By Julia Shanks
Success is an ethereal concept that means something different to each farmer. In fact, when I query new farmer/clients for their definition of success, I get a wide range of answers:
“Being profitable doing something I love”
“The farm sustains itself”
“Increasing profits every year doing it sustainably for ourselves and the land.”
“Have a good quality of life, profitable, sustainable”
“Being known for good food”
“Being a part of the community, being able to cover my business and personal expenses”
While my clients define business success differently, the overall idea is the same: keep doing the work they love. And in order to keep farming and producing food in a sustainable way, they need to cover their expenses, have something leftover to pay themselves, and be able to do all this in a reasonable number of hours per week.
Having a definition for your success is the first step in getting there. It defines the destination (even if it is a moving target). The second step is creating a roadmap to get there: this can be anything from a full-blown business plan to a bulleted list. Implementing your plan, getting to your goals, and achieving success is about holding yourself accountable and building a daily practice of good business habits.
Perhaps the easiest analogy is that of someone trying to lose 10 pounds… you need a plan (like exercising 3 days a week and increasing your vegetable intake) and likely you need to modify your eating and exercise habits to stay on track. If you do things same as ever, you’ll continue eating and exercising like you did in the past. Setting the goal isn’t enough. You need regular habits like blocking time on your calendar for exercise or creating meal plans.
Success is losing 10 pounds.
The plan is to exercise 3 times a week and eat 5 servings of vegetables a day.
The success habits are writing exercise into your calendar and not grocery shopping when you’re hungry.
What are these business habits of successful farmers?
To help illustrate these habits, I will share some examples from a farmer I worked with a few years ago… let’s call her Charlotte, owner/operator of Blazing Saddles Farm. She grows vegetables and raises livestock on 10 acres in Hudson Valley, NY. She defined success as:
Being profitable doing something I love
80% retention rate of CSA members.
Grow CSA to 75 members this year
Sell to four wholesale clients
Have net profits of $35,000 a year.
I love how specific Charlotte’s definition is. There will be no question as to whether or not she’s achieved success. Either she has the profits, or she doesn’t. She has 75 members in her CSA, or she doesn’t. Certainly, over time her definition may change, but for now, she can set out a path to get there.
Make time for bookkeeping and business management.
If you’ve read anything I’ve written or heard me speak, then this is hardly a surprise. If you don’t carve out time to work on your business, not just the operations, then you won’t have the capacity to track your numbers, look at them, and make adjustments. This ties into Habit #2 (monitor and analyze).
This is a big one; and it encompasses a lot! To achieve her profitability goals, Charlotte will:
Create a budget that gets her to her goal
Track her expenses
Track her revenue
Look back at her profit & loss on a regular basis to see what adjustments she needs to make to ensure she stays on track.
For Charlotte to have the information she needs to reach her CSA and profit goals, she needs to have good records. And to have good records, she needs to track her numbers.
All of this takes time; it’s more than just looking at your bank statement to see if you have more money in your bank account than when you started the season. And it takes time throughout the year.
It’s hard to imagine finding the time, especially during the peak growing season, when you work this hard just to stay on top of the day-to-day operations. Where do you find an extra 30 minutes for the side work… that bookkeeping stuff; marketing or other office work??
I can certainly offer tips on how to create space for the business management – from streamlining your systems (think The Lean Farm) to making a plan during the down-season. But I think Richard Wiswall said it most succinctly – if you invest 100 hours over the course of a year, to figure out how to work smarter not harder, you could easily generate an additional $10,000 in profits. This means, spending the time to figure out which sales channels and products are most profitable (and focus your energy there); and creating the systems so that you can work more efficiently.
If you make that kind of investment of time, that’s a return of $100 per hour!
Monitor and analyze
“You can’t manage what you don’t measure.” Keeping good books is the first step (and if you’re implementing Habit #1, you’re making the time for it). The second step is to go back and look at your financials to see how you’re doing. Some questions to ask yourself:
Are you keeping on budget?
Are you achieving sales and profit goals?
What’s working; and what’s not working?
What changes can you make to get back on track and stay on track?
I realize all of this business management can be overwhelming and confusing. And if numbers aren’t your strength, it will take a needlessly long amount of time (and probably more than 100 hours per year). You don’t have to do all the bookkeeping and financial management yourself.
Hiring a bookkeeper or accounting firm is an option. But remember this is a collaboration not an abdication of responsibility. I recommend you work with your bookkeeper to create the systems that enable you to get the information you need to make informed business decisions.
First, determine what information will help you make better decisions about your business? Do you want to know the profitability of different enterprises (greenhouse veggies vs. flowers, for example)? Do you want to know the cost of selling to different markets, and what level of sales volume you need?
Now that you know the questions, you can work with a bookkeeper or accountant to figure out:
What numbers/data do you need to track to get to the answers?
What systems do you need in place to help your accountant track the information?
What information do you want to get back from your accountant and how often?
In other words, find out what your accountant/bookkeeper needs from you, to get the reporting you need from them; and what system will you use to exchange data and details?
Listen to your customers and get feedback
“Do what you love, and the money will follow.” It sounds like good advice, but it’s probably some of the worst advice you can take (search: “The Perils of Following Your Career Passion”). The reality is that the money comes from your customers. And if you’re not doing what your customers love, they won’t buy from you.
Listening to your customers can be hard. I mean, what do they know about farming and what it takes to get a dozen eggs to the farmers market. How many customers complained about your green tomatoes completely unaware that Aunt Ruby’s German Green is not red when ripe? Many times, they have feedback that we don’t want to hear. We need to take it with a grain of salt, but often times we can get insight into what the customer really wants to see from us. (Like maybe they just want red varieties of tomatoes. Exhibit A: my mom!).
Even if the customers don’t have constructive feedback, listening to them sincerely and receptively will make them feel valued and cared for. This creates customer loyalty. And for a farmer like Charlotte, this helps to ensure customer retention.
Work to your strengths
While it’s important to listen to your customers, you need to balance their wants/needs with your strengths. Trying to satisfy everyone’s needs is a recipe for disaster, especially if they want something that you can’t deliver upon (like organic chicken at $2/pound).
When I launched my catering business in 1997, I was starved for work. While I had a clear vision of the kind of events I wanted to do, I also needed to pay the bills. So, when a prospective client called asking for tea sandwiches for 60 people, I said, “Sure!” He had called the Four Seasons Hotel who quoted him $12/person; and asked me if I could do it for $6. “No problem,” I said.
Tea sandwiches aren’t difficult, per se, but you need to get the bread right. The bread provides not only the structure for the sandwich; it also creates the aesthetic. It needs to be sliced thin and even so the sandwiches are dainty and elegant. For further refinement, the crusts are trimmed off. If you want round sandwiches, to create a little variety, then you have even more trim and waste.
At $6/person, it wasn’t worthwhile to invest in any special equipment to get my bread sliced perfectly. I couldn’t even afford to make round tea sandwiches with all the waste. I just had a regular ole serrated knife. My slices were fine, but certainly not refined. My fillings were delicious, but they didn’t have enough butter to seal the sandwiches together.
I knew my sandwiches weren’t perfect, but they tasted good, and good for $6/person. I even added some homemade mozzarella to the order as a thank you for the business.
Two days later, I received a letter from the client: “The sandwiches looked like a 12-year-old made them. If you consider yourself a professional chef, you should be run out of town in a roasting pan.” He even criticized the mozzarella.
Defensive Julia thought this guy was a jerk. Entrepreneur Julia considered his comments and what I could learn from this experience. (In hindsight – he was a jerk, but also right). The obvious takeaway is that I don’t have the precision and patience for tea sandwiches.
The bigger lesson is that my hunger for work hindered my business in three ways:
I had an unsatisfied customer who wouldn’t refer me to new clients.
This unsatisfied customer now wouldn’t even call me for an event that I would do well.
While I was busy working on an event that wasn’t a good fit for me, I wasn’t working to build my core business.
All business owners face this at some point. As a new or financially struggling farm business, it can be tempting to offer a product that’s not in your in brand/niche. Most cases are not as disastrous as my story. But before you start offering a product that isn’t in your wheelhouse, ask yourself a few questions:
Can I earn a profit selling the product at a competitive price?
Is this the kind of work I may want to do in the future?
If things don’t go well, what can I do to preserve my relationship with my customer so that it doesn’t hurt future business?
Growing new products, or taking work outside of your area of expertise, can be an exciting way to push yourself into new areas (see Habit #7). Just make sure it doesn’t hurt your core business or reputation.
Focus on providing value
One of the more difficult aspects in farming is charging the right price for your products – enough to cover your costs and generate a profit, while reasonable enough to attract customers. If you sell a commodity product like corn, liquid milk or soy, the market sets the prices, and it can be difficult to charge what you need. If you provide added value, then you can charge a higher price.
Farmers struggle in a similar way as independent bookstores competing against Amazon. If you think of the book as a commodity, then you compete on price. Whoever provides the lowest price wins the customer; Amazon wins every time. But a bookstore also provides value. They provide the opportunity to thumb through books, get recommendations from real people (people in your community whom you trust), and provide a community meeting place, including opportunities to meet the authors for book-signings and readings.
Bookstores provide all these features to customers. Because local, independent bookstores can’t compete on price, they provide value in other ways to their customers that Amazon can’t.
As a farmer, you also provide value compared to large scale growers in the Midwest, California and Florida. Your farming methods (from seed selection to soil management to harvesting) ensure your products have better flavor and texture. Because you harvest hours or days, instead of weeks, before delivery, your produce has time to develop more flavor; and has better shelf life.
You don’t just sell a tomato, egg or sunflower stem. You sell better flavor, texture, structure, and shelf-life in a way that connects your customers with their community and environment.
On the surface, Charlotte’s CSA may seem more expensive than buying vegetables at the regular grocery store. But she provides value to her customers in ways that the supermarket cannot. Besides the obvious freshness and flavor of locally grown produce, she creates opportunities for her customers to enjoy new and exotic foods. You can’t get the same varieties of tomatoes or potatoes at the supermarket. Her customers can see where their food is grown and know that the impact on the environment is far lower.
With a values-based mindset, Charlotte can communicate with her customers and provide reasons to stay with her.
Find a work-life balance
Certainly, working 100 hours a week can be necessary at various stages of business and certain times of the year. But this is not a sustainable work habit. At a very basic level, you will be too tired to work efficiently; and the risk of injury increases dramatically. On a deeper level, you’ll burn out. Either way, if you work too hard, you’re no good for anyone.
Finding the right balance and learning to say “no” to some opportunities, can even increase profits. If you scale back your business so that you work a more reasonable number of hours, you can focus on the most profitable enterprises.
Charlotte struggled to manage all aspects of her farm business – from raising cattle, to running both a winter and summer CSA, managing staff and selling at the farmers markets. Given how tight the labor market is, she spent more time hiring, training and managing employees, than she did actually farming.
She decided to scale back her business to only sell to a winter CSA. This allowed her to operate her farm with less outside labor. She focused on growing in the summer and selling in the winter. She had the energy during production time to give that extra 10% effort (for weeding and trellising, among other things) which she knew could increase her yields by 25%.
Work-life balance doesn’t have to mean scaling back. It may be delegating the tasks of your farm that you don’t do well. If you hire someone (like a bookkeeper) to take on a task that you don’t have time for – you can hire someone appropriately skilled to do the job right. (See also, habit #4).
Growing doesn’t have to mean expanding the scale of your business. You can continue to grow as a business owner through professional development; things like:
Researching new production techniques
Trying out new marketing strategies
Reaching out to new customers
The business climate is always evolving. Continuing to do things “same as ever” rarely works.
This is especially important now, as the local food movement grows and evolves. CSAs are less popular now with the increasing availability of farmers markets and supermarkets that carry “local” and organic products. With minimum wages increasing, and regulations changing under the Fair Labor Standards Act, business owners need to get creative to keep their labor costs down.
By reading, researching and growing, you will be better able to adapt and pivot. And by monitoring and analyzing – habit #2 – you’ll quickly see when changes are needed.
Building and growing a successful business requires hard work and diligence. But with good business habits, you can achieve it! Here’s to achieving your goals!
Julia Shanks is the author of The Farmer’s Office and The Farmers Market Cookbook. She works with farming and food entrepreneurs to help them achieve financial sustainability through business planning, cash flow planning and financial feasibility studies; and is a Certified QuickBooks Pro Advisor. You can learn more about her work at thefarmersoffice.com.