Here’s a link to part one of this two-part article. It would be worth going back to read part one in order to get up to speed.
1. Direct market
This is easier to understand for someone working at a smaller scale. However, direct marketing is wise even for farmers who are working at large scale. Unless someone is growing industrial commodities, direct marketing can be a primary vehicle of trade for the successful farmer. It affords for a higher margin on products because it cuts out a middle party who may take their own cut or add a middle expense.
There is business security in a diversity of marketing options. When one market dries up for you, you have several others on which to rely while developing a new market to make up for the loss. Salatin calls this stacking enterprises. Direct marketing your products is a powerful way to also help keep your farm itself diversified. As permaculturists around the world have proven, there is increased land productivity when growing a diversity of plants. This improves the health of your soil and aids in water retention. Direct marketing also takes more time.
This is the part of farming as a business that many farmers don’t like. They want to be on the land getting their hands dirty or with their animals. But, a large amount of time needs to be spent promoting what is going on and selling the products of the farm. Cultivating relationship with chefs, schools, senior centers, market directors, food hubs and consumers is a must for the farmer who is direct marketing.
For the more entrepreneurial of spirit, a community supported agriculture buying group is a common option. This is popular with both producers and consumers. A CSA affords the farmer to have a good idea of their income ahead of time because consumers pay up front for a season’s or year’s worth of products. In effect, this allows consumers to share the risk of producers while being guaranteed a constant flow of seasonal food. Products are either delivered directly (often weekly or bi-weekly) to the buyer or delivered to a pick-up spot.
Similar to a CSA are farm distribution centers where customers can pick up their orders from a central location. They may or may not have already paid ahead of time, but this is more a “meet you half way” approach compared to actual door-to-door delivery. Sometimes farmers collaborate together to create a common location and broaden the choice of what’s offered to consumers.
The traditional farmer’s market is often the most common place to direct market. Though this provides direct connection between consumer and producer, the schedule of the market places tough burdens on the farmer. The producer must organize their week around production tasks that align with the processing, transportation and set up at the market. Crops don’t always come ripe at the exact time they must be picked and processed in order to get to the farmer’s market. Not really a middle man, the market organizing entity will usually charge farmers a fee for their market space. This can be a flat fee or a percentage of sales. Note, many of the other farmers are selling similar items so price pressure can quickly eat into profit margins. Yet, a farmer’s market is a great way to get started building an audience and exposing the farm business to more buyers. Establishing a trusted relationship between buyer and farmer is a strength of the farmer’s market model. Producers can also develop lasting relationships with other producers with whom they may collaborate on projects, resources or expanding product offerings.
Finally, a farm stand is a good option for some farmers. Location is the key element here for starting a farm stand. These can be on your property or they can be away from the farm located on some highly visible, easily accessed spot. Tourists and afternoon rush hour traffic are common targets for market stands. On-farm stands may offer less exposure to traffic, but gives the farmer a chance to expose the buyer to their operation, which can deepen the buyer-producer relationship.
2. Gross margin analyses
You don’t have to be scared off by this idea. We don’t need to be CPAs to do a bit of basic adding and subtracting of costs and income. The point is that producers need to have a handle on how much it costs to produce an item and for how much it can be sold. The trick is to keep track of all the costs and time that went into getting a final product to market. Farmers usually estimate this too conservatively and neglect to add in some costs that aren’t readily identifiable.
As farmers, unless we’re doing it as a hobby, we need to understand where our break-even point is on any enterprise we have going on our farms. Knowing this is simply keeping a good record of all our expenses related to an enterprise. This includes cost of materials, cost of labor, cost of fuel, cost of feed, cost of seed, the costs of maintenance, the cost of depreciation, taxes, etc. When all these are added together, they represent one side of your margin analysis. Don’t forget to add in your own time. You have to know what a dollar value is for every hour you work. How valuable is your time to you and your operation? Be sure you include that for an accurate determination of your total costs.
The other side of your margin analysis is your total income from that enterprise, such as the total sale of broilers. You subtract your total costs from the total sale and you come up with the difference. Then, divide that difference by the total sales. This gives you a percentage and your gross margin. This looks like a very simple equation: (total sales – total costs) / total sales = gross margin %.
This helps you know how much of each dollar of sales that you keep as profit. For example, if you know your total costs of annual production of chicken eggs is $2,300 and at the end of the year you’ve sold $5,400 worth of eggs, you have a profit margin of 57.4%. That means you are earning $0.57 for every dollar of sales.
This is especially important when you have multiple enterprises to know which are more profitable and worth your time than other activities on your farm. Without determining this for each of your activities, you won’t know what you should continue doing and what you should stop doing.
3. Multi-enterprise operation
It’s rare that someone can make a living on the farm selling just one or two things. As Salatin said, it’s easier to find 100 people who will spend $1,000 on your products than it is to find 1,000 people to spend $100. That may seem counterintuitive to the multi-enterprise idea, but it’s not. Consider this; it is easier to sell five products to one customer who is already buying something from you.
The hard part isn’t growing or raising a product. The hard part is getting the customer in the first place. If you have multiple products to sell them that were derived from a multi-enterprise farm, you stand a better chance of landing that customer the first time and a better chance at offering something else the customer wants. It’s so often the happy customer will ask, “what else do you have?”
4. Conduct time and motion studies
Successful farmers know how to be efficient. You don’t get to be efficient without knowing how long it takes to do something. If you’re harvesting apples, you need to know how long it takes one person to harvest apples from one tree. You need to know how long it takes to dress a chicken. You need to know how long it takes to prep tomatoes for market or fulfill CSA order.
Why do we need to know these times? You need to know whether you’re doing them efficiently or not. And if you think the process is too long, if you conduct a time and motion study, you now have a benchmark to compare if you look for a way to change the process to be more efficient. Can you cut five minutes off CSA basket preparation by arranging the environment differently? Will that five minutes more mean anything if you’re processing 50 CSA baskets? That’s a savings of more than four hours! Most farmers can use that extra four hours in a day.
Time the main processes on your farm and document them. Then study it to see if there might be a change in the process to cut down on the time. This is most often done by ensuring the environment is right for the process and getting things in order ahead of time (the motion part).
5. Concentrate on creating a portable farm
A portable farm is one in which the equity of the farm is in management and information not in hard assets or infrastructure. Single-use, capital-intensive infrastructure creates undue pressure because too much of the farm’s equity is tied up in them. “We become enslaved” to the infrastructure that the industrial agriculture mindset thinks is needed for farming.
When the capital-intensive, single-use infrastructure becomes obsolete or inefficient or unpopular, you’re still stuck with it and have to use it. Portable infrastructure removes the land from the farming equation and makes many choices of what to do possible. Your operation can be moved from one leased farm to another and you don’t lose a single customer because they are portable too.
Depreciating infrastructure, such as grain silos or large storage barns is not where you want your equity residing on your farm. You want it in your people and they knowledge they maintain and can convey to others. This is what some finance people call fluidity. This doesn’t mean you have no infrastructure at all. However, you want to keep that at low as possible.
Salatin closed his discussion with a variety of words of wisdom about changing our mindset when we set about doing something. He said that we are often brought up thinking that we have to do everything right and repeated the oft-quoted saying if it’s worth doing it’s worth doing right. Salatin taught this is the opposite idea we need to have on our farms because we often don’t succeed at something on the first try and we should be encourage to keep getting better at what we do because in his words, “If it’s worth doing, it’s worth doing poorly first.”]]>