How to Start Cassava Flour Business
Important Note: throughout this article, we will be using the Nigerian Cassava industry as a case study since it’s the largest globally. The Nigerian cassava flour business is lucrative and versatile.
The global Cassava flour market is expected to cross US$ 8 Billion by 2024. Presently, cassava is one of the most popular feedstocks for starch extraction. Compared to other sources, cassava starch extraction is more straightforward and economical, achievable on a small scale with little resources.
Cassava is a relatively cheap source of starch extracting raw material that can match the starch properties provided by other natural materials. The demand for cassava starch is projected to reflect substantial growth over the forecast period.
Cassava flour has gained popularity due to its neutral taste, high purity, superior thickening characteristics, and excellent textural features.
Besides, cassava starch also has some essential characteristics, including high paste transparency, high paste viscosity, and high freeze-thaw stability. Witnessing all these attributes, the growth of the cassava starch market appears to be very promising in the future due to its random use in the fruit, beverage, fiber, paper, and adhesive industries for a wide range of applications.
Starting the Cassava Flour Business
Using Nigeria as a case study, to improve the resource advantage of cassava, the Nigerian Government has adopted various policies to promote cassava processing. In recent years, with an increase in the price of wheat flour on the international market, the Nigerian Government has endorsed a strategy of partially replacing wheat flour with cassava flour to reduce wheat flour imports. As a result, more and more Nigerians want to make more money from Nigeria’s cassava flour sector.
To start a cassava flour processing business in Nigeria, you need to consider the following things:
- Perform a Market research
Market research is vital before any business is carried out. It will help you understand the consumer demand for goods, the state of development, and patterns of the industry, competitors, etc. It is best to know if your country allows or restricts the business you do. Because this is going to have a massive impact on your business.
- Apply for and receive the required commercial licenses and permits
After finishing the market research, you should consider starting the business of processing cassava flour. First, you need to know what commercial licenses and permits are required for the cassava flour processing business and obtain these licenses before starting the business.
If you’ve got enough money, that’s the best thing. Of course, you can choose a loan if you don’t have enough money. The Nigerian Government is funding the cassava flour processing sector to get government loans and policy subsidies more quickly than other companies. When planning funds, recognize plant building funds, equipment procurement funds, pre-operational funds, and workers’ salaries. So if you need a loan, you need to measure the amount of money in advance of the loan.
- Have a rich source of raw cassava
Based on your production requirements, you need to supply enough cassava raw materials to decide the number of days your plant can run. Nigeria is the largest cassava producer globally, so you wouldn’t have to overthink raw materials. It’ll be more comfortable if you have a cassava plantation. If you don’t, you can buy cassava from farmers near the factory.
- Rent or buy land for business operation
You need to develop a piece of land for a cassava flour processing plant. Enterprises with adequate strength can choose to purchase suitable land for self-built factories. Of course, you can also opt to rent land for the building of a plant. The location of the plant is very critical. You need to remember the following terms:
- If the transportation is convenient. If it is easy to transport raw materials and finished goods.
- The proximity of the plant to the raw materials and to the demand. It is better to select a place near the cassava plantation and the product market to minimize transport costs.
- If there is a proper supply of water and electricity
Given the above, the best place for the cassava flour processing plant should be in the suburbs.
- Purchase some of the processing plants and machinery
After the factory construction is completed, you need a cassava flour processing machine to produce cassava. Machines and equipment to be purchased include dry sieve, cassava washing machine, cutting machine, rasper, desander, plate and frame filter press, airflow dryer, vibration sieve.
- Employ the services of full time and part-time workers
After the equipment has been purchased, the staff is needed to transport, install, commission, and operate the equipment, so you need to employ factory workers and managers.
After all of the above has been prepared, you can start processing the cassava flour business. You don’t need to worry about selling cassava flour in Nigeria. Since cassava flour can be sold to local bakery or other food processing stores in Nigeria, it can also be exported to near-African countries and even to the international market. More and more states consider cassava flour as a replacement for wheat flour for bread making.
10 Business Rules for Starting a Successful Cassava Flour Business
If you’re going to start a cassava flour business, you’ll want to succeed. And, since we all like to eat cassava, we all need you to succeed. With that goal in mind, here are our 10 Business rules for starting a successful cassava flour business.
Rule One: Your Cassava Flour is a business and not a hobby
There are several ways that people get into the cassava flour business. Some folks are fortunate enough to inherit land and a family business tradition. For those folks, the farming business is in their DNA, and they know it’s a farming business, not a weekend hobby. Others get into the cassava flour business by making a conscious choice to leave a career and start or acquire a farm. Both sides of the fence are quite common. Hence you wouldn’t need to get very far to see an experience.
However, many people, if not most, get into the small-scale cassava flour business more slowly. So they figure, why not sell it? First to neighbors, then to a local market. You know…it’s the, “if you build it, they will come mentality.”
Before they know it, they’re running a cassava business without ever creating a business plan to succeed at the cassava business. A few years go by, and they expand their chains of cassava supply. Their days are busy, processing cassava tractors, machine maintenance, seeding, planting, and harvesting crops. Then they rush to a Saturday market to sell what they can, bring home what they can’t, and keep doing the same thing.
And they learn a hard truth — if you build it, they WON’T come. Instead, you MUST attract them, and that’s called marketing.
It’s sad to say that there are a lot of people like this. They never stop and assess if what they’re doing is the right business model because they never created a business plan in the first place. They just started with a hobby and kept doing the same thing.
That’s a mistake, so don’t do it.
Rule Two: Before you launch out, streamline your competitive advantage
One of the reasons that so many people, at least on the few bunch side, start with a few supplies is because they view it as low risk. After all, a few barrels don’t cost much, so it’s easy to start producing eggs for others. And chicken tractors aren’t expensive to build, so it’s not that big a deal to get into the Cassava flour processing plant business, though you have to figure out the sieving and processing side.
But here’s the thing. If the business is easy to get into for you, it’s easy for someone else to do the same. That means the barriers to entry are low. Generally speaking, that’s not good.
So how will you achieve a competitive advantage?
Now, don’t get this wrong, you can get an advantage in that business. But, if the barriers to entry are low, your advantage has to come from either,
- Proximity to markets,
- Being a low-cost producer or,
- Because you’ve achieved excellent brand recognition. Or a combination of those factors.
There are several ways you can gain an advantage regardless of what specific business strategy you choose, but the point we are trying to make is this: nail down what your competitive advantage will be before you start. Then, have a strategic reason for every farm enterprise you operate, and every farm decision you make.
In other words, don’t just ramp up your cassava flour production next year because you sold out this year. If your motive is profit (and it should be because this is a business, right?), you have to assess the most profitable cassava enterprise for you and your market.
Rule Three: Decide on the Best “Go to Market” Strategy before You Start
If you have something to sell, there are a lot of ways to sell it, right? Particularly in this age of e-commerce and drone shipments.
But the fundamental questions you have to CLEARLY answer are, who are you going to sell to and how are you going to reach them? In other words, you have to define your go-to-market plan.
Now, with direct-market farming, there are several ways to go to market, including:
- Farmers markets
- Farm stands or on-farm sales
- Selling to retailers
- Wholesale selling to distributors
- CSA or community-supported agriculture
- Metropolitan buying clubs (MBC’s) or delivering to groups of farm customers
- Selling to restaurants
Rule Four: As much as you can avoid debt
So we say “as much” because debt can be used intelligently to gain leverage. However, that doesn’t mean most people use debt intelligently.
Look — your cassava flour processing is a business, and businesses have balance sheets. So let’s start with that.
Balance sheets are divided into assets and liabilities. Assets-good, liabilities-bad, right? Because liabilities are something you owe…they are debts you have to settle. So you better be sure you can fix it, or the creditor will come after your other assets. Like your land and house, if you don’t set your farm up correctly.
But, if your business has the income to support the debt, then some debt may make sense.
There are many ways you can fund your cassava flour business, from grants to savings and family help to upfront payments via CSA programs. Just remember…debt ruins far more businesses than drought, and there’s enough to worry about in farming. Design your cassava flour business to run without debt, so you don’t add that level of stress.
Rule Five: Streamline the gap between what the land requires and what the market requires
This is both a business and an ecological rule. And it’s important because we often get caught up in our ideology or fantasies of what we want to do on the farm. That’s fine — -if you have a hobby farm. But the minute you depend on it for income, it’s a business, and you gotta let go of those fantasies.
That doesn’t mean you can’t match your primary business objective — to earn attractive profits — with your ecological values and land resources.
Rule Six: Ensure that Profit is balanced with passion
Okay, so we’re talking about a business, right? Not a hobby. So…measure EVERYTHING That Affects Profit Everything. It’s not about what crops are cute or what farming tasks you like to do. It’s about making money. Unashamedly! And making enough money, both in terms of profit margin and in terms of steady cash flow.
Often, you see or hear people ask this illogical question. “What should I charge for my cassava/flour/finished product”…you name it. Naive because that’s not a question business owners ask others. Do you think Apple is asking Samsung what to charge for the new iPhone?
The answer to what to charge is simple and is derived from three data points:
- What is your cost of production?
- What is your required profit margin?
- What will the market bear?
Only you will know those data points. Sure, others might think of what the market will bear, but their answer is meaningless.
For one reason, you can create a market for anything. Who would have thought that we’d be paying Apple a $1000 for a single cell just a few years ago? Of course, no one, and who knows where we found the money to do so. But Apple created the market for it, just as you can for your cassava flour products.
Also, others won’t know what profit margins you require. For instance, if you have a debt to service, your margins have to accommodate that.
And others certainly don’t know your cost of production. Nor do they understand your specific target market and its demographics. So the point is to measure everything that affects profit because you absolutely need to know your production cost, down to the nickel. What does it cost you, ALL IN, to produce that flour?
Rule Seven: Understand the difference between Cash flow and Emergency
If operating a business is new to you, this next statement may sound strange. Nevertheless, there are lots of ways a business with decent profit margins can go out of business. Or file for bankruptcy. It may sound counter-intuitive, but it’s true.
There have been plenty of businesses that had attractive profit margins but poor cash flow management. They went bankrupt because they couldn’t come up with the cash to service the debt. And, there have been even more companies that grew too fast, so they went under.
Rule Eight: Safeguard your Assets
Just to reiterate our point one more time. This is a business, so does any real business NOT operate as a corporation? Of course not. So form an LLC at a minimum to provide some separation of business and personal assets.
Now we are not trying to play CPA or lawyer; hence we are not offering legal advice. See your own experts for that. Moreover, in any business, you have to protect your personal assets, especially in our litigious society, where a person can sue (and win) for having coffee spilled on them.
Beyond legal structure, be sure to get the right insurance to protect you. That means a farm policy to insure against loss of equipment, infrastructure, and pieces of machinery. However, more important, it means a product liability policy. That’s very vital because you’re producing a consumable like, say, cheese.
Keep in mind that product liability insurance likely won’t save you if you’re negligent. And here’s what we mean, you have to process the flour the right way following good manufacturing processes and so on. To protect your assets by forming the legal structure recommended by your advisors and by getting insurance.
Rule Nine: Quit Your Day Job
Yes, you read that correctly. For heaven’s sake, you start out a full-time business, you’re not going to put in half-hearted commitment. So close the door behind you, burn the bridge, and quit your day job. If you want to have a successful Cassava flour business — or any kind of processing business — get rid of your crutches. Go out and do it!
So many people might be thinking, “No! That’s crazy! Don’t take the leap until you know its working.” And, okay, that’s fine if that’s the path you’ve chosen to thread. Nevertheless, we are willing to bet that, if you think that way, you’ll always be stuck in your day job.
This isn’t telling you to quit your job and go start Cassava flour because we are aware that anyone could be reading this post. IN a nutshell, we’re saying that, if you are determined to have a farm business, then — yes — go out and build one. You want to build an excellent cassava flour business, and it will take your full-time energy, passion, and commitment to achieve that.
Holding on to a job creates two problems for you.
First, that income (and yes, health care) from the job will always be tugging you as a safety net, saying things like, “Hey man, you can always return to the rat race. It’s clean in here, and you get a paycheck. Stop doing that dirty farm work.”
The second problem is that it takes away a lot of your attention, what with the commute, the stress, and the actual day job you’ll have to do. That’s consuming energy that could go into your building your cassava flour business.
Rule Ten: Begin your marketing efforts before you start production
So, if rule nine seems absurd, this one may as well. How can you start marketing before you start your cassava flour? Well, you can, as you can start blogging and marketing over a year before having your first breakthrough production.
Now, does that make you nervous? As in, you’re afraid to market and don’t know where or how to begin? Are you thinking, “Hey, I don’t even have Space? No products, no nothing. So I have nothing to share!”
Well, that’s not true, is it? Because you have a story to share, even if you’re just taking your first steps. And the reason you’re taking or contemplating those steps is a very vital part of your story. That’s the part that people will care about and connect with! So you have an opportunity right now to be open — to be vulnerable, and connect with people on a very emotional level.
How?
By sharing the truth, your dreams about the life you want to create. Your vision for the change you represent, which could be for the animals, the environment, your community, or even personal health reasons. Or every one of them.
And be honest about your fears, because every one of us has fears. If you’re worried that you don’t know how to cultivate the cassavas or run the business, then say so. And that’s all compelling stuff that connects on an emotional level with an audience in a way that big brands simply can’t match.
So, you don’t have to worry about pushing products or spouting features and benefits of what you have. You simply get to share your story and build relationships. And that is at the core of effective cassava marketing.
Now, here are five Benefits of marketing your cassava flour business before you start processing;
- You’ll build a loyal tribe of supporters because you’re allowing others to live vicariously through you.
- If you do it correctly, you’ll get a head start on building your most crucial marketing asset: your email list.
- By creating one blog post per week, for example, you’ll get a big head start on search engine optimization (SEO) by marketing early.
- You’ll gain the potential for media exposure by sharing your plans.
- You’ll have access to free and valuable market research and find out what folks seem to be interested in, and what they’re not.
Starting a cassava flour business isn’t as hard as it seems; however, you have to follow the right steps to get things right. These strategies and tips listed herein is a great place to start.