Marketing and Economics for Small-acreage Properties

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Marketing and Economics for Small-acreage
Properties
Developed by Cinda Williams, University of Idaho
Extension Bob Hamblen, Colorado State Cooperative
Extension Kevin Laughlin, University of Idaho
Extension Susan Donaldson, University of Nevada
Cooperative Extension
UNCE, Reno, Nev.
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What well learn today

• Reexamine your property goals
• Do you want to make a buck?
• Can you make a buck?
• Business plans
• Marketing methods
• Keys to success
• Resources

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So, you want to make a buck?
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Reexamine your property goals

• Look at the map you made in Module
  1, Lesson 1
• Youve added, revamped and changed the plans for
  your property
• Now comes the time to ask,
• Can I make a buck at this?

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Reexamine your personal goals

• Why do you want to sell a product?
• Do you have the skills and resources to grow,
  raise, manage and market a product on your
  property?
• Why do you want to do this? Is it going to be FUN?

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What are you going to sell?
www.sustainablepoultry.ncat.org
http//blogs.venturacountystar.com
www.eatapples.com
http//blog.americanfeast.com
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Are your physical resources adequate for the
enterprise?

• Irrigation water?
• Soil?
• Climate?
• Length of growing season?
• Vicinity to buyers or consumers?
• Equipment?
• Storage?
• Property access?

yourproduceman.com
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You are a physical resource
USDA NRCS
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Does your family share your enthusiasm for the
product and this venture?
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Time and money
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What about external factors?
USDA NRCS
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So, you still want to make a buck?
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How are you going to decide?

• Guess
• Throw dice
• Use a dart board
• Use a decision-making process
• Use a SWOT analysis

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Another approach Develop a business plan

• Mission statement
• Goals (short-term and long-term)
• Marketing plan
• Production and operating plans
• Financial plan
• Staffing and labor plans
• Management plan
• Contingency plan

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Why write a business plan?
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A business plan becomes the road map for your
enterprise
www.internest.com
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It is specific to each particular business
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It serves as the basis for obtaining financing
for the proposed enterprise
www.communitybank.net
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A business plan is most useful if you put it in
writing and can refer back to it regularly
www.realhomebusiness.com
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Why spend so much time on planning?

• 70 to 80 percent of new businesses fail in the
  first year
• Failure is often attributed to a lack of adequate
  planning

www.sheepcrc.org.au
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Start by knowing your product

• Crops
• Traditional (acres of a single crop)
• Multiple crops
• Specialty
• Livestock
• Traditional
• Specialty
• Value-added products

NCSU
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Do your product homework!

• Read, research and explore everything you can
  find about the product
• Research similar enterprises
• Talk to your family and get their input
• Ask yourself Why might consumers buy my product?
  What makes it stand out?

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Why buy my product?

• Take five minutes to develop a plan to tell your
  story as a PRODUCER to explain why someone would
  want to buy product A, B, C, etc.
• Then, take five minutes to develop a plan to
  tell your story as a CONSUMER to explain why
  you would want to buy product A, B, C, etc.

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Understand your market
Village Market, Calif.
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An example niche markets

• Ethnic vegetables
• Kid goats for religious holidays
• Heirloom vegetables or fruits
• Pesticide-free fruit
• Free-range chicken eggs
• Duck or turkey eggs

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Direct-marketing methods

• Roadside stands
• U-pick
• Community-supported agriculture (CSA)
• Custom livestock
• Restaurants or grocery stores
• Institutional customers (schools, prisons,
  colleges and corporations)
• Farmers markets
• Value-added processing

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On-farm or roadside stands
Rural Roots
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U-pick
Farm-fresh treats and U-pick fun
Travel Oregon
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Community-supported agriculture (CSA)
Great Basin Basket CSA
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Custom livestock
UNCE, Reno, Nev.
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Restaurants or grocery stores
bonappetitnetworks farm to fork
Rural Roots
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Institutional customers
bon appetitnetworks farm to fork
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Farmers markets
Jonathon Demcak
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Value-added processing
Lavenderridgereno.com
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Agritourism
H. George, UCCE
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• Youre only limited by your creativity and your
  ability to successfully market!

gunsncoffethestranger.com
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More marketing alternatives

• Web-based ordering
• Mail ordering
• Catalogs
• Cooperative partnerships
• Cooperative marketing
• Etc

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Dont discount word of mouth
UNCE, Reno, Nev.
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Collaborate with the competition
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Now youre finally ready to develop a business
plan!

• Remember, the parts of a business plan are
• Mission statement
• Short-term and long-term goals
• Marketing plan
• Production and operating plans
• Financial plan
• Staffing and labor plans
• Management and contingency plans

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Whats your mission?
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Examples of mission statements

• Our mission is to bring additional net income
  into our enterprise by providing the
  highest-quality product.
• Our mission is to provide vegetables for local
  consumption, which increases the financial
  security of the operation.

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What are your goals?
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Examples of goals

• Increase the sales of apples by 5 percent for the
  next fiscal year
• Increase the overall return on investment by 10
  percent for the next fiscal year
• Increase the sales volume by 5 percent in a
  selected region by next fiscal year

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Now youre ready to write a mission statement and
goals!
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Marketing plans
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Whats missing from your business plan?

• Production and operating plans
• Financial plan
• Staffing and labor plans
• Management plan
• Contingency plan

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Production and operating plans

• To complete a production and operating plan, you
  need to collect information about
• The cost to grow or produce your product
• The average yield for your area
• The going rate, or average sales price

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Basic financial questions

• How much do you want to make? (A gazillion
  dollars?)
• How much will it cost to produce?
• What can you sell it for?
• What do you need to sell it for? (Whats the net
  profit?)

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Determining production costs so you can set a
selling price
www.pnwchees.com
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Production costs

• Supplies
• Equipment
• Labor
• Land
• Insurance
• Transportation

• Taxes
• Permits and fees
• Advertising and marketing
• Wages

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Determining a selling price

• What does it cost to produce?
• What is a reasonable profit? Remember, making a
  profit is not a crime. Your time has value!
• What will the market bear?
• What is the price of similar products?
• What allows you to charge more for your product?

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What methods of payment will you accept?

• Cash and carry
• Credit/debit cards
• Checks
• Running a tab (financing)
• Barter

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Making a reasonable profit

• How do you figure a profit?
• Markup or gross margin?
• What is the difference?
• What will the market allow?

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A marketing example

• If you want to sell a
• bushel of carrots that cost
• 50 to produce, what is the
• selling price if the
• markup is 50 percent?
• Cost (50) 50 Markup (25)
• Selling Price (75)

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A marketing example

• What is the selling price
• if the gross margin is 50 percent?
• Selling Price (100)
• Cost (50) Profit (50 of selling price, or
  50)

• Markup profit is 25
• Gross margin profit is 50

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Financial plans
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Financial plans generally include

• Balance sheet What you own versus what you owe
• Income statement A snapshot of your income
• Cash flow statement (really important!) Income
  and expenses for a specific time period

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Funding your enterprise

• Personal funds
• Debt financing
• Equity financing
• Traditional lenders

www.wannanetwork.com
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Funding your enterprise

• Small, farm-friendly banks
• Small Business Administration
• Rural economic development agencies
• Grant sources

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Staffing and labor plans
www.ces.ncsu.edu/chatham
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Management plans
UNCE, Reno, Nev.
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Contingency plans
www.sure-it.co.uk
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Keys to success

• Do something that you love
• Provide quality
• Start small and grow incrementally
• Keep good records production, financial and
  regulatory

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Keys to success

• Provide what the customer wants
• Maintain a loyal, preferably local, customer base
  
• Provide more than just a product consider the
  social aspects
• Involve others

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Keys to success

• Stay informed and up-to-date
• Plan for the future
• Evaluate and adjust continually (practice
  adaptive management)
• Persevere
• Obtain adequate capitalization

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Where can I get help in developing a business
plan?

• Small Business Administration
• Small Business Development Centers
• Chamber of Commerce
• State Departments of Agriculture, Marketing
  Divisions
• State Economic Development Agencies
• USDA Sustainable Agriculture Research and
  Education (SARE)
• Colleges and universities
• Libraries

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Peer resources and support
NRCS
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Summary

• Understand your product
• Understand your resources
• Understand your market
• Understand your customers

USDA NRCS
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Summary

• Create and use a business plan, and adjust it as
  needed
• Be flexible and open to new opportunities
• Check out free resources available to you
• Network!

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Homework

• Select three new enterprises that you are
  interested in exploring for your property.
• Fill out the Proposed Enterprise Development
  Activity Sheet for the three proposed enterprises
  for your property.
• Evaluate each enterprise based upon the site
  plan you developed for your property.