Keys to success in value-added agriculture

20 Pages·2001·0.606 MB·English

by  Holly Born, Southern Sustainable Agriculture Working Group., National Center for Appropriate Technology (U.S.), Appropriate Technology Transfer for Rural Areas (Organization)

K S
EYS TO UCCESS
in Value-Added Agriculture
BBBBByyyyy HHHHHooooollllllllllyyyyy BBBBBooooorrrrrnnnnn
AAAAAbbbbbssssstttttrrrrraaaaacccccttttt::::: Fourteen farmers in the Southern U.S. CCCCCooooonnnnnttttteeeeennnnntttttsssss
were interviewed for a project funded, in part, by the IIIIInnnnntttttrrrrroooooddddduuuuuccccctttttiiiiiooooonnnnn
USDA’s Southern Region Sustainable Agriculture UUUUUpppppdddddaaaaatttttiiiiinnnnnggggg ttttthhhhheeeee KKKKKeeeeeyyyyysssss tttttooooo SSSSSuuuuucccccccccceeeeessssssssss...............................................................................................11111
Research & Education (SARE) Program. This
SSSSSuuuuussssstttttaaaaaiiiiinnnnnaaaaabbbbbllllleeeee PPPPPrrrrrooooofffffiiiiitttttsssss.....................................................................................................................................................................11111
publication presents, largely in the farmers’ own
TTTTTrrrrraaaaannnnnssssslllllaaaaatttttiiiiinnnnnggggg UUUUUnnnnniiiiiqqqqquuuuueeeeennnnneeeeessssssssss
words, important lessons they learned in adding
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value to their farm products and marketing directly
KKKKKeeeeeyyyyysssss tttttooooo SSSSSuuuuucccccccccceeeeessssssssss
to consumers. The keys to their success in value-
IIIIInnnnn ttttthhhhheeeee SSSSShhhhhooooorrrrrttttt RRRRRuuuuunnnnn......................................................................................................................................................................................... 33333
added agriculture include high quality, good record-
keeping, planning and evaluation, perseverance, IIIIInnnnn ttttthhhhheeeee LLLLLooooonnnnnggggg RRRRRuuuuunnnnn..............................................................................................................................................................................................1111133333
focus, and building long-term relationships with RRRRReeeeesssssooooouuuuurrrrrccccceeeeesssss..........................................................................................................................................................................................................................................................1111166666
customers. AAAAAbbbbbooooouuuuuttttt ttttthhhhheeeee FFFFFaaaaarrrrrmmmmmeeeeerrrrrsssss..............................................................................................................................................................................................1111188888
A publication of
Southern Sustainable Agriculture Working Group
and
The National Center for Appropriate Technology’s
ATTRA Project
JJJJJaaaaannnnnuuuuuaaaaarrrrryyyyy 22222000000000011111
Keys to Success in Value-Added Agriculture
Introduction However, you can only cut costs so far before
the quality of your product and the services
Updating the Keys to Success you provide begin to deteriorate. Thus, this is
not a sustainable strategy in and of itself. This
In 1995, Southern SAWG is where adding value comes in. In the Cur-
conducted on-farm interviews with twenty- rent Case example above, if you can charge 5%
four farmers from around the South who were more without hurting sales, then your profit is
adding value to their raw farm products and also $50. (If you can cut costs and raise prices
marketing more directly to consumers. From by 5%, your profit goes up another 50% to $75!)
those interviews, we produced the booklet,
Making It On the Farm: Increasing Sustainability Translating Uniqueness
Through Value-added Processing and Marketing, into a Sustainable Advantage
which listed ten general business practices that
we considered keys to success. Dr. John Ikerd, formerly at
the University of Missouri
Having completed a round of more intensive and long a champion of
phone interviews with another fourteen farm- sustainable agriculture, had
ers for a project funded in part by the Southern this to say about sustainable
Region SARE program, it’s time to update our profits (1):
keys to success, in the context of sustainable
profitability. We believe that profitability is If you decide to produce exactly the same
essential to truly sustainable agriculture. As thing that someone else is producing in the
we stressed in the first booklet, there is no same way they are producing it, and if you
simple blueprint for success when you’re trying succeed, any profits you realize will not be
to add value to your farm products. It takes sustainable and neither will theirs. If you
hard work, ingenuity, and a financial invest- expect someone else to provide you with
ment no matter what you do. However, a few opportunities, you are destined to be
general practices emerged from our interviews disappointed. If you expect someone else to
that could be considered keys to success. Many solve your problems, you will be
of these keys are fundamental for the success of disappointed. You have to do something
any small business, while some are unique to creative and productive yourself if you expect
farm-based, value-added enterprises. All the market to reward you for having done it.
should be shaped to your particular situation And, if it’s easy to do, it won’t be worth much.
rather than taken as absolute rules.
If someone else provides you with a market,
they—not you, ultimately will realize the
Sustainable Profits
benefit. You didn’t create the market—they
did. If someone else provides you with a new
Profits can be earned in many ways. Most
pest management or fertility program, they—
business owners tend to concentrate on increas-
not you, ultimately will realize the benefit.
ing sales in order to increase profits. However,
You didn’t increase productivity—they did.
cutting costs can be an easier way to increase
You certainly can learn from others and can
profits. If your current profit margin is 5%,
integrate others’ marketing and production
then you can double your profits by either
services into ‘your’ production/marketing
doubling your sales (a 100% increase) or by
system…. [But] your uniqueness is the only
cutting your costs by 5%. Which option do you
source of profitability that cannot be competed
think is easier? Here’s an example:
away, and thus, is the only source of sustainable
profits.
Current Case Double Sales Cut Costs by 5%
Sales: 100 units @ $5 = $500 Sales: 200 units @ $5 = $1000 Sales: 100 units @ $5 = $500
Costs: 100 units @ $4.75 = $475 Costs: 200 units @ $4.75 = $950 Costs: 100 units @ $4.5 = $450
Profit = $25 Profit = $50 Profit = $50
Keys to Success in Value-Added Agriculture Page 2
What is a competitive advantage? Basically, it’s
business jargon for anything that keeps others
from successfully competing with you. It may
come from being able to sell at the lowest price
due to scale economies, having a monopoly, or
being among the first to produce or market in a
new way. Most farmers are not in the position
to find advantage in the first two ways. Most
farmers can change their production and mar-
keting systems, and increasing numbers of AAAAAddddddddddiiiiinnnnnggggg VVVVVaaaaallllluuuuueeeee tttttooooo MMMMMiiiiilllllkkkkk
farmers are producing new crops and new
products, and experimenting with alternative
A cheesemaker says, “The hardest part of
marketing methods.
planning was finding the time to do it! It was
difficult to find other representative busi-
A competitive advantage is almost always
nesses to serve as a model or template. In
short-lived. The nature of the market is such
deciding how to market, I first had to con-
that only the innovators, the first ones to take
sider what would generate the quickest cash
the risks, are going to profit. As others learn
flow. The specialty cheese niche depends on
how to produce that new crop or enter that
retailers whose customers would be likely to
new market, competition will drive prices
appreciate the product. I identified a niche,
down and profits will disappear.
but I could have used a whole lot more
education. Certain markets set me back
“Identify a niche and the type of market to fill
because of the difficulty of entrance.
that niche,” advises an interviewee. Niche
marketing—selecting a specific group of con-
Putting her ideas into practice proved chal-
sumers and targeting them in your marketing
lenging. “I had to consider how to distribute
effort—is a system that farmers are hearing
my products and whom to actually ap-
about more and more. For many farmers, the
proach,” she says. “My local farmers’ market
niche approach has paid off. But, just as we see
is open to producers only, so I have to attend
organics going from niche to mainstream, any
the market myself, which takes a huge
profits from a niche will gradually be competed
amount of time.
away as others notice it. Unless you are fortu-
nate enough—very unlikely!—to be the only
“I began making catalog sales three years ago.
one who can fill that niche, your profits will
Shipping is a problem, though. It’s really
decline. The process of finding and filling
expensive on a perishable product, since you
niches is ongoing, not a one-time event.
have to ship by two-day air. Information is
lacking on better routes or methods. I consid-
Success in the short run requires producing a
ered a website with online ordering, but it
high-quality product or service, working to
takes enormous amounts of management
increase sales and cut costs, diversifying to
knowledge, and you still have the problem of
reduce risk, and finding niche markets where
shipping.
the added value of your product can be realized
in higher prices.
“I find that person-to-person sales are the
most effective marketing strategy. Wholesal-
Success in the long run requires all of the
ing is the least effective, as buyers are slow to
above, plus the added advantage that comes
pay. It’s really hard to enter retail outlets,
from whatever it is about your operation that
such as specialty shops, and months of
cannot be copied, or can only be copied with
promotion are usually required. I need to
great difficulty or expense. For example,
redesign my brochure to address deli and
focusing on your location will attract buyers
restaurant needs. I’ve broadened my market-
who want to “buy local.” Tell the story of your
ing methods since I began, but I always had a
farm—no one else will have quite the same
mental plan of markets to develop.”
story.
Keys to Success in Value-Added Agriculture Page 3
more money. We started a step at a time. First,
KEYS TO SUCCESS
we looked around to see what the market wasn’t
IN THE SHORT RUN providing and then we attemptedto fill that
need, adding and dropping products as we went
along. We’re not into large, large volume. We
♦ Start small and grow naturally only do 100 to 150 cases per year.”
♦ Make decisions based on
♦ good records The flower grower’s
♦ Create a high-quality product recommendation to
♦ Follow demand-driven production start with farmers’
♦ Get the whole family or partners markets is an excel-
♦ involved lent one, for many
reasons. While
♦ Keep informed
selling at farmers’
♦ Plan for the future
markets is time-
♦ Continuous evaluation
consuming, costs are
♦ Perseverance low. In addition, many producers find that
♦ Adequate capitalization farmers’ markets are a great place to begin
building relationships with customers.
Many successful marketers began with a client
base established through interactions at the
farmers’ market. A cheesemaker started with
farmers’ market and other direct sales in order to
Start small and grow naturally
get contact with customers and to learn the
business, relying on some thirty years’ experi-
“Grow slowly at an organic rate. ence in direct sales in a different line of business.
Watch what sells. Don’t increase She started by selling at the wholesale price. “I
debt load. Farmers’ markets are a looked at cheese prices in specialty and retail
safe training ground to begin stores, and I raised my farmers’ market prices to
selling.” retail level.”
—a flower grower
Our interviewees discussed their most important
“Start small and don’t grow too fast,” advises a problems in starting the enterprise. Marketing
salad mix grower, echoing the opinions of most and lack of familiarity with the product by
of our interviewees. “Don’t start too big and customers were mentioned by four respondents,
invest a lot of money. Be patient and go followed by financing, lack of technical informa-
through your research and development phase. tion and available expertise, and lack
Whatever you start with, try to of labor (three respondents each).
get ALL the profit—no whole- Two respondents mentioned zoning,
salers!” You’ll be learning, and tax, sanitary, and other legalities.
naturally making mistakes
along the way. Starting small Only two producers said that comply-
means that your mistakes are ing with regulations presented a
likely to be less costly. If hindrance to their business; as one
you’re new to managing an producer said, “regulations were the
agricultural enterprise, it is least of my problems!” Of the two
much easier to manage a small operation. who did have difficulty, the expense and time
involved in complying with regulations was
A producer of baked goods and preserves says, mentioned. One producer had problems at first
“We began value-adding to diversify. Ninety because
percent of our product ingredients are grown
on-farm. We also needed to make
Keys to Success in Value-Added Agriculture Page 4
the authorities in her area were unfamiliar with Half of the producers had previous experience
the products she produces, so she had to help in financial management in non-agricultural
educate them. businesses. The others were nearly all self-
taught. Of those, two mentioned getting
When asked whether taxes had caused any assistance from their accountants. Two produc-
problems in running the business, four of the ers mentioned that they were still learning, and
fourteen said yes. The time involved was cited wanted and needed to learn more about finan-
as the most important problem. One respon- cial management.
dent said taxes were “a hidden cost that is
complicated and time consuming, especially if
you’re expanding.” Workers’ compensation for
employees and liability for property tax for
Create a high-quality product
grain in storage were also mentioned.
Finally, one grower emphasizes, “Don’t go into
it thinking that you’ll make a bundle!”
“Number one
is having a good
product.”
Make decisions based on good records
—a specialty
condiments
“Our biggest challenge was adapt- producer
ing to a new environment. Keeping
careful records and maps to deter-
Since these farmers can’t compete in the high-
mine what to plant, based on what
volume commodity markets, they have to
grows well here and what sells,
concentrate on quality, not quantity. “Offer a
has been crucial.”
very, very, very high-quality product,” says a
—a flower grower
grower. “Quality” is made up of many dimen-
Trying to manage and grow an enterprise sions. Fresh, better tasting, clean, reliable,
without good records is like trying to find an sustainably produced…it may be hard to
address in a strange city without a map. With- define, but these producers know it when they
out records, you are limited to making edu- grow and process it. And consumers know it
cated guesses about the progress of your busi- when they taste it!
ness, whether or not you are meeting your
goals, and the possible reasons why or why While it may be tempting to use seconds, culls,
not. Only two of the producers said that they or damaged fruits, vegetables, and herbs in
were not keeping records, but even these two processed food products, the wise grower will
turned out to be keeping at least some records resist that temptation if he or she is serious
for tax purposes. about developing the enterprise. As one
grower says, “For goodness’ sake, do it right!
Fifty-seven percent of the producers relied on a No low-grade, substandard ingredients, since
computerized system, with QuickBooks soft- the buyer knows what he’s getting. No blend-
ware mentioned by three respondents as their ing! This is a downfall for a lot of specialty
system of choice. “QuickBooks is a really great farmers, who don’t want to throw away half
computer bookkeeping system,” says one. the crop if it is substandard.”
Quicken was mentioned by one respondent
and the other four did not specify what soft- With growing concern today about food safety,
ware they used. Two respondents relied on old- it is important that products be safe to eat and
fashioned ledgers, and the others relied on to use. This is a vital dimension of quality.
sales and production records and notes and “Cleanliness and attending sanitation school
minutes of their corporate meetings. are crucial. If I would not eat my
Keys to Success in Value-Added Agriculture Page 5
product, I will not sell it,” says one producer. Of those who did not let the market dictate
their choices of activity, most started small and
While it is legally required in some states to be learned about niches they could fill.
certified as a food handler in order to sell
certain products, all producers should be A cheesemaker says, “I didn’t know what our
familiar with the basics of food safety. Just one market would be. We prepared for mail order
case of illness that could have been caused by and wholesale options, but we never pursued
the product is often enough to put the small them because the on-farm market developed so
operator out of business entirely. quickly. We never had to try any other market-
ing strategies. Really, we just developed our
own marketing style, depending on customer
requests, such as adding crackers, wine, and
jams to our product line. Now all our milk goes
Follow demand-driven production to the on-farm cheese business.”
“Find your market first and
make sure that the market fits Vaaaaallllluuuuueeeee AAAAAddddddddddiiiiinnnnnggggg
what you’re already doing.”
ooooonnnnn aaaaa LLLLLaaaaarrrrrgggggeeeeerrrrr SSSSScccccaaaaallllleeeee
—a salad mix grower
A producer of organic packaged jasmine rice
“See what other companies do, but don’t says, “We began our value-added enterprise as
emulate them too closely. Innovate, don’t copy; a way to diversify and because with low com-
pick out only what they’re doing right. Find modity prices, to continue farming, we had to
your market first,” adds the salad mix grower. make more money. We researched for six
When asked whether marketing considerations months beforehand, looking at different crops.
affected their choice of value-adding activity, We decided to grow specialty rice organically—
eleven of the fourteen respondents said yes. a new variety and new technology. We try new
varieties all the time.
In agricultural marketing, there are the “push”
and the “pull” approaches. The “push” ap- “The hardest part of planning was not knowing
proach means producing a product, and then how much we could sell. Looking back, we
“pushing” it onto consumers—the traditional should maybe have written a business plan, but
means of marketing many commodity crops. we didn’t know what we were getting into! We
The “pull” strategy, however, is increasingly knew how to grow rice, but didn’t know any-
becoming the norm in today’s environment. thing about packaging and marketing. We got
With this approach, products are “pulled” out help from the agricultural economics depart-
by consumer preference. It appears that most of ment at Texas A&M and the folks at the Rice
the producers employed this “pull” approach Research Station came up with the gift bag
and looked for an existing market outlet or idea.
opportunity, rather than producing a product
and then looking for markets. “The state agriculture department was very
helpful with legal issues. Being certified or-
The presence of farmers’ markets in the pro- ganic complicates things, but we’ve found it to
ducers’ area was an especially strong induce- be a very effective marketing strategy. We find
ment to begin producing. As we’ve learned, that most sustainable and organic associations
farmers’ markets are a good testing ground. are oriented to small producers, which is not
Some of the respondents test-marketed or were helpful for us. Organic rules are not a good fit
actually asked to develop products by buyers. for large-acreage commodity crops.
Generally there was an attitude of producing to
meet the needs of the consumer. “Lack of knowledge in marketing was our
biggest problem in getting started. The state
agriculture department and the USA Rice
Keys to Success in Value-Added Agriculture Page 6
Federation gave us marketing assistance. We spreading the word of mouth about their
participate in the ‘Taste of Texas’ state-labeling products.
program. Our labels also say that the product
was produced on a family farm, is organically A maker of jams, jellies, preserves, hot sauces,
certified, and that the rice is a special variety. and baked goods can attest to the importance of
We find that these labels do help sales. The getting the whole family involved. Two of her
processing facilities are not on-farm; we con- children are attorneys and they helped her
tract with a rice miller and packager. We offer write the business plan and get the enterprise
2- and 25-pound packages. We need more incorporated, as well as research the legal
information on packaging options; in fact, that requirements for her business. She says, “Plan-
is one of our biggest challenges since packaging ning was a lot of fun. My husband was for-
is so expensive. merly a chemical engineer, and he did the
recipes and kept a notebook of calculations. He
“We have a diversified customer base. About also takes care of financial management, in-
75% of our product is marketed wholesale cluding taxes.”
through brokers and distributors—50% to the
health food industry and 25% to mainstream When asked about the number and type of
retailers. Food service accounts for about 5% people involved in the value-adding enterprise,
and mail order 20% of our total sales. We added most had two people, and most of the rest had
mail order after five years. We were getting a more than three, or only one—the respondent
lot of publicity in food magazines, and people him- or herself. Most of the people involved
were requesting our product, but there was no were family members or part-time workers.
retail distribution in many areas. We do have Over half the respondents had made a change
some problems with mail order, since the in the number of people involved since starting
weight of rice really adds to shipping costs. We up. Nearly all respondents added labor as sales
also had to hire some additional help since we increased, although two respondents had
needed someone to take and fill mail orders scaled back production for various reasons, and
and handle the extra office work involved. likewise scaled back the number of people
involved. As one respondent said, “Sales
“Our biggest management problem now is volume increased, but my energy decreased! I
more competition from large companies. My had to have help.” Of those who had not
advice to other aspiring value-added producers changed the number of people involved, one
is to make sure your product is unique. It has got more efficient equipment to take the place
been a great experience, but again, it’s very of labor. Lack of adequate, affordable labor was
difficult to compete now in the grocery indus- identified as a constraint by many of the pro-
try.” ducers.
Get the whole family or partners involved
Although no one identified this as a key specifi-
cally, during interviews the importance of
family and partner involvement became clear.
The people we interviewed made the most of
the different skills and talents available in the
family. Spouses with skills in accounting were
essential to many of the enterprises. Nearly
everyone we talked to had involved family,
friends, co-workers and so on in
Keys to Success in Value-Added Agriculture Page 7
Adding Value
Keep informed
to Beef
“Farmers need to become more aware of
A beef producer says, “ I market my beef direct
value-adding. Be mobile—get into
to the consumer and through some local stores.
townships and share information, look
I got into value-adding after going to a sale
into partnerships and cooperatives.”
barn. I never wanted to go there again! I
—a beef producer
wanted some control over the price and I knew
I wouldn’t get fairly compensated at the sale
barn. I like doing something different, but if “Your local, most experienced, best, friendly
I’m spending time and energy doing something grower-processors—and visiting their place
different then I should get extra revenue. and taking pictures and notes—are the abso-
lutely best resources,” says a flower grower.
“As a first step in planning, I did some adver-
tising to see if I would get any response. I also Hands down, other farmers involved in value-
did some research on feeds and how to finish adding were identified as the best information
the cattle. I got a lot of responses from the resources. Farm visits, telephone and e-mail
classified ads I placed, and started selling half conversations, and networking at conferences
and quarter beeves. Word of mouth helped and other events can give you information and
attract new customers. insights that you can’t get any other way.
However, be aware that others may see you as
“Customers wanted separate cuts of meat, so I competition and not be willing to share their
started doing that. I give away many pounds knowledge. A good idea is to do as the salad
of hamburger, which brings in business, either mix grower did, and solicit information from a
directly or through building a relationship with grower in another state who will not be threat-
the community in general. I’ve probably given ened by you.
away more beef than I needed to, but I think I
help the community as much as they help me. Trade shows are especially recommended for
producers of specialty and gourmet products. A
“Selling quarters proved too unwieldy—it was producer of specialty vinegars, dry spice mixes,
more work to get the same amount of revenue, and other condiments says, “In the first year, I
and customers didn’t understand how much loaded up the pickup and headed to [the
meat is in a quarter and thought they were nearest big city] with a list of shops that I got
getting ripped off. Now I’m thinking about from a friend. We also relied on word of
only selling half and whole beeves, since mouth. We tried to target high-traffic stores. I
selling separate cuts requires a lot more paper- attended trade shows sponsored by the state
work and effort. agriculture department, which increased our
statewide exposure. We now supply specialty
“Labeling is part of my marketing strategy. My and gourmet food shops, do mail order, and
beef is labeled with our brand name and ‘raised have supplied restaurants in the past. We also
hormone-free and antibiotic-free’, which I think supply catalog companies. I don’t drive around
helps in marketing by building recognition and in the truck anymore, but prefer to concentrate
making us a ‘name brand’. on trade shows for my marketing. For whole-
sale, trade shows are the most effective market-
“If I had it to do over, I would have planned ing strategy. There used to be wine festivals for
more, especially for growth. I would have tried retail, but that market is now saturated. We
to get all the meat sold before slaughter, since I offer free garden tours as a draw. We now also
have difficulties in matching production and have a presence on the Internet, with a retail
sales. It seems like you’re either a bad producer website. We’re trying to increase sales. The
or a bad marketer. ” upswing in the economy has helped a lot!”
Keys to Success in Value-Added Agriculture Page 8
which she included a worst-case scenario and
operated under worst-case assumptions
Plan for the future
If they had it to do over, only four said that
“Do your research: ideally you would they would not plan beforehand. One respon-
spend two or three years planning.”— dent said, “I don’t think I could have foreseen
a cheesemaker what I know now”. Of those who would have
planned, the need to plan for expansion was
mentioned by most. The growth of the business
“Fail to plan and you plan to fail” is a cliché for
presents challenges to new entrepreneurs. A
a reason—it’s true. Planning is often neglected
grain products manufacturer says, “Be careful
since there’s no immediate payoff, but it is
what you wish for—I was inundated with
essential to success. Cindy Thyfault, president
orders! Prepare for issues related to a sudden
of Westar Trade Resources, a strategic market-
increase in demand since the worst thing you
ing and new business development company in
can do is not be able to fill orders.” Only three
Amarillo, Texas, says, “Don’t fall into the trap
people said that if they had it to do over, they
of writing a [business] plan just to get a bank
would write a business plan. Two people
loan (3).” For small entrepreneurial companies
mentioned that the only need for a plan was to
the failure rate in the first 5 years is 90% (3)!
be able to borrow money, since lenders usually
Careful planning is crucial to avoid failure, or
require a business plan.
at least to minimize your losses as you learn.
You may or may not need a Most of the respondents did not
formal business plan, but you do think a business plan was neces-
need a strategic plan. This plan sary. A cheese maker, for ex-
will define your business mission, ample, says she didn’t plan
your present situation, and where beforehand but just fell into it:
you want to be in the next few “The cheese business happened
years. You will need to cover gradually. I wanted to maximize
assumptions and risks, goals and my efforts with the idea of only
objectives and how you will so many hours in the day.” She
report progress. “Be realistic in says she wouldn’t plan if she
terms of goals, pricing, and the had it to do over again because
limits of your time. Factor quality of life in “my enterprise began as a path of spiritual
there somewhere,” advises one interviewee. growth.” She says, “I did write a business plan,
Another says “Start on a shoestring and re- but only to show the lender to borrow start-up
main flexible. Realize that the best-laid plans money.”
can go wrong and that things change. You need
to roll with the punches.” The easiest parts of business planning seemed
to be figuring out the production requirements;
About half the respondents wrote a business since the respondents were already producing,
plan to start with and another wrote one later they were most familiar with these. Judging
in order to secure an expansion loan. While from what our interviewees had to say, farmers
one respondent had previous experience in without previous experience often have real
business and was able to write her own plan, difficulty dealing with financial issues in
and another had children who were able to planning. Asked what was the hardest part of
write the plan, the others relied on sources such writing a business plan, “putting real numbers
as Extension, the loan coordinator , the Small in the plan”, in the words of one respondent,
Business Development Center, and the local emerged as the main difficulty. There were
Economic Development Center. One respon- difficulties in knowing which numbers to
dent said that she just made it up and that it include and in finding or estimating accurate
was as much a projection as a plan, in numbers. Projections of
production volume are particularly difficult to
Keys to Success in Value-Added Agriculture Page 9
make. Another respondent said that just find- previous experience in marketing outside of
ing relevant information in general was hard agriculture and were able to apply their experi-
and that you had to persevere and ask a lot of ence to agricultural enterprises.
questions.
Once their businesses were past the start-up
stage, marketing issues and competition posed
the major barriers to success for respondents.
Continuous Evaluation
One said she is trying to redesign her promo-
tional materials to target the needs of new
customers; another said that, “It’s a letdown
“Stop and evaluate (be objective)
when sales deals fall through because my
periodically, to see if it’s really
product does not have a long enough shelf life.
WHAT you want to be doing and
I may need contracts in the future.” Another
HOW you want to be doing it.”
producer said, “Competitors are using cheap
—a cheesemaker and manufacturer
vinegar in very fancy packages that sell better
of gourmet dinners
than my own high-quality vinegars.”
Once their businesses were past the start-up A plan that is not periodically reviewed is
stage, marketing issues and competition posed nearly useless. Your business is constantly
the major barriers to success for respondents. changing and your plan must be reviewed and
One said she is trying to redesign her promo- modified accordingly. The plan must be kept
tional materials to target the needs of new current for you to effectively measure your
customers; another said that, “It’s a letdown performance. “Be ready to change in mid-
when sales deals fall through because my stream, as there is no way you can predict
product does not have a long enough shelf life. marketing,” says an interviewee. As you gain
I may need contracts in the future.” Another more experience and knowledge, you should
producer said, “Competitors are using cheap incorporate your new perspectives and insights
vinegar in very fancy packages that sell better into your plannning. Be sure to keep examining
than my own high-quality vinegars.” your original goals and make sure that your
business is still meeting your goals.
When asked about whether they had a market-
ing plan, about half the respondents said they When asked about whether or not their goals
did, although only three had prepared a formal had changed since they started, eight respon-
plan. Those who had chosen their products dents said yes and six no. Those whose goals
based on market opportunity had plans, had changed seemed about evenly divided
whether written or not. Some respondents said between growing the business and scaling it
that they didn’t need a plan, since experience back in order to have more personal time.
and trial and error make marketing needs clear When asked what sorts of problems they face
eventually. in managing their enterprises, it was clear that
people are, in the words of one respondent,
Many respondents did not get much help with finding it difficult to “balance attention to the
marketing, but rather developed their own business with quality of life.” Nearly thirty
approach with experience and talking to their percent of the respondents said that this was
customers and to other growers. A few of the their biggest problem. For example, one re-
respondents got help from state agriculture spondent said, “Then, my goal was to find
departments and economic development anything that was profitable. Now, my goal is
centers. One respondent tried taking samples to expand my ongoing profitable business.”
into her state’s small business development However, another respondent said, “The point
center, and never heard from them again. comes when I have to stop pushing the cart
Publications such as Growing for Market were uphill. I’ve made a conscious decision not to
also mentioned. Some respondents had grow past a certain point. ”
Keys to Success in Value-Added Agriculture Page 10