Developing a successful farm business. Ariana Torres, PhD Assistant professor Marketing Specialist November 14, 2017
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1 Developing a successful farm business Ariana Torres, PhD Assistant professor Marketing Specialist November 14, 2017
2 The first steps to take when establishing your farm business are critical. Personal Needs Assessment How much money do you need to live on each month? How much of this money will be drawn from the business?
3 Vision and mission Environmental scanning Strategy Formulation Implementation
4 Vision & Mission Statements
5 Vision statement What kind of business do you want to be? Why do you want to begin this venture? To increase your income? To become your own boss? Where do you want to go? Be lofty Destination 10 years down the road Comprise things that you value, treasure, hold dear to your heart Relationships Career objective Lifestyle Legacy
6 Writing down your vision Write down your BHAGs goals Build the best product, cause no unnecessary harm, use business to inspire and implement solutions to environmental crisis. To grow in neighborhoods across America to offer every family fresh, local, organically grown foods from a trustworthy source, in a pleasant shopping environment.
7 Mission statement Why are we here and where are we going? The purpose What are we in business to accomplish? The business How are we going to accomplish it? The values What principles and beliefs form the foundation of the way we do business?
8 Think about your mission statement next time you are working on the farm To produce high quality, nutritional, and flavorful vegetable for consumption in both local and regional markets. To create opportunities for leadership in highly productive teamwork for local women who work on the farm. To grow a hydroponic operation that provides safe, wholesome, and nutritional food for my community and produced in an environmentally responsible way.
9 Environmental scanning feasibility analysis 1. How attractive is an industry as a home for a new farm business? 2. Can you identify possible niches you can occupy profitably?
10 Develop a network Join member organizations Do your research
11 Farmers markets in the U.S. grew from 1,755 in 1994 to more than 7,864 in 2012, according to the USDA. Why? They are wonderful incubators for building your farm business. Indiana farmers markets = 155 and counting
12 Why farmers markets? Capture larger share of customers dollars Improved cash flow Delegate marketing to market managers Obtain immediate feedback Varieties Products Join networks Build relationships Roadside stands Restaurants Institutions Food hubs Cooperatives CSAs
13 Tell the real story behind your produce Who are you What do you stand for Where are you from What are your standards What are your challenges How consumers purchases impact your community/family
14 Industry revenue has risen by 2.1% annually ($4.8B) Increased consumption Rising prices Moderate increase in the population A growing focus on healthy campaigns Most vendors are small selling directly to consumers Rising disposable income Health campaigns Time-crunched consumers Prices of vegetables is expected to increase Vegetable consumption is higher than fruits Increasing production costs
15 Key success factors Attractive product presentation Experienced workforce Proximity to key markets Ability to control stock on hand Produce currently favored by the market Economies of scope (diversity of crops all year long)
16 SWOT Analysis
17 SWOT Leverage Control Scan the environment for internal and external factors Internal Strengths Weaknesses Every business faces threats, how can you control them? External Opportunities Threats
18 Strengths Weaknesses Opportunities Threats
19 Develop a business plan. Six components of a business plan include: 1) Executive Summary 2) Business Description 3) Operations 4) Marketing Plan 5) Management 6) Financials For a step-by-step guide to writing a business plan, visit
20 Business Model Canvas
21 Who are our key partners? Who are our key suppliers? What activities do our value propositions require? Distribution channels? Customer relationships? Revenue streams? What key resources do our require? Our value proposition Our distribution channels Customers relationships Revenue streams What value do we deliver to the customer? Which one of our customers problems are we helping to solve? What bundles of products and services are we offering to each segment of customers? Which customer needs are we satisfying? What is the minimum viable product? How do we get, keep, and grow customers? Which customer relationships have we established? How are they integrated with the rest of our business model? How costly they are? Through which channels do our customer segments want to be reached? How do other companies reach them now? Which ones work best? Which ones are most costefficient? How are we integrating them with customer routines? For whom are we creating value? Who are our most important customers? What are the customer archetypes? What are the most important costs inherent to our business model? Which key resources are most expensive? Which key activities are most expensive? For what value are our customers really willing to pay? For what do they currently pay? What is the revenue model? What are the pricing tactics?
22 1. Value proposition Customer Jobs of FM customers Factor Stocking up on fresh and healthy food Feeling good about the purchase Eating fresh and healthy food Protecting family and its health Looking modern/trendy Learning something Buying specialty goods Type of factor Functional Emotional Basic, functional Social Social Functional, emotional Functional
23 Gains of FM customers Pains of FM customers Factor Type of factor Factor Type of factor Fresh food Functional Higher prices Product Healthy food Sellers recommendations (personal approach) Functional Social, emotional Inconvenient opening hours Not enough information on the source of goods Convenience Product Good feeling about supporting local producers Stylish packaging Social Social, emotional, functional Anonymity of farmers No parking Queues No card payments No returns Product Convenience Convenience Convenience Convenience No restrooms Convenience
24 2. Customer segments
25
26
27 Who is more likely to buy fresh fruits and vegetables in the US? 2.Customer segments Women > men College and post-graduate 45+ years old Management, business, and financial operations Professional and related occupations Household income $75,000+ White race
28 3. Customer relationships What medium will you use to reach customers? Social media Website Paid advertisement in search engines (Google) Dedicated personal assistance or self-service What will be your strategies to retain your customers? Stand for something and communicate to customers Utilize positive social proof that buying from you will improve their benefits Use the words they love to hear Make it personal
29 4. Market channels Direct-to-consumers Wholesalers Complex Fragmented Dynamic Institutions Intermediated
30 Key Activities, Partners and resources What do you need to do to fulfill your value proposition? What key resources do you need for each activity? What partners and key suppliers will be necessary?
31 8. Revenue Stream Farmers market sales Restaurants At-the farm Grocery stores Is there any price difference? What are your price strategies for each channel? Capital investments
32 9. Cost structure What are the most important costs needed to fulfill your value proposition? What key resource What key activity
33
34
35 Collect primary data Test the problem you think the business will solve for the customer Test the business model in the market Make changes and adjustments in the business (pivots)
36 Important considerations
37 Where to Find Help Local health department County farm service agency Soil and water conservation agency Your bank Economic development corporation in your area.
38 Grants that may be available: USDA (grants.gov) Sustainable Agriculture Research Education (sare.org) Community organizations, economic development groups, and foundations Local banks Farm Credit Farm Service Agency Cost-Share Programs NRCS/EQIP
39 TIP! A new resource for funding opportunities was recently released and contains almost 60 resources including crowdfunding platforms, start-up accelerator funds, state and federal programs, and other miscellaneous funding opportunities for food-related businesses in Indiana and Michigan. The 61-page PDF is available online at unding_sources
40 Don t forget insurance! Farm insurance Liability insurance
41 Liability Insurance Liability insurance extends coverage to a person, business, or entity to cover bodily injury or property damage Bodily injury includes the cost of care following an accident, the loss of service one might endure as a result of that accident, and the cost of restitution should the accident take a life or permanently injure someone. The term property damage includes the loss of property and the loss of property use. Many farmers markets purchase liability insurance; many also require that their vendors purchase insurance to protect themselves from a lawsuit, should an accident occur.
42 Market Minimums Everyone needs a different level of insurance coverage based on their exposure and their net worth. The insurance industry regularly defaults coverage to $1 million. The Commercial General Liability (CGL) Policy is the most common policy used for insuring farmers markets, and it normally covers up to $1 million per claim, with a maximum payment of $2 million per policy period.
43 How Much Does Insurance Cost? Typically, vendor liability insurance premiums cost between $400 and $500 each year and will cover the vendor for the entire 12 months. Despite the fact that many vendors only sell a few months out of the year, they are still covered for 12 months.
44 Risk Management Vendors can help to address risk management in order to reduce negligence lawsuits. Precautions have to be taken to ensure the safety of everyone involved at the market. Addressing risk management not only prevents accidents, but it also protects the market and the vendors from being sued when accidents occur. As a vendor, you need to be aware of your surroundings, remain alert to customer behaviors, and help the market to remain a safe place for everyone involved.
45 Make financial projections Use an enterprise budget to check potential profitability purdue.ag/hortbusiness Forecast income statement, cash flows, and balance sheet Use decision making tools Breakeven analysis Sensitivity analysis Net present value
46 Thank you for your attention
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