06/07/2020
Why Value Addition is Business.
My Business Advice, Author: Ekaale Ekuam
6 July 2020
Ever heard of this catchy word value added service or value addition, now Value added service in its basic sense means additional or extra features a firm adds to its existing products and services before offering them to customers, meaning customers are willing to pay based on the perceived value. The addition of value can either increase the product’s price or value in return increase sales revenues. The firm can add value in many ways offering better quality, increase convenience or offer faster and better product or service. Adding a brand name to a generic product or assembling a new product in an innovative way.
While value addition is a process of creating value for customers, the same can be harnessed to create a business venture.
Valued added products that became business ventures?
In agriculture for example value-added farming entails changing a raw agricultural product into something new through either packaging, processing, cooling, drying, extracting or any other type of process that differentiates the product from the original raw commodity. There are several examples of value-added agricultural products which include yogurt, jam, juice, pumpkin flour, banana flour, crisps and cassava flour just to mention a few.
Adding value to any agricultural product is a worthwhile entrepreneurship endeavor if one is to take up Value Addition seriously. There exist higher returns that come with the investment, the opportunity to open new markets and extend the producer’s marketing reach as well as the ability to create new recognition for the farm produce.
Value added Farming is not without its challenges to farmers. The biggest hurdle to overcome in value addition venture is food safety and regulations, for example if you are interested in taking your tomatoes and turning them into a high quality jam you are required to meet all food and safety regulations. Putting together a very good recipe and formulation of your product may pose significant challenges as well, you may require some expert advice here.
Take another example of soap making using aloe vera or any other products that are not from plants, making soap requires time and effort in finding the right recipe for high-quality soap. You will also want to research the market potential for your product to define your customer profile, so that you are not wasting your time in formulating a product that will not sell.
Starting a value-added agricultural business is an exciting opportunity for the small farmers or anyone interested in diversifying and exploring new markets. The best approach is starting small and finding your niche is key to your long-term success. Evaluate the risks associated with the business and have a solid plan in place to keep you on the right track. Scan your immediate environment and look out for value addition opportunities that you can undertake and scale it further and make it a business venture.
If you want to invest in agribusiness value addition entrepreneurship, give it some serious thought, people think agribusiness is for those who have retired and gone to rural areas to do farming, no, a younger generation is taking agribusiness seriously as a way of doing business besides the eight to five jobs.
Local, regional and international markets are opening up for our agricultural produce and you need to stay abreast and understand the market trends so as to perform market led production along the value chain, understand how to finance a value addition business as well conceptualize raw material sourcing for your value addition enterprise.
All sectors in the economy offer huge potential in value addition business. The process of value addition is simple in nature and one must find the right balance.
My insight today focuses on Kenya as an agricultural economy and opportunities it presents in agribusiness value addition and ideas.
According to Food and Agriculture Organization (FAO) Small scale producers offer over 70% of the worlds food needs while Agri-businesses are the major providers of employment worldwide. Improving the sustainability of food value chains can massively benefit the rural poor. Globalization has changed the way we put food on our tables. Agribusiness can provide a decisive ‘pull factor’ effect in value chains by linking small holder farmers with agri-businesses and agro-industries since they can create employment and developing newer standards that make food safer and offer better quality. Value chains, contract farming and public-private partnerships can deliver multiple benefits, win-win situation for all players.
In conclusion, every corner of this country presents opportunities for value addition ventures, from the fisherman from lake Turkana, fish skin value addition, the camel herder from Mandera, camel hides and skins as well as camel milk products value addition, the bee farmers in Ukambani, honey and wax value addition, the Banana farmer from Kisii, banana crisps, banana flour value addition etc.
Evaluate your surroundings, find this very important value you can add in raw products and in the process create a venture that will be sustainable. Go create your own product along the value chain. Create Value.
The Author is an Entrepreneurship and Innovation Management Consultant.
