Level 3 · Part 4
Start small and check the numbers
Test a small batch and compare it fairly with selling raw.
Before you invest in equipment or a large batch, run a pilot: make a small amount, count everything it costs, and see what buyers will pay.
| Sell raw | Sell processed | |
|---|---|---|
| Quantity (units of raw product) | 100 | 100 |
| Income from sales | 100 | 180 |
| Extra costs: processing, packing, transport | 0 | 60 |
| Losses and unsold stock | 10 | 20 |
| Result | 90 | 100 |
In this invented example the processed product earns only a little more, even though the sale price is much higher, because the extra costs and losses use up most of the difference. Also, the processed product needed more work and more time before being paid. The comparison must include these.
Include your time and the waiting
Count your own labour, the time to find buyers and how long you wait for payment. A higher price is not an improvement if it comes with much more work, much more risk or slow payment.
Value addition without owning a farm
You can add value by buying from farmers and sorting, drying, packing or delivering; by providing storage or transport; by connecting farmers and buyers; or by providing a skill or service to the sector. These are real businesses and the same rules apply: start with a buyer, count the costs and test small.
Exercise 3.4 · My pilot plan
- Choose the smallest batch that would teach you something.
- List every cost for the batch, including your time, and the price you hope to get.
- Compare the result with selling the same raw product without processing.
- Decide in advance what result would make you continue, change the idea or stop.
Background reading for this part:
- Value from village processing (Diversification booklet 4) — Food and Agriculture Organization of the United Nations (FAO), Peter Fellows
- Developing Sustainable Food Value Chains: Guiding Principles — Food and Agriculture Organization of the United Nations (FAO), 2014