Are you making these 3 deadly mistakes with your new bee business?

So you are thinking of starting a new bee business?

The time is now, the manuka gold rush is on, people are making huge profits from the recent crazy demand for our special manuka honey, and you want in?

Great! You're not alone. And I believe it is definitely possible to reap the benefits of the amazing medicinal properties of manuka honey, and the worldwide demand for it.

But are you making these 3 deadly mistakes in your planning? If you can figure these out in advance, and still make your proposition look worthwhile, you will be ahead of the game, and have a chance of making it all work.

So what are these mistakes?

1. Trying to do everything

Think of the old fashioned beekeepers - beekeeping has been a cottage industry for forever. It's only recently that it has morphed into a commercial operation. And even now, in many countries, honey production is still partly done by the semi-commercial cottage industry sector.

In the United States for instance, commercial beekeepers are mainly into pollination services. It's manuka honey that has changed all this for New Zealand.

So what are some of the attributes of the cottage industry, and how does this hinder you making profit?

A cottage industry typically does many of these activities:

  • owns hives
  • are the beekeepers - often the beeks are all in the family, it's a generational activity passed down
  • the business is privately owned and run, by the family, all hands on deck
  • grows and expands their beehives themselves
  • builds their own hardware
  • makes their own queens
  • extracts honey
  • packages honey into jars, with their own label and brand
  • sells honey, maybe at markets
  • may make a variety of other honey related products such as comb honey, propolis, bees wax
  • may make a product from bee products, such as hand cream, or candles
  • owns the land the hives are on
  • grows their own manuka and other bee food trees

You get the picture. It's a beautiful self-sufficient model. Definitely a dream for many, and good work too.

But...if you are going for this model, know that it takes a huge amount of work. And that the consequence of a huge amount of work is that you can only do so much, even if you are truly passionate and dedicated and hard-working.

So, what does 'so much' look like? 

The stats for registered beekeepers are split into:

  • non-commercial up to 50 hives
  • semi-commercial 51-250 hives
  • commercial more than 250 hives

So I would suggest that the self-sufficient model is down at the semi-commercial end of the scale. If you do the maths on this, it will not reap millions of profit.

That's not to say this is not a worthy goal. Just don't get your goals muddled - a self-sufficient family business v a large commercial operation. Pick one. Plan appropriately.

2. Not allowing for the weather

It used to be a joke in my family when I was a kid, that farmers were always complaining about the weather. No type weather was OK for them.

Well, hmmm, same thing with bees, which is just another form of farming if you think about it. There is never perfect weather. Something will always happen. It'll rain at the wrong time. It won't rain. It'll be too windy. It'll be too hot. Or too cold. Or both, in one season. We in NZ live on an island, so our favourite weather forecast is 'four seasons in one day'. Always take your umbrella and your sunblock. 

Last year, 2015/16 was a poor season for manuka in many places. The manuka flowering was cut short by a big storm, which effectively stopped nectar production. 

This year 2016/17 is so far shaping up to be a poor season, pretty much across the board. It's not finished yet, but indications are the manuka is not flowering heavily at all.

Even though NIWA suggests that 2016 is our hottest year on record (good for flowers you would think), and the rainfall has been just average - not too wet and not too dry.

So can your business model still turn a profit if the weather craps out? Because it will you know. You can pretty much guarantee that. Or will your financial plan only succeed on a string of bumper crops?

Which brings us to the third deadly mistake:

3. Using the wrong numbers

You've researched the industry. Put the resultant numbers into a spreadsheet, and it looks great, you'll be a millionaire in your second year, no sweat.

I bet you've used numbers like owning 1000 hives by year 2, making 40 kg honey per hive, and selling that honey for $40/kg.

Yup, that's what the interwebs would suggest are reasonable assumptions.

So why are these the wrong numbers?

I talk about this in more detail in this blog post, but here is the summary again:

a). Owning 1000 hives is certainly doable. But it means you are in the business of growing bees, not making honey. Hives that you are splitting and growing will not be huge honey producers because they will never build up to super strong hives while you are splitting them. Bees or honey, you pick.

b). 40 kg of honey per hive: there is plenty of anecdotal evidence that this was possible.

Each hive that produces honey (not being grown for beehive increases) could produce 40 kg. Or at least, once upon a time, it could. Now it seems that beekeepers are struggling to get past 25 kg. Part of this will be poor recent seasons, but partly it is that there are too many other bees around.

It all comes back to enough food supplies - a poor season or too much competition for the available food supplies means the bees do not have enough resources to thrive, and to make lots of honey.

c). $40/kg implies that your honey is manuka. 

OK, cool, so you need to put your hives in heavy manuka areas. At the right time. More on that in this blog post too.

Not as easy or fool proof as it sounds.

d). So you could have some beehives for growing bees, and some for honey. And some of those honey hives could be in manuka and others in pasture or bush.

Say you're going for 1000 hives, and you expect to have 400 hives as honey producing and not for splitting. And of those 400 hives you'll have half into the heavy manuka. And it will be an average season.

Then instead of your equation being 1000 hives x 40 kg x $40/kg = $1.6mill

it'll be a bit different, maybe 400 x 1/2 x 25 kg x $40/kg = $200,000.

You can do the proper maths, my point is make sure your assumptions are not too enthusiastic.

Why do these numbers persist on the interwebs? My guess is they are from the productive-only hives of large commercial companies. And not actually a true cost of being in business, or a true representation of the average yield of hives.

 

And if you can avoid these 3 deadly mistakes in your financial and business planning, and it still looks like a good idea, then you are on to a winner, and have a chance of turning a dollar.