Pictured Above: During the last 3 years, Matt Rohlik and his Minnesota-based precision farming company Ag Integrators, have flown roughly 80,000 acres with unmanned aerial vehicles, moving toward a more service-based model for delivering the technology.
Unmanned aerial vehicles continue to be one of the more promising, while at the same time controversial, technologies emerging in agriculture.
Farm equipment dealers have begun to gain a foothold in the UAV market during the last few years, with many looking to establish a hardware foundation on which to eventually build a lucrative service business.
“This technology has evolved faster in the last 18 months than precision ag as a whole in the past 20 years,” says Matt Rohlik, CEO of Ag Integrators, a Minnesota-based company dedicated to precision farming technology.
Rohlik was first introduced to UAV technology at a conference in Iowa about 4 years ago. After seeing a speaker present with a drone, Rohlik says his eyes were opened up to the new technology and how it could impact local farms.
“It became very clear that this is the next step to find the site-specific issues that are in fields, doing surveys, inspections, etc., and we jumped on the bandwagon,” he says.
During the last 3 years, Rohlik’s company has flown roughly 80,000 acres with drones, and in his time working with the technology, Rohlik has gathered a few tips to better implement this UAV technology into a precision farming dealership.
As Rohlik says, UAV technology is far ahead of its time and is quickly evolving. In less than 18 months, UAV technology went from companies struggling to take simple pictures with drones, to them taking millimeter-accurate photos, live streaming the data and sending the data feed to a device seemingly instantaneously.
The investment costs for launching a UAV business can vary. Deciding to hire someone within a dealership vs. partnering with someone from outside the company will alter investment costs. The price of a smaller unit can be $2,000-$5,000 depending on the system, and then dealers have to factor in insurance on top of the piece of equipment.
However, the pace of the UAV industry has led to some concerns for future investors in the technology and Rohlik has an experience-based message for dealers.
“Understand that this thing will turn faster than any other precision farming item that you’ve had,” Rohlik says. “Whereas computers and tablets are being replaced every few years, in the drone world right now, we are replacing these things by the day.”
This turnaround rate of replacing drones is moving faster than regulatory policies, meaning regulations simply cannot keep up with the speed of drone technology, Rohlik says. He expects to see greater rules and regulations coming in the near future.
This past June, the Federal Aviation Administration (FAA) released a new rule for commercial use of small unmanned drones. The ruling, which took effect in late August 2016, offers new certification requirements for drone users. Operators must pass a written aeronautics test every 2 years rather than obtain a pilot’s license, and clearer restrictions are placed on when small drones are allowed to fly during the day.
“The FAA has done an excellent job of putting this stuff together and that makes a few people mad,” Rohlik says. “I think the thing we need to keep in mind is very few planes go down in a year. The FAA is in charge of making sure things are good.”
Because the UAV industry is still so new, many are unfamiliar with the purposes and different types of UAV technology. Rohlik previously talked with venture capitalists from San Diego about where the UAV industry is headed.
Gain an understanding of UAV technology and how quickly it is changing.
When beginning a service-based UAV business, hire someone qualified in precision ag and and the commitment to support the product.
Find a way to bring in your most loyal customers to test the UAV system whether through a pilot program or roundtable groups.
“They like to call drones a data visualization market sector,” he says. “Meaning that a lot of these drones are used for visualizing crops, structure, infrastructure, traffic and anything with livestock.”
According to the venture capitalists Rohlik spoke with, in 2015, $465 million dollars of venture capitalist money was spent on the UAV industry. “When you take a look at how much money has been invested, there’s a lot of people that want to play in this market sector,” he says.
Sales & Repair vs. Service-Based
Because of the opportunity and profitability the industry possesses, Rohlik says two different businesses can form out of UAV technology — a sales and repair-based business or a service-based business.
Rohlik compares the sales and repair model to most farm equipment dealerships. “In that situation you have a product, you are marketing that product, you are selling that product, you are servicing that product, you are supporting that product and you are training on that product,” he says.
It’s the same model maintaining any other piece of farm machinery, he says, such as a tractor, combine or sprayer. While there may be updates to the piece of equipment, for the most part, it is a straight sale.
In a service-based business, dealers have two options for how they can be selling UAV systems, Rohlik says. “Either you’re selling these to the grower or agronomist or whoever it may be, and you have a fee-based service after that, or you’re owning this technology and preparing a service to this grower, agronomist or consultant.”
The benefit of a service-based business, according to Rohlik, is the relationship you build with your customer. You become their trusted advisor.
“This technology has evolved faster in the last 18 months than precision ag as a whole in the past 20 years...”
“I think of it as a UAV maintenance plan,” he says. “I’m going out there to help take care of my customer’s tractor, combine and sprayer, and I’m going out there to help them take care of their crops.”
Though both a sales and repair or a service-based UAV business can be profitable to enter, Rohlik receives many more questions about the service-based business and how to implement it into a dealership.
The service-based business allows for dealerships to offer a wide range of support options to sell to their customers, including scouting, sampling and consulting services. Field scouting services are the number one priority, Rohlik says, because with a service-based business the best way to assist the customers is by surveying the field.
The next service opportunity is sampling. Rohlik suggests that both tissue and soil sampling are suitable tests and the decision of which is better to use is more a matter of personal preference.
“To go out and sample spots in the field according to what the sensors of these drones are sending back to you is a value-added service,” he says. “Most farmers, if they’re going out to look at a problem and they know they have a problem, they’re going to fix it.”
With sampling services, the customer is able to fix in-field problems immediately rather than put what Rohlik calls a “donut on a flat tire or a Band-Aid on a cut — just a temporary fix.” After sampling, dealers can interpret the results or work with a third-party to write a prescription for the customer to implement a complete solution to a problem in the field.
The final service option is consulting services that create a trusted relationship between dealer and customer. “In some cases, people just want to be consulted about what they’re doing and how they’re going about this,” Rohlik says. His recommendation is to develop a peer group to talk about the industry and the latest advancements so dealers can understand what is going on with the technology.
Beginning a UAV Business
The most important thing to consider before entering the UAV business says Rohlik, is the commitment needed to market such a product — beginning with qualified personnel. He notes that while a dealership’s best precision farming staff may be entirely qualified to sell UAVs, they also may be taking on several different projects as full-time precision salespeople and cannot dedicate the required time solely to UAVs.
One of the benefits of developing a service-based UAV business, according to Matt Rohlik, is the relationship you build with customers. “I think of it as a UAV maintenance plan,” he says.
In such cases, hiring someone specifically for UAV sales is necessary. Personnel also need to be trained to operate such machinery, especially because of the increase in rules and regulations.
Time demands throughout the season are also crucial to UAV sales. In northern states, the window to sell UAVs is 4-6 months, according to Rohlik. After that, dealerships need to decide what to do with staff during the months they are not selling drones.
Rohlik offers a few suggestions to combat this situation by hiring either precision staff who have a lighter summer season, shop workers who are looking for a slower-paced job or students from universities with UAS-specific programs such as North Dakota State, Kansas State or Indiana State.
Not only is timing a factor for managing personnel, but also for pricing of the UAV services. In a service-based business model, dealers are not only selling a product, but they are also driving to survey the land, processing the data and writing prescriptions — which all takes time.
Some questions Rohlik suggests asking when pricing UAV services include, ‘What is your time worth to get to a location,?’ ‘What is your shop time,?’ ‘What is the surveying time;?’ and ‘Will you be charging to process and interpret data?’
To determine a dollar rate per acre, he suggests calculating the total number of hours to do the job and divide by the number of acres to be surveyed.
The investment costs for launching a UAV business varies. Deciding to hire someone within a dealership vs. someone from outside the company will alter investment costs. The price of a smaller unit can be $2,000-$5,000 depending on the system, and then dealers have to factor insurance on top of the piece of equipment.
The insurance rate, however, will decrease with the increased regulations of UAV equipment. When Rohlik started, he was paying roughly $3,000 dollars in liability insurance and now he pays under $1,000.
It is also important determining who will lead the initiative. “It does take some time,” Rohlik says. “It is a managerial skill. There’s obviously customer emotion, and it does take awhile to get off the ground.”
Once dealers determine the right personnel to lead the new initiative, they have to find a way to bring customers in to try the technology. Rohlik suggests a formula of pulling some top, middle and lower end customers.
“The farmers who don’t do a lot of business with you, some who do half their business and some who do all the business with you,” he says. With this group of mixed-interest customers, Rohlik says, you should then discuss with them either together or individually what they are looking for in UAV services.
These customers can help answer the questions of how the program will be structured and what the customers are looking for. In the end, Rohlik says, it’s all about fulfilling the customer’s needs.
“You must ask yourself, ‘How are we benefitting the customer?’ because that will be the key to moving forward,” he says. “My recommendation is to have a pilot program. Connect with the top 10 or so of your easiest-going growers and develop that program with them and test it out.”
That way if mistakes are made early on, the dealer will not lose business and customers will understand from the beginning that there may be a few kinks to work out in the program.
Another important factor to consider is data ownership and control. With a high volume of data collected and stored by UAVs, dealers will have to consider the precautions to ensure the safety and security of the data.
“We have a very firm stance here that growers own the data,” Rohlik says. “We simply help store it for them.”
There are a few options for how to store the data including via the cloud or at an offsite location. Rohlik’s company uses an offsite location because, as he says, “Some people are afraid of where their information is. The cloud is a good tool, but it’s just not for everyone.”
With improvements in UAV technology, the speed at which data is being processed is becoming faster — and the technological advancements of drones make it the most accurate precision ag tool compared to its alternatives, Rohlik says. He compares the processing and geo-referencing of field data to that of a yield map. “If this spot says I did 225 bushels an acre,” Rohlik says. “I know I can go there, and it’s a reference. It’s mapped and planted right there.”
“I think of UAV service as a maintenance plan. I’m going out there to help take care of a customer’s tractor, their combine, their sprayer, and I’m going out there to help them take care of their crops...”
The computer system and data processing programs are also improving, increasing the strength of the overall UAV systems. Rohlik saw firsthand the enhancements in UAV technology when watching a drone work with windmills.
“It’s amazing how close these things can get to surveying,” he says. “We are talking millimeters. They can see hairline cracks in windmills.”
Sensor technology is another key improvement to the UAV systems.
“Whether it’s thermal technology or just regular RGB (red, green, blue), the quality and clarity of our sensors lately is just phenomenal,” Rohlik says.
He witnessed a drone inspect a cement grain silo in less than 45 minutes when it would normally take a crew of workers a whole week to do it.
The complexity of UAV technology, according to Rohlik, makes it a high-commitment product, though the benefits of implementing such a system are also abundant.
“It really is a precision ag product because you have to show the customers how to use it,” he says. “You have to make sure they’re comfortable with how to use it. You’ve got to have the support to back them up.”
When explaining the return on investment to a potential UAV customer, Rohlik likes to compare the technology to a sprayer.
“You can have spraying custom done, and it costs something to do it,” he says. “The problem that always resonates in growers’ heads is ‘The co-op can’t get to me for 2 days? What am I going to do?’ So farmers go out and end up buying their own a sprayer so they can do it when they want to do it.”
With the drone technology, the grower is in control of their field and is capable of making sure everything is in order. Rohlik has several stories of growers saving thousands of dollars with the help of drone technology — from detecting unhooked tile lines to raccoons in the drain tiles.
In those cases, the UAV systems preserved crops and saved money. Rohlik is careful to note that the benefits of drone technology do not necessarily equate directly to monetary savings, but instead may gradually improve crop yields or the ability to survey a field more efficiently.
Similar to with the sprayer analogy, with UAV technology, “You’re in control,” Rohlik says. “One thing farmers like is to be in control.”