactions are organised. It is important to start trading, and then think about how this transaction took place. There will be upstream aspects, like how the food was produced and taken to this place where it was traded to consider, and, there will be downstream issues, like the customer needs, their experience, your offering, and the value the whole transaction brings to everyone involved.
Below I emphasise how the farm and the process of food production is linked to the shop and the transaction itself. The way the product and the service of making it available to the customer is “designed” can honestly only be tied to the way the food is produced. The way the food can be sold, by harvesting food waste, also links to the way the product is experienced. What I recommend is to build a circle, or nxazonke between the production of the food, and the way the customer can influence the way they buy the product. This is a key feature of an urban agricultural enterprise. The farm is dependent on the harvesting of waste from customers and from the environment, and this relationship is an integral part of the enterprise.
On the other hand, the relationship with the customer needs to be made to work, and this can ensure future trade and also the establishment of a new pattern of interaction between the farmer and the customer. This relationship needs to be enhanced by events and social media, and technology to harvest waste. These take on only some of the operations of the enterprise, but is a key process that will guarantee access to biomass for food production, and gives customers a way to lower the costs of the food they buy.
The process of finding out what works for your particular enterprise should be a slow considered affair. First start selling. This will give you cash to live and also cash to experiment with. Try to save as much as possible. Also start to harvest useful waste from the environment, organise them, and start setting up the systems detailed below.
From your first transaction, start to think of how you can improve it. This transaction and those that follow it, is the unbroken line of interaction that you will have with society. This chain needs to be enhanced as you go along.
Before you conduct the exercise below, in planning your ideal farm/shop, consider the following:
To start a business is not a “big bang” where you set up a complete enterprise from day one. It is better to build the business slowly and based-on the sales that you are making.
Do not take any unnecessary risks. In the beginning of setting up a farm/shop you should be investing firstly in your soil and the production system on your farm. This should be done with available waste materials first, and there is enough biomatter available if you look closely. Note that this is something that you need to communicate to your customers, and show it to them, especially in the beginning and emphasise the intensive biological systems that you are building.
You should never use more money than what you can afford to lose in the beginning. Start with what you have. Collecting and organising waste materials is a good first step. Be aware of what you have and the resources that you can in fact draw on. This may include labour and transport to bring materials to your farm. Start collecting these in an orderly way, as you will have to build quite a bit of technology and infrastructure.
If you need something and to not have the money to pay for it, form a partnership with someone that has. If there is already a spaza shop near your farm, consider partnering with them, and sell on a consignment basis. You then need to brand your produce, so people know where it comes from, and remember, you eventually have to start your own shop, particularly to accommodate the ancillary enterprises, like recycling and food waste systems, on site.
When you need to spend money on something, make sure that you can afford the loss if it fails. If you want to grow a speciality crop, and have a buyer, make sure you do not invest too much in the first crop. The crop or the buyer may fail. Be aware of what you can lose, and focus on that which sells easiest, spinach and cho-molia, for instance, in the beginning.
When you have a process that works, like growing a speciality crop, do not immediately invest in an expensive system. First get the original process optimised and understand it well before you invest in an “upgrade”. You may have found a way to grow spinach very well, but think hard before you commit say, to a whole tunnel to grow it. You may oversupply your market, or the cost of the tunnel may outweigh the profit you can a make selling a lot more spinach.
When something goes wrong, you need to learn as much as possible from it. Do not “throw” anything away, and a failed crop can always be put to good use in composting or liquid manure. Turn a lemon into lemonade. This is how you will save R1 a million times, in effect making a Million!
On the other hand, build your reputation, brand, and name all the time. Your first customer is in fact your most important customer. If you are willing to deliver good value from the start, you will build a good reputation. Urban agriculture can only survive if it trades with integrity. Build value in every transaction and in everything you do on the farm. Be prepared to educate your customers about how you produce and show them the value of biological technologies. This is your unique selling point, and these technologies convert the waste they generate into cheaper food!
Also remember, an enterprise has to function in society, and in the ecology. You cannot control either of these processes, but you can always influence them positively. It is important to “throw your bread on the water” and do what you “ought” to do, as opposed to only doing what you “can”. Remember, you are creating a new market, a new enterprise and a new sector in the food system. Note how your enterprise creates value. You need to have a key transaction in place, where value is exchanged, and this transaction must be as efficient and seamless as possible. This is the only way you can sustain a good price for your customers, and the only way you can sustain the business.
Creating small enterprise in a global economy
Small urban and other farmers sit at a difficult and disadvantaged point in the food system. For them to get ahead, they have to concentrate on systems that maximise productivity, as they are facing competition from large producers who can sell at lowest possible price. They have to manufacture inputs themselves, and biological technologies are essential in this regard. A small urban farmer and retailer needs to aim to sell at the highest possible retail price, based on the lowest possible cost of production. This is different to the global marketing system, which is geared for selling bulk commodities at lowest global prices. This structural difference is the base upon which we need to build the enterprise.
To derive the maximum benefit from both production and retail, and the short supply chains that underlie an urban agricultural enterprise is what the enterprise aims for. The hallmark of a sustainable food system would be a short supply chain. This is not only due to the long supply chains in our current food system (which we want to avoid), but because a short supply chain would create a more competitive enterprise. Once again, the enterprise form must build and conserve value in the enterprise and or the local area. This building of local value is the key insight behind the development of a viable urban agricultural enterprise.
Short supply chains and local economies
It is possible to eliminate almost all steps in the traditional supply chain. Urban farmers are very well placed to build short supply chains into the business, and we have discussed this extensively in the blogs on this website. A short supply chains enables the producer to capture most of the value of the produce they produce, and also allows influence and control over this supply chain, and the stakeholders who patronize it.
When a farmer is in control of their supply and value chains, they are able to exert control over things like packaging. Many farmers buy packaging as a “standardized” item, and this is consistent with the conventional systems that transports food over large distances and where the producer disappears from the product. An urban farmer, who knows her own customers, cannot engage in this business practice. They need to customize their packaging as they themselves have to feature on this packaging. Packaging is an opportunity to build a two-way relationships with the customer.
An urban farmer should also use that which is already available. Transportation is a good case in point. Idle taxis and bakkies can offer a key transportation service for the urban farmer. It is in the convergence of an idle taxi and a delivery opportunity where sustainable value is created. Urban farmers should seek out and find these synergies with others in the local economy. This is where business development must focus on.
Farmers’ markets and shops would encapsulate all the features of a short supply chain. The farmers’ market or shop would represent a singular supply chain in a large value universe, and in many cases would be the whole value chain itself: farmers only need a farmers market or shop to realise this short value chain system, and this indicates the great opportunity of developing a farmers shop or market.
Farmers should also look at additional kinds of Community-supported agriculture, from allowing farm visits, to vegetable box schemes, in building their enterprises. There are many ways to sell directly to local customers and here farmers need to be innovative.
There are also several mobile apps that can be integrated into the subsystems of the farm. These include finance, traceability, and other features and indicates an urban farmer can build a pretty sophisticated business from anywhere on earth. However, the point here is that local sales are to the benefit of the farmer, due to the systems detailed below. These apps also link to organisations that can provide assistance to urban farmers, and this is another instance of building a reciprocal institution amongst urban farmers and others. This is the way to go, and we do hope these suggestions are useful.
The ideal enterprise
To construct a successful urban agricultural enterprise, you need to focus on creating short supply chains, for your inputs and for your produce. You are pioneering the role of a Producer/Retailer, and this is a very novel concept in our food system. You need to be able to manufacture, influence and source the entire value and supply chain, from farm to fork, so to speak. On your farm, the most important process will be the manufacture of inputs. As important will be your sales channel and enterprise, but this input manufacturing system is the source of the original biological value you need and which is built-into your products. This system will be technology-heavy, and this will instil reassurance in those who question your farm and its place in the city.
Your food waste processing facility is really important. Even if you only have a normal compost heap, make it look good. You can use old pallets to make neat square compost heaps. It would be best to use a metal cage to keep rats out, and these look more professional than pallets. Your recyclable processing system must also look neat and better than those of reclaimers.
Inside your shop, you need to be competitive with supermarkets. It would be perhaps important to have some kind of a scale or measure for your produce. You need to make sure people know they get a better deal than from the supermarkets, your biggest competition and the price setter. You also need to professionalise your sales, but you do not have to have extensive packaging etc. you need to deliver value to the customer and this may mean a very lean form of packaging, like a string holding a bunch of spinach together. What is important is that the message about your produce is conveyed. By harvesting waste and producing in the local areas, you have positive effects on society. This is what needs to be included, in the mind of the customer, when they buy from you. This is your unique value proposition.
In this chapter a basic process is suggested on how to establish this enterprise. To do this, I discuss the ideal state or form such an enterprise should take and this is detailed in my blog post on a “liberation urban agriculture” available at: https://www.izindabazokudla.com/post/the-idea-of-a-liberation-agriculture-and-the-rise-of-a-new-food-system. The basic building blocks of this enterprise are detailed in the next chapter of this series: https://www.izindabazokudla.com/post/the-essential-technologies-for-an-urban-farm-editorial-for-24-june-2023. These basic technologies need to be implemented and sequenced with each other to realise a circular enterprise.
A sustainable enterprise
The circular character of sustainability becomes quite obvious when building this value conserving enterprise. We need to take seriously the metaphor of a circle, and this can be described in detail, and how things like water and waste to institutions are built amongst the farmer and stakeholders, including customers. In these cases, we would need materials and resources and information and relationships to be built, and this in turn builds value in these exchanges. In all cases, we can identify circular processes that feeds these sub-systems of the enterprise, and it is by imaginatively creating these, that sustainable effects emerge in an enterprise.
We also emphasize key actions you could take to build these circular systems. Something like packaging is not only an opportunity to avoid plastic and emissions, but also an opportunity to add value: you could illustrate the identity or branding of your enterprise in the packaging, and some even insert seeds for re-planting, in the packaging materials. The idea and metaphor of a circular enterprise allows us to think beyond how we have always done things and offers real opportunities for emerging entrepreneurs to shape their enterprises.
The first step is to describe your enterprise as it is at the moment, and this is to keep a record of whare you came from. After you have described your enterprise at the moment, you need to think creatively and strategically on the ideal form of your enterprise, and this is the guiding light that you need when developing it.
How do you function at the moment? Describe, for yourself, either in words or in pictures, or record it in memory, of how you are trading at the moment. In this honest description, identify where you lose value by not building circular system, and where you lose the value of waste. Where are you not building reciprocal relationships? Where are you adopting technology without engagement and innovation? Where can you improve, and can you see an unbroken chain of customer transaction that you can work on into the future?
Describe the ideal state of your enterprise. In this description, focus on an ideal form of your enterprise. Take a look at the 19 or more technologies and innovations you could implement, and think of how you could build each in an ideal way. Think of your farm/shop in the best possible way and imagine the best possible kind of enterprise you can build, should you have access to the necessary resources. This is the picture you need to have in your mind, and build a timeline from today to this ideal enterprise. This is the outlines of your business development plan. Think of when and how you will acquire the necessary materials, technologies, and inputs. Think of how you can achieve the three-tunnel integrated urban farm in your local area. Think of the milestones you need to achieve in getting there and start to plan the journey to do so!
How many circles and interactions take place in your farm? How many times is waste processed before it is integrated with the soil? Who many products are possible from one sequence of processes, like compost, worms, liquid manure, and casings? How many interrelated circles of processing do you create? What is your source of abundance, to feed the systems in your enterprise? You need to identify a source of biological materials to feed the systems in your farm. Should you be able to harvest abundance, develop the technologies to process it, and this is the fuel your farm needs to thrive.
These biological processes will indeed help “clean” your community, and they are important for the narrative around product design. These features of how you produce food must be included in the story and narrative around your products and farm. This is why it is important to be biological in your production: to guarantee food safety.
Your shop neds a name, and this has to be a “beautiful” name that will attract customers and convey the message of socially-beneficial food production. A shop will be the base where you will develop ancillary enterprises. This shop must have a name. This shop must give customers good service, which includes food at a competitive price point, education about nutrition and good eating, and uphold customer rights and interests.
You also need to focus on product and service design. The price point of your produce is important. I recommend selling at 5% lower price than the nearest supermarket. This will be at about R 40 to R 50 a kilo. When people know they can get food cheaper at your shop, you will attract and capture the market. If you integrate biological technologies in your production system, and harvest wastes, you will be able to uphold this price point. We will discuss these retail development strategies in the next delivery.
You also need to think about the actual transaction. You should not let your customer wait, but you also need to work uninterruptedly in the field. You need to have a selling process defined and implemented on the farm. Let people come buy at specific times, or have pre-weighed or packaged produce available,. Also note that you may want to sell fresh off the field, and for this you need to develop a system that can sell this efficiently.
You need to focus also on the customer experience. You customers will be buying from you, and you will be educating them on nutrition, biological production systems, food waste and recyclables. Create a customer journey on your farm, so customers are exposed to the full set of systems that you operate. This will show them the value of biological technology and how this benefits the community. Emphasise how their participation in the farm and its operations lowers the price of food.
To actively capture and develop your local market, customer communication is important. Your first port of call should the sign with the name of your farm. This must be prominent. This can also communicate your prices and deals that you offer and is important as this enables people to start talking about your farm and the value that you bring. This is the first step in professionalising your farm.
The next step is to use SMS and WhatsApp to build a database of customers. Start advertising your deals every morning. Here your price point will be important as people will see the value you offer.
Start a loyalty programme and see if you can reward regular customers with special deals. Yu can also start trading bulk foods, like maize meal or potatoes (which you may not be able to produce competitively), and also start trading in consumables like sweets. Once you have a loyal customer base, partner with bakkie traders to offer these bulk specials. Consider changing your WhatsApp account to a business account and start using the analytics on the system to gain information about your customers.
Start communicating the benefits of urban agriculture. You could emphasise the price that you are offering. You could also emphasise the jobs that you have made available. The effects of harvesting food and recyclable waste is another key point to convey to your customers. Should your farm be beautiful, it will speak for itself. Recyclables will lower the cost of food purchased from you, and this is good for your customers!
Keep a good eye on the competition. Take a look every day at the prices for food at the Johannesburg Fresh Produce Market (and the internet offers several services that communicates latest global prices) and adjust your own prices accordingly.
Start grading your produce into 1-3rd grade and offer them to the customer. When they are able to select from multiple products, they will realise better value for themselves.
Start keeping records of your sales. You will see what days are better for selling. Note that wages are paid in the last week of every month. On the 1st the Social Grants pay out and on the 15th Government wages are paid. On these days you need to sell!
Once you are trading and realising significant revenue, you can consider registering the business. I would recommend only doing so after a few years of trade. First register for personal income tax and aim to avoid tax as your enterprise probably “owes” you money. Once trading, note that you are in effect running a “personal liability company” that does not need to be audited. You may only need a local trading licence to trade. When you achieve revenues of about R 3 million consider registering a private company but then also register for turnover tax. This will reduce your tax liability. You may not want to do more than this, and only if you achieve R 5 million turnover consider establishing a private company. It may be best to stick to a turnover tax as a form of compliance, and stay with being a personal liability company or a partnership.
The last key aspect of enterprise design is the form of engagement that you will practice. This is also a form of governance, as people can influence your enterprise when you engage with them. The most important will be the hosting of events at the farm/shop. A first event could be the launch of the enterprise. On this day, give out food for free and educate people on good eating and the value that you offer. This is a key exercise and you should do this at least once a year.
After this initial event, organise additional events where you can showcase and educate the community on recycling, food waste processing, and also organise days for bulk-special sales and other deals.
Use SMS and WhatsApp extensively for this. Also develop a social media presence, although most customers will be local and it will be cheaper for them to look at your sign than social media.
Building a community around your farm is important. This will maintain a network around your farm and facilitate communication and education. This is a key operation in tour enterprise. This is where you build relationships that will feed the enterprise into the future.
Urban farmers are looking at the promised land from a mountain from afar. Only urban farmers can complete this endeavour and build a new locally focussed food system that benefits the immediate community. By building tight relationships we not only create a new enterprise, but we create a means for the community itself to ensure its own food security. I look forward to seeing what farmers have done, and to build better on top of this.