As we all know, the economic environment can be volatile in the agricultural sector, and is subject to change at all times. Imagine losing a large percentage of your revenue virtually overnight for factors that are out of your control. Potentially, you may not even need to imagine this as it has happened many times over, to a variety of industries:
- Trade impact from COVID
- Market sentiment changes
- Weather events
- Pest or disease incursion
- The list goes on…
It is vital, both for yourself and for your staff, to begin to lay the groundwork for your team’s growth by securing diversified income streams. Refrain from placing all your bets on a single facet of contracting, be it a specific crop, or service.
If your business relies on a small number of large clients (a ‘whale’ customer), one particular crop type, or one service type, you’re playing a risky game, not building a solid foundation for growth.
Smart Contractors Diversify by:
- Deciding to offer new services for the same clients. Why not find out what your customers need that you may be able to offer now? You have the operators, perhaps dry hire some equipment and look to add another string to your bow.
- New customer types. An example of this would be looking to do work for customers who supply different industries or agricultural sectors ie: not all customers fully reliant on the dairy pay out etc.
- Premium niche offerings that can carry higher margins. This could look like being an early adopter with new practices such as precision ag services, or perhaps looking to service more of the lifestyle block sector and charge a premium.
Another important exercise we will look into more at a later date is back costing all the services you offer. This is critical to get the information you need to identify which services are making the best margins, and which you either need to improve, or let go.
Start simple: Look at your top income source — now ask yourself: If this disappeared tomorrow, what would I fall back on? If the answer is “nothing solid” — it’s time to act.
Increasing the scope and value of your services is the key to being able to build and develop your team. Cultivate strong customer relationships by elevating your service quality. Listen to their feedback, address their concerns promptly, and maintain open lines of communication to build trust and loyalty over time.