Pigs, how can something so hideous be so delicious. Who knows?
I’ve spoken about the pig farming business before and I just shared my views on farming in South Africa, and how difficult it is but there are ways to increase your success as a small business by aligning your abilities with your business model.
Starting a Business
When you start a business, you start out by studying the business, its supply chain, and the value chain of each part of the supply chain, and then you look at the overall industry and the macro situation. We just looked at the macro situation in farming, now we look at the micro situation.
What is pig farming
Pig farming is the raising and breeding of domestic pigs as livestock. Pigs are farmed principally for food (e.g. pork, bacon, gammon) and skins.
Being an experienced entrepreneur (and not a farmer) I know that the closest to the beginning of the supply chain the most experience, knowledge and capital is usually required. So I am starting at the end.
- Where is pig meat sold (both locally and internationally depending on my capacity/scale)
- How much do pig meat/pork retail for (retail)
- How much do pig meat wholesale for (wholesale)
- What kind of meat comes from the pig (pork) What else can be made from pig meat: bacon, sausage, gammon, ham, trotters, brawn, scratchings etc. (the processing)
- Logistics: how to pigs get to the farm, slaughterhouse, and meat to the buyer (used to calculate transportation/storage needs)
- How is a pig slaughtered / How much does it cost to slaughter a pig
- When / how old is a pig when slaughtered. What do they cost to buy alive at this age?
- Cost to feed a pig during its lifespan / what does it eat
- What medicines do pigs need / What diseases do I need to look out for
- What is the legal requirement to hold pigs in the area I am located?
- How to raise a pig, how much space etc. What is needed to take care of a pig?
- At what age should I buy a piglet (when they are the easiest to manage). What do they cost when bought
- How do pigs mate, how long are they pregnant for, how do they give birth etc.
I haven’t started anything yet, I am building an abstract representation of the business (I call this technique supply value logistics). Each of the above points will be expanded upon. But you can already see the opportunities and business models opening up. Now, remember I still know nothing about pig farming I’m still researching. But in theory and starting at the beginning, there are a few business models I can and each business model will have its own strategy:
- Buy a mommy pig and a daddy pig and they consummate their love and we have little piglets.
What is required to do this (value chain)? The equipment, materials, skills and space required.
If I go this route should I sell the piglets or raise them until slaughter age, and if I raise them until slaughter, should I sell them or slaughter them and sell the meat myself?
- I can buy piglets at the right age, raise them until slaughter age.
What is all required here? (value chain)? The equipment, materials, skills and space required.
And should I sell them at slaughter age or slaughter them and sell the meat myself?
- I can buy pigs at slaughter age, slaughter them and sell the meat (we are exiting the actual farming business here).
- I can buy pigs at slaughter age, slaughter them and process the meat into sausages gammon etc.
- I can buy meat from pigs that has already been slaughtered wholesale and sell it retail
- I can solely operate the abattoir and charge a fee for every pig slaughtered. Or I can buy pigs and slaughter them in my abattoir.
- I can raise pigs, slaughter them and sell the meat aka vertical integration. Very risky in SA unless you are well capitalised.
- etc. each point above can have various permutations
I use a framework called “Effection Theory” which looks at the following:
– Who you are, what you know and who you know (Bird in Hand)
– The time, the effort and the money you have at your disposal and can afford to lose (Affordable loss)
The most important thing when using Effection Theory to start a business with what you have, it does not entertain pie in the sky logic and advocates the use of heuristics – a practical method that gets the job done, not perfect but good enough.
Choosing a pig business model using Effection Theory and heuristics
If I have R1000 pie in the sky logic is I will buy a farm and farm pigs, whereas in reality, R1000 will only get you pig meat wholesale, heuristics dictates that you buy wholesale and sell retail. If you only have R1000 then anything else is pie in the sky. That’s it, end of the story. If you do not have more money and don’t want to wholesale then that’s the end of the road as far as using effectuation theory and heuristics. That is as far as I am concerned the end of the road as we don’t dream here.
Effection Theory: Who do you know
When you starting a business on your own and you just flip-flopping around. You will see the value of using a framework in business, even though it might seem obvious. Within effection theory, there is something called “Who do you know”. This is essentially who do you know, either in the business or needs the product or service of the business you are going to start. While this might seem obvious to call on people who you know are in the industry it is not always utilised because flustered entrepreneurs don’t think straight when they are flailing.
If you know somebody, in the pig business, you can learn a skill: they can teach you (you can offer to work for free, work for what you can learn not earn).
But you can also come up with an arrangement, if this part checks out, then you can ask them if they will contract farm for you. Basically, you pay for the piglet and they rear it for you and give it to you when it is ready to be slaughtered. Can you start this with R1000 probably, should you? No. The return on investment will be too long. You still go with the above wholesale option. You look at who do I know that loves pork and sell to them R100 or R200 packs. You turn that R1000 into R2000 within a day or two. You do that week after week until you have enough to go to your friend and say I want you to raise 10 or 50 pigs for me etc. Then if you want to later you can farm on your own. That is a realistic way of doing it.
My Effection Theory and heuristics
When I put myself through the motions of starting this business. The following came up:
My bird in hand tells me, I live in suburban Cape Town, I cannot farm pigs where I live and I have no intention of leaving the Cape and I want to farm close to home. My options for smallholdings are Philippi and Joostenbergvlake which is zoned rural. Is it possible to farm pigs in those areas?
I’ve already researched pig slaughter methods and it is a messy business, and I don’t want to have the blood of innocent animals on my hands. This rules out for me operating an abattoir but also that I will outsource this so I would need a place to outsource to.
My bird in hand also tells me if I want to process and I have the equipment and skills to process but don’t have money for a whole pig and to slaughter that pig then I have to buy meat that has already been processed. This will eat into margins will I still make enough profit?
Now remember we are still dealing with pure theory here, if you are interested in this business, you have to research your local business conditions.