Business management for small-scale agro-processors-A FAO Corporate Document

 

by
Peter Fellows and Alexandra Rottger

 

There is a great diversity of agro-processing worldwide and in some countries it accounts for more than 60% of the employment. Many people start agro-businesses at a small scale, often working from home and selling to neighbours and friends via a roadside stall or in a local marketplace. Characteristically, small-scale production is labour-intensive as there is rarely sufficient money to invest in specialized processing equipment. The quality of products may vary and small enterprises often do not have consistency of supply and so cannot cater for wholesalers or retailers who require guaranteed deliveries of consistent quality. Small-scale processors also may not have contracts with raw material or packaging suppliers but buy materials from local markets.

 

There are many millions of these businesses in emerging economies, and with advice and assistance some of them can develop into larger scale enterprises. When smallscale processors try to scale up operations a series of issues may be encountered. For example, products may be in direct competition with those of other processors when displayed on retail shelves and so the quality of the packaging becomes much more important. Retailers may negotiate lower prices than processors have experienced when making direct sales to consumers.

 

Any scaling up of operations brings new challenges: typically these businesses employ more people and the owner must have staff management skills; more careful control is needed over business finance, especially production and distribution costs; business management and financial planning skills are required to stay ahead of competitors; investment decisions are needed for both new equipment and improved packaging. The larger production volumes require production-planning skills and may create a need for environmental protection through waste management. Other issues, such as market research, product development and the business image may also increase in importance.

 

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