Why Financial Literacy Is the Key to Success in Livestock Production

Now, imagine if you rear some chickens as a hobby and you do not feed them properly or fail to follow a proper vaccination schedule. What do you think will happen? Of course, your chickens will perish en masse. However, one thing we must understand is that the effect of losing birds to disease or starvation may not be as catastrophic to someone who is just rearing birds for fun as compared to someone who depends on his farm for a full time living. With that said, you still wouldn’t be happy to see your birds dying even if that event has zero significance on your chances of living a financially stable life. This is why we assume that anyone with common sense will try their possible best to keep their animals alive and healthy. Now, when you are rearing livestock for commercial purposes, suddenly, just keeping your animals alive and healthy isn’t enough. You need to figure out how to sell your products and keep your expenses as low as possible. Without further ado, let’s delve into the specific reasons why financial literacy is key to success in livestock production.

Firstly, before you even start operations, financial literacy could either make or break your business. Why do I say this? Imagine you had GH¢ 15,000 in your account, and you decide to rear 500 layers. You could easily afford to purchase 500 day-old chicks because a day-old chick currently costs around GH¢ 10. Therefore, 500 of those would cost GH¢ 5,000. But wait a minute, if I have GH¢ 15,000 and spend GH¢ 5,000 out of it, don’t I still have GH¢ 10,000 left, you may ask. Probably, you are forgetting that you need to spend some amount of money on feed, vaccines, labour, etc. For instance, if you want to rear 500 layers, you may need to spend GH¢ 7,850 on feed, GH¢ 340 on vaccines and GH¢ 2,000 on labour for the first 4 months. As you can see, your remaining GH¢ 10,000 wouldn’t even last for 4 months (assuming you have land and structure already). Hence, having good budgeting skills is very crucial for the success of your livestock venture.

Another good reason why being financially adept will take your farm to the next level is that you get to know when there is an opportunity to expand your farm. To illustrate this point, let me tell you a short story. Like I said in earlier posts, I used to do bookkeeping work for farmers and one time I had a poultry farmer client. I noticed that the demand for her eggs far outweighed what she was capable of supply – in a day, she could get close to 30 customers asking her if some eggs were available for sale, and she would almost always turn them away. And of course, me being me, not wanting to leave money on the table, suggested to her that we had a fantastic opportunity to expand the farm and make more profit (at the time, she had around 1000 layers and was making GH₵ 3,000 profit on average per month). Do you know what’s even sweeter about her situation? She was a government worker, which meant she could secure a loan against her salary. To cut everything short, I suggested she applied for a loan of around GH₵ 30,000 to immediately add 500 day-old chicks – This would have ensured that our monthly profits would be approaching GH₵ 5,000 in eight months. But as fate would have it, she disapproved of my plan citing reasons such as she doesn’t want to deal with employees and many other excuses. So sadly, we passed up such a great opportunity. So the moral here is that being financially savvy (you can achieve this by keeping up-to-date financial records) could help you recognize growth opportunities.

Finally, a good reason why farmers need to master the financial side of their business is to create a motivated workforce. Why do I say this? I’ve met far too many people, whose farms seem to be doing pretty well, but don’t really care about their employees’ welfare (the employees, especially farmhands are usually overworked and not very well paid). Now you may be saying, “My farm is a success. Who cares about some whiny employee’s feelings? – if anyone leaves, a thousand others are waiting outside the door willing to replace him”. Sure, even though many others may be willing to fill the role should any of your employees leave, you must consider that you could even take your farm to higher levels if farmhands or key employees stay longer in your farm. This is because they would fully understand the systems and how things are done. But when you always have employees leaving, you need to rehire and train new people which may cost a lot of money and time. Now, you can only know if your farm can afford to pay workers or perhaps, relieve them of their workload by employing more people if you keep accurate financial records. For instance, you are a pig farmer, and you have a farmhand catering to around 80 pigs, and he receives just GH₵ 500 monthly. Assuming you make around GH₵ 3,000 a month in profit, increasing his salary to GH₵ 600 will not impact your farm’s finances very much. And by so doing, it becomes less likely for him to leave.

Maybe you want to start a livestock farm in Ghana, but you don’t know much you need to invest in or the potential returns you could get from your investment. Don’t worry, we got you covered. Contact us for your professional business plan today, and we’ll be ever ready to assist you with a professional business plan. Also, in case you need help with financial record keeping, you can contact us.