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MOF&G Cover Winter 2008-2009
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  You are here:  PublicationsMaine Organic Farmer & GardenerWinter 2008-2009Business   
 Mind Your Business: Plan Now for Success Next Year Minimize

by Melissa White Pillsbury

For many farmers, time spent figuring out where and how to sell farm products is not their favorite task; but profitable sales are a must for a successful, long-term business. Spending time in winter preparing for the coming season can alleviate much of the displeasure some associate with marketing and recordkeeping.

If you’ve already sold product off the farm, look at sales and production records from previous years – especially sales and costs. With adequate records, you should be able to answer some basic questions:

What are your primary products or markets?

For most farm businesses, five or fewer core products or markets account for 80% or more of sales. Know what these are so that you can track trends in your key market and/or product areas and be poised to take advantage of opportunities that might emerge. Knowing your core is also useful when you need to prioritize where to spend resources; it will keep you from spending too much on markets or products that don’t contribute significantly toward your bottom line.

What are your variable costs?

Variable costs are those directly related to production, such as inputs, materials, hourly wages and travel costs. When production goes up, variable costs go up; when production goes down, variable costs go down.

What are your fixed costs?

Fixed costs are those you’re paying to be in business regardless of your volume of production. Some will increase if you decide to increase production (if you buy new equipment, for example), but this increase is not considered a variable cost because it does not automatically fluctuate with your volume. Once you buy a new tractor, you have to make the payments regardless of how many acres you grow. You are simply now operating at a new, higher level of fixed costs. Examples of fixed costs are insurance premiums, utilities, taxes, rent, salaries (not to be confused with hourly wages), tools and equipment and cost of capital (interest paid on borrowed money).

Being familiar with your costs allows you to identify inefficiencies in your system, minimize per unit costs and focus on the volume and diversity of products and the mix of markets that will create the most profit. Knowing costs also helps you price your products. If you’ve been pricing without knowing your costs, find out what your profit margin has been at these prices. Then, knowing your costs, take control over the long-term success of your business by setting prices based on a desired profit margin.

If your records don’t let you answer these basic cost, sales and production questions, then you’ve identified Goal #1 for the coming year: Keep Better Records! Ask yourself: What questions would I like to be able to answer about my business this time next year? Then implement a system to get there.

Two tips:

Anticipate how much time you’ll have to maintain records during the busy season. Spend time now setting up a recordkeeping system that’s easy to use in spare moments during the busy months and that will produce meaningful data at the end of the season.

You are probably not going to track every sale made or cost incurred as you go, so think of how to find a few hours every week during the busy season to catch up on recordkeeping.

Once you have good records, you can make better production and marketing decisions. Given your available land base, equipment and labor, you should have a sense of your production capacity and your baseline income goals. From this perspective, examine and possibly revise your marketing strategy, or craft one for a new enterprise.

Not all potential markets will match you and your farm. The right markets will depend on your skills, motivation and time; your land and labor resources, available capital, equipment and location; and the volume, quality, diversity and seasonality of your product. Consider carefully which markets fit your circumstances.

Here are other actions you can take now to plan for sales next season:

Farm stand or other on-farm enterprise: Work on infrastructure (parking, access, other amenities), promotion (signage, customer list, community relations) and sourcing (supplies such as berry boxes; products to resell). Call your insurance agent and make sure you have the right coverage.

Farmers’ markets: Contact market managers or other current vendors to learn whether the market is accepting new members, what product gaps exist and what the rules, fees and deadlines are. If you have experience at markets, think about improving your system to maximize sales: Display pricing prominently, simplify pricing to minimize time spent making change, make products more accessible (knee to shoulder height) and/or appealing (bounty, diversity, quality), offer more recipes and preparation information, etc.

Community Supported Agriculture (CSA)/subscription farms: Develop a potential customer list (start with friends, family, co-workers) and talk to them about your concept. Ask about quantity, price, choice, convenience, etc. Approach area businesses and organizations about hosting a pickup site for their employees/members. If your area has a buying club, find out about filling members’ needs. If you’re continuing an existing CSA, poll last year’s customers about likes/dislikes and what else they’d like to buy. Stay in touch with customers over the winter and sign them up early for next year. Build loyalty through relationships with members – especially with long-time and/or enthusiastic ones. Give brochures to customers to share with friends.

Wholesale accounts: Find out who is in charge of buying for distributors, restaurants, schools, retailers, processors, institutions (hospitals, daycares, assisted living facilities, summer camps, etc.). Make an appointment to discuss opportunities. Be prepared to present your farm in a professional manner: Bring farm literature (brochure, business card, product/price list, etc.) and samples or photos of your product. Establish communication and be realistic and honest about expectations for quantity, quality, consistency, price, payment, etc. Start slow and build a relationship.

Grower coop: Talk to farmers with similar or complementary products or practices who might want to market cooperatively with you. Start small and see what opportunities and challenges arise.

Seed/tree companies: Contact the company to learn about its needs and requirements.

Sales is all about relationships. The more time you invest in building the right relationships now, the more time you’ll have when you need it to focus on farming and delivering your great product. Remember: People want what you’ve got. They’re just waiting for you to present the opportunity to them.

Melissa White Pillsbury is MOFGA’s organic marketing coordinator.

    

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