Any business can fail for any number of reasons, but indoor farming is an incredibly delicate organism that depends on many disparate factors being perfectly aligned and in balance. This increases the risk of failure for those unaware of the number of plates that need to be kept spinning in perfect time. This list is not definitive but gives you a good idea of the most common mistakes to avoid.
1. Avoid a Trial and Error Approach to Design
There are multitudes of factors that are naturally managed and balanced with indoor farming. The sun cannot be changed, irrigation to every plant is different as weather patterns can change from moment to moment and even the nutrition in the soil can vary across the area of the field. Planning your farm therefore gives you the ultimate control but also dramatically increases the variables that you can and must consider.
These variables start with the facility’s very layout, such as the size of growing space, plant distribution, airflow and more. Additionally, without having the right models in place to determine the exact light recipe and combination of CO₂, nutrients and water required to grow a successful crop, growers can find themselves wasting time and money on testing phases to try to maximize yield and revenue. Once you have developed a model for your vertical farm, you should then put it through a testing phase on a smaller scale to ensure it is viable.
2. Pick the Right Crop
It’s far easier to develop a profitable and scalable facility if you know the needs of your crop inside and out. That ideally means specializing in one type of crop that you can design your facility around, electing the right growth spectrum and studying that particular plant’s biology to better understand how to optimize irrigation, nutrition, air flow, CO₂ concentration and propagation in order to maximize elements such as taste, nutritional content, visual appeal, potency or shelf life.
Too many growers have tried to hedge against perceived risk by trying to grow multiple crops. By default, it is extremely difficult to have one installation that is optimized for a wide variety of plants, and therefore the returns from each crop are lower than they could have been. The facility then may have to suffer through downtime as the technology is tweaked and optimized for the next crop — eating into profitability and adding unnecessary costs.
3. Location, Location, Location
The old adage that location is half the battle has never been more relevant than in vertical farming today. Vertical farms have a key advantage in their ability to be located close to their customer, whether they are selling to food processors, supermarkets or local shops. Removing the vast transport logistics associated with today’s food supply chain slashes costs and helps appeal to an increasingly conscientious customer. The lack of transport costs also helps counter the higher production costs resulting from higher energy and labor inputs.
At city planning level, there are also many advantages of co-locating a vertical farm with other facilities such as office buildings, shops or residences — which could draw the vertical farm’s excess heat to reduce demands on other sources of energy.
4. Simplify Your Business Model
Proximity to customers and the ability to produce crops year-round at a sustainable rate is a strong advantage in the market, whether you’re growing for the food or pharmaceutical sectors. Therefore, consider the opportunities available through establishing exclusive contracts with customers at a fixed rate that will offer more financial security as you build your business.
5. Be Realistic About Operational Cost
Setup and fit-out costs represent a high initial outlay for any indoor farming entrepreneur, but the ongoing operational costs (energy, labor, inputs, maintenance, etc.) are also significant. Businesses not only need to find creative ways to mitigate these risks (e.g. growing through the night when energy tariffs are lower and the outdoor climate is cooler to assist HVAC systems’ efficiency), but also consider the cost-benefits of different configurations and process flow.
6. Set Prices Based on What Consumers Will Pay
At the 2017 inaugural AgLanta Conference11, PodPonics’ CEO admitted that the company missed out on higher potential margins as it priced its crops to compete with conventional growers, ignoring the price premium that food traceability, pesticide-free growing and local production can increasingly attract from consumers in some markets.
7. The Skills Gap
In many cases, those who have embraced the promise of indoor farming have not been traditional growers but rather tech entrepreneurs, engineers or hobbyists. Vertical farming requires a unique mix of skills to be successful: big data scientists, systems integrators, project managers, engineers, growers and plant scientists all have a role to play in addition to the core functions that any business needs to be successful (financial strategists, marketing and business development, etc.). From the leadership perspective, experience at replicating and scaling a business is critical. Ignoring any one of these functions leaves a serious gap in business capability that could undermine the overall success of the operation.
8. Remember What You’re Selling
In a bid to capitalize on the new technology and growth models offered by vertical farming, some growers have forgotten that their primary focus should be on growing and selling the highest quality food. Instead, they have tried to recoup their investment by trying to commercialize their vertical farm’s technology, process and methodology. Unfortunately, as we have seen, every vertical farm is different with potentially very different needs. The trick is to not to try and do many different things at once, but instead keep a clear focus on doing one thing as well as possible.