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The poultry industry is massive and still growing so wherever you find yourself in the poultry value chain, be rest assured that when you do things right, you are going to make massive profits. With that said, as a prospective entrepreneur or investor, I am sure you may be wondering which aspect of the value chain provides the best returns; whether to start a farm or to sell products. I am going base my decision on which aspect of the value chain is more profitable on the five criteria below.
- The barrier of Entry: It is more difficult to set up a poultry farm as compared to just retailing products such as eggs. In setting up a poultry farm you may require special government licenses and abide by some environmental protection rules. Most people would not want to or are incapable of going through all this process so the very few that are a part of this value chain enjoy some significant profits. Farm 1:0 Products
- Scalability: For this criterium, the ease at which a business can be expanded is taken into consideration. In this case, it is very difficult and costly to expand a poultry farm; you need to purchase more equipment, hire more workers and potentially face more regulation hurdles. On the other hand, you can create a simple Facebook page and sell products to people nationwide without spending a dime of your own money; https://tinyurl.com/ycga7zej is the link which explains this in detail. Farm 1:1 Products.
- Capital Intensiveness: Again, if you are a poultry farmer rearing layers, for example, you need to spend money on feed, vaccines, drug, supplements, etc for four months straight before obtaining any form of revenue but an egg distributor has lower overhead for selling the same products. Farm 1:2 Products.
- Level of Skill required: Why do you think surgeons earn more money than cleaners? It is not because surgeons save lives but rather, it is just relatively few people who have the skills to perform medical operations – because the demand for surgeons is way higher than their supply, they (surgeons) tend to enjoy higher salaries. If you examined poultry farming into much detail you would realize that animal husbandry and managerial skills are required while the distribution of poultry products such as eggs don’t require any special skill hence we have far a greater number of distributors as compared to farmers. Farm 2:2 Products
- Return on Investment (ROI): This is a measure of how efficient an investment has been. ROI is calculated using the formula below
ROI = Current Value of Investment – Cost of Investment× 100 Cost of Investment
It is worthwhile to note that starting a poultry farm requires a lot of startup capital in the purchase of land, construction of a structure, etc, therefore, it may take a relatively long period to fully recover your investment let alone, make a positive return. (By the way don’t confuse ROI with profit because, in calculating profit, the purchase of land or buildings are not considered as expenses). In contrast, let’s assume you spent GH₵ 1,000 on a website, and you sold GH₵ 20,000 worth of products in one year with a gross profit of let’s say GH₵ 7,000, your ROI becomes 50%. Therefore, selling products usually promises a faster rate of return as compared to farming. Final score,
Farm 2:3 Products.
Conclusion
If you consider the five factors outlined above, then selling farm products has a slight edge in terms of profitability. It is also important to note that because selling products seem to offer a quicker return, the market is more saturated as compared to poultry farming hence farmers enjoy relatively less competition.
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