Building Better Sustainable Horticulture Businesses (LP20001)
What’s it all about?
This investment is equipping horticulture growers in Western Australia to make data-driven business decisions by providing them access to rigorous industry-level insights on financial and production performance. This information will be acquired over three years of data collection which will inform annual industry benchmark reports.
The previously funded project Vegetable business benchmarking (VG17000) identified a gap in the maturity levels of strategic, financial and business management capabilities among vegetable business owners participating in the research.
This investment will deliver a similar service to VG17000 with a more deliberate focus on working closely with growers to develop their capability and will be expanded to all horticulture industries.
Participating growers will have the opportunity to discuss their results with an expert on business and financial management, including working through ways to practically implement positive changes to their business.
At the end of the second year, the project has delivered significant value to all those vegetable and pome growers that committed to participate. Particular areas of focus that the project has supported participating grower with through the analysis and consultation has included:
• Measure to retain profit in the current challenging economic climate
• Analysis of profitable crop selection
• Strengthening the balance sheet
• Linking management practices and paddock practices through to profitability
In a challenging economic environment, the project has provided much clarity as to how to ‘weather the storm’ and retain profitability within individual businesses; this can be seen in the Monitoring and Evaluation scores and comments:
“given all the crazy things that are going on in the industry, this project has been a life saver!”
“working with the guys from the project gave us the data and importantly the confidence to negotiate a well needed increase in price for our product”
“the analysis made it painfully clear what needed to be done”
“I thought I’d learnt everything needed from last years analysis, I was wrong – there’s always more to learn!”
The project has now produced three years of WA Pome and three years of WA Vegetable industry financial performance benchmark data. Together with the three years of vegetable benchmark from the previous VG17000 project there is now six years of vegetable industry financial performance benchmark data in place.
Despite these achievements, participation levels were below the targeted level in both industry sectors. Issues with capacity to commit time and effort amid the challenging environment were a common cited factor by growers.
Despite industry-wide challenges with input costs, labour costs and labour availability, the Project Team report significant progress with participating growers. Many participants were proactive in supplying their data shortly after closing out their 2021/22 accounts.
Some key themes emerged from the 1:1 consultations, such as; deepening understanding of links between paddock practices and profit, and associated specific key profitability drivers to inform key business decisions – particularly zeroing in on crop selection in terms of capacity to generate profit and clarifying specific crop market price required to retain profit margins in response to rising production costs.
More buy-in from the participants has seen an improvement to the detail and accuracy of their balance sheets, which opens new potential expansion opportunities and improves borrowing capacity.
Industry benchmarks are currently on course to be produced in January 2023, which will reduce the time between end of financial year and publish date of results from 12 months to 6; making the results timelier and more relevant.
The project has had a successful first year in terms of providing tangible specific benefits to participating business owners and producing industry benchmark averages to benefit the wider vegetable, pome and horticulture industries.
Monitoring and Evaluation results indicate that 93 per cent of the participants see the value of project participation to their business. The project has produced specific examples of improvement to individual businesses relating to the reduction of operational costs, reduction of unnecessary selling costs, restructure of business to increase scale to increase profitability, gaining further investment and accessing finance at more beneficial rates.
This comes at a time when the horticulture industry is faced with steeply rising input costs and labour issues requiring business owners to be acutely aware of the cost structure and profit drivers in their business to maintain margins and profitability. Project partners Planfarm have gone beyond the original scope of the project to meet this challenge by developing a Cost Analysis Calculator to assist business owners in quickly identifying the optimum pricing structure based on the results of their individual business analysis. This has been a key focal point of all the 1-2-1 reviews that have been conducted by Planfarm.
At an industry level, the project has produced single-year benchmark results for FY 2019/20 and FY 2020/21 for the pome, vegetable and horticulture (combined). Together with the three years of benchmarking results from the 2017-2020 Vegetable Benchmarking Project (VG17000), there is now five years of continuous benchmark data for the Western Australian vegetable industry spanning from FY2016/17 to FY2020/21 – a national first in Australia.
Participation rates were 59 per cent and 70 per cent of the targeted level for the pome and vegetable industries respectively during this period. The gap was often a failure of business owners who had committed to participate in the project meeting the level of requirements to meaningfully participate in the process to meet project timelines.
While the reasons given by many growers focused on the direct and indirect impacts of the recent COVID wave in Western Australia, this, in and of itself, is also an indicator of the management maturity levels of these particular business owners that they have chosen to prioritise reactive activities over this foundational activity in the face of the many challenges the industry currently endures mentioned above.
Nevertheless, this provides an area of focus for the project as it enters into its next cycle of analysis in FY2022/23.