Project Everest

Work Update

Agriculture Project - Malawi - Business Model Brainstorm

by
Rachel Chan
Rachel Chan | Dec 14, 2017 | in Agriculture Assessment

Since the end goal of our work in Malawi is to develop a sustainable business around a socially beneficial good or service, the Agriculture Assessment Team brainstormed an initial business model canvas. As we still do not have a clear idea of what our final product will be, it was a challenging process. Nonetheless, we laid the foundation to ensure that the whole team and future teams will be on the same page. This can be subject to further iteration as we continue to empathise with more farmers and analyse data from the experimental farm.

Our current idea of the product we could offer is as follows: 

  • Provision of a farming blueprint and ongoing consultancy service for farmers
  • Guarantee to buy crops from farmers and sell them to other businesses via established partnerships. This would be something that farmers can opt in to according to their individual circumstances (e.g. they would not opt in if they merely want to grow more for themselves to eat).    

As we identified that many farmers may lack the capital to purchase inputs, we could work with existing micro financing organisations to offer the product to farmers who lack the capital to make an upfront investment, or take on the risk ourselves by providing farmers with inputs and recouping our costs plus an additional margin once the crops have been harvested and sold.

Our business model canvas is attached. This is tentative and we are open to other ideas. We would love to get feedback and insights from everyone! :D 

edited on Dec 15, 2017 by Andrew Vild

Rachel Chan Dec 14, 2017

Business Model Canvas

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Lucy Noble Dec 14, 2017

Would love to see some input from some of our experienced Agricultural leaders on this one!

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William Lee Dec 15, 2017

I like the microfinancing option you've embedded into the business model.

From the perspective of microfinanciers, the key issue is risk. They want to know that they are not going to lose the money they are investing into these farmers. The risker the investment, the higher interest rate they will charge, Therefore to ensure that farmers receive a reasonable financing rate, you need to give the financiers peace of mind that the blueprint will have a strong return on investment.

So, how can you prove this to them? The first step would be to provide a full costing of your experimental farm (inputs, labour, etc.), and the subsequent yield produced. The yield can then be multiplied by the market price (which I know will be hugely affected by market price volatility - this can be dealt by using scenario analysis). These figures can calculate return on investment that proves the concept from a microfinancier's perspective.

On top of this, you would likely need to produce some stress testing analysis to see what would happen if things like weather impacts yield, or if market prices crash, which will dampen revenue. Also, the size of the farm will likely give differing return on investment, based on economic efficiencies in larger farms.

I think if you gathered all this data, across many farms, this would provide a strong business case for investment.

Let me know what you think, and if I can help in any other way.

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Wade Tink Dec 18, 2017

Formulating these financial models would definitely help with generating the argument to financiers and/or the farmers themselves. Are you in a position to create these?
When conducting this it would make sense to base it on the blueprint size of 1 hectare of land so the inputs/outputs are scalable and can be easily calculated for each farmer's individual circumstance.

Having a model such as this would provide value across Cambodia and Fiji as well. Perhaps check if they have already created this.

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William Lee Dec 18, 2017

Yeah, I can certainly create one based on Malawi in January, which I can share with other countries

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Jimmy Bayssari Dec 18, 2017

What is really interesting is that these financial models exist, but that the inputs are specific to the context you are working in i.e. Fiji or Cambodia or Malawi.

To formulate a financial model around the specific aspects of the farm, you will need to make valid assumptions about the current state of market supply of vegetables.

The current idea on offer:

'Provision of a farming blueprint and ongoing consultancy service for farmers.

Guarantee to buy crops from farmers and sell them to other businesses via established partnerships. This would be something that farmers can opt in to according to their individual circumstances (e.g. they would not opt in if they merely want to grow more for themselves to eat).'

is at the core of the FarmEd business model and is already being set up in Fiji.

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William Lee Dec 18, 2017

Hey Jimmy, would you be able to share the model with me? Would love to have a look at it

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Wade Tink Dec 22, 2017

Let's tag the hell out of Jimmy here and I will get onto him directly and see what he has. Would love for you to get your hands on it Will.

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Rachel Chan Dec 18, 2017

Hi Jimmy, thanks for that! Where can we find out more about how FarmEd is going about setting up the distribution of produce from farmers to businesses in Fiji?

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Rachel Chan Dec 18, 2017

Thank you for your suggestions William! We will definitely need data to back up the return on investment and the considerations you have outlined will be useful for future teams to keep in mind as they measure the outcomes from our experimental farm. We also aim to find out if an upfront payment is viable for early adopters so that we will be able to prove the concept before turning to microfinance institutions.

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Alex Piatek Dec 15, 2017

I'm curious to what pains and tensions you identified to consider coordinating the logistics of product distribution?
In a previous Malawi Ag. team post, the pains and tensions seemed to source from the farmers end, such as, lack of crop rotation, dependence on fertilisers and lack of irrigation.

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Rachel Chan Dec 15, 2017

Hi Alex,

The pains and tensions that you mention do exist – they are the primary source of low yields for farmers. However, we also considered the potential implications if we do manage to increase farmers’ productivity with our blueprint. We felt that it could potentially result in oversupply of produce to the local markets. As such, we thought it would be good to have an option that guaranteed a way for farmers to get an income from selling their produce through us, since some of them currently do not have the capacity to transport the produce to the main markets.

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Alex Piatek Dec 16, 2017

Interesting! I like that you have a model that is increasing the security of the farmers income.
Will there be a feedback loop for the farmers, to recognise what is over or under supply, so you are not stuck with produce that you can't sell to the markets?

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Rachel Chan Dec 18, 2017

Yes, we will have to monitor the supply in the markets over time in order to avoid surplus that cannot be sold. Our two main crops are maize and legumes, which are staples and will not have this issue. Our only concern is with the vegetables, which are highly perishable. One potential solution the team could look at down the track is preservation techniques and better storage methods.

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Ciaran Hoare Dec 17, 2017

Hi Rachel, one thing that the team here in Cambodia has been doing is investigating the supply chain of fruits and vegetables from farms and in and out of the local markets. If you gather this kind of data you'll be able to see (ish) how likely that oversupply is, and what the consequence may be.

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Rachel Chan Dec 18, 2017

Hi Ciaran, thanks for your suggestion. We have started looking into the supply chain at the main markets in the city centre of Blantyre. However, we will still need to look at rural markets that are closer to the villages, as well as the informal interactions within the community. We will leave this task for the next team to complete. Do you have any suggestions for how to best go about collecting this data?

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Wade Tink Dec 18, 2017

In line with what Ciaran is saying; from an external perspective there needs to be some quantitative support as to why increases in productivity would oversupply the market. From the information provided by previous projects in Malawi food security is a major challenge in the country...suggest you take his advice and quantify this impact. If it is the case it will no doubt provide other opportunities.

If transport is the issue have you considered this as the business model- providing transport services?

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Rachel Chan Dec 18, 2017

Food security is indeed a major challenge. It may be the case that an increase in productivity would merely allow farmers to consume more. We just raised oversupply as a potential concern, particularly with perishable vegetables during the high season. However, we will need to collect data from before and after we have provided our blueprint to measure our impact.

In terms of transport services, there is already a functioning system in place (e.g. public transport like bicycles, motorcycles, minibuses, trucks). Hence, if we were to transport the produce, we would likely utilise these existing methods.

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Ella Grier Dec 20, 2017

With this proposed business model, I am concerned that your customer segments are not well refined and need more clarification. While it is important to have multiple revenue streams set up within any business model, I think that perhaps your 'mark up distribution stream' and 'upfront payment' for blueprint streams cater for two different 'small holder farmer' types within the Malawian agricultural system.
A once-off blueprint is a low risk venture that would have much appeal to very small holder farmers (1/4 of an acre), whereas a provisional blueprint, where you leverage off the distribution of fresh produce, would require small holder farmers of a much greater land size.
If your focus is too heavily on catering to "different customer personas" then you risk having that Product - Market - Fit and your business model is going to become overly complex very quickly.

Overall have loved the work you guys have been pumping out this month, keep the ideas coming.

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Rachel Chan Dec 20, 2017

Hi Ella, thanks for your insights! We recognise the issue of not having clearly defined customer segments. This is because we have not conducted enough primary research to identify the most viable option.

We agree that we should focus on one customer segment to begin with and have left it up to future teams to determine this. More interviews with farmers will need to be conducted to assess their willingness and ability to pay for our potential products and a typical customer persona can then be created.

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Amber Johnston Jun 30, 2018

Status label added: Work Update

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