Developing Business & Marketing Plans for Small Acreage Enterprises

Transcription

1 Developing Business & Marketing Plans for Small Acreage Enterprises Kynda R. Curtis Associate Professor & State Specialist Department of Applied Economics Utah State University

2 Today Discuss the importance of business plans Discuss the components of a business plan Activity Discuss demand and rational for direct market sales Overview of direct marketing outlets advantages and disadvantages Activity Ruby Ward small acreage financials/budgets

3 Importance of Business Plans Road Map Increase the probability of success Measure of success Alignment with goals Define Market and Access Characteristics of market Vehicle for reaching market Secure Capital Often required by Banks

4 Importance of Business Plans Evaluate external/internal environment Evaluate competition Market share, cost structure Define competitive advantage Why is the product different/special? Does our operation have a cost advantage? Provides measure of success Creates new revenue streams New markets New enterprises

5 Plan Types Business Plan Executive Summary Background & History Mission Statement Business Goals & Objectives Product Description Market Assessment Competitive Analysis Financial Analysis Conclusion Choice of plan depends on audience Marketing Plan Mission Statement Goals and Objectives Competitive Strategies Marketing Objectives Marketing Strategies Product Price Distribution Promotion Financial Statements Conclusion

6 Why Spend so Much Time on Planning? percent of new businesses fail in the first year. Within 5 years 85% are gone Business failures are most often due to: Inadequate planning Under capitalization Do not have the needed management skills as part of their team

7 Required Information SWOT Analysis (Strengths, Weaknesses, Opportunities, & Threats) Internal resources strengths and weaknesses Human, technical, financial and management resources External resources opportunities and threats Economic, technological, government policy changes Mission Statement Operation purpose Goals & Objectives Product Description Market Description Financial Statements

8 SWOT Analysis Purpose to identify: Strengths Weaknesses Opportunities Threats Internal Externa l Competitors Firm Market Conditions Customers

9 Strengths and Weaknesses Goal: objective assessment of your strengths and weaknesses to: Identify, protect and deploy resources, Understand capabilities and Develop core competencies Assess strengths and weakness: Relative to your competitors, and Important to your customers Note: This is difficult to do well.

10 Resources Inputs into a firm s production process such as capital equipment, skill of individual employees, patents, finance, and talented managers. Tangible Resources Assets that can be seen and quantified Intangible Resources Family commitment, networks, organizational culture, reputation, By themselves resources do not create a strategic advantage for the firm Examples of misdirected resources?

11 Strengths and Weaknesses Consider marketing Products/services that serve new market Promotion that is personal Distribution/location that suits your market segment Consider people Management Unique skills Relationships/networks

12 Strengths and Weaknesses Consider operations/facilities Implementation Facilities/equipment Cost management/efficiency Consider finances Profitability (or potential) Cash flow Capital resources-ability to obtain credit

13 Product Description Define product and characteristics Differentiation strategy Value-added possibilities Service Outside the Sale Support system Technology Production and service

14 Pricing Production Costs Fixed Costs-not dependent on production Buildings, Equipment, Salary Variable Costs-dependent on production Hourly employees, fuel, veterinary Total Costs FC + VC Average Costs TC/# of units Competition Pricing

15 Pricing Product Positioning Penetration Pricing Stimulate demand Parity Pricing Equals competition pricing Premium Pricing Higher than competition to signal quality

16 Distribution Contingent on market preferences Grocery or specialty food Direct markets Brokerage firms and middlemen Health and safety concerns Packaging Labeling Refrigeration

17 Promotion Advertising Access to your market Marketing Groups Promotional information Test Marketing

18 Financial Analysis Balance Sheet Solvency Income Statement Profitability Breakeven Analysis Pricing mechanism Financial Ratios: Return on Equity Debt to Equity Current Ratio

19 What s Important to You? Values Small, family owned businesses may need to discuss the role of values Values are the standards, beliefs or qualities that you consider worth upholding or pursuing They are not goals, but instead can be thought of as something that reflects your view on life or a judgment about what you find important Your values will directly shape your business strategy and whole farm management choices

20 Vision, Mission, and Goals Dream a Future Vision Set and Prioritize Goals Develop a Mission Statement

21 Vision/Mission Statements Statements that explain who we are Type of organization Products/services Needs we fill Statements that explain our direction, our purpose, our reason for being What difference do we make? Statements that explain what makes us unique Values People Combination of products and services

22 or the last century the Louthan family has established deep roots in the agriculture industry, and has developed a reputation for producing high quality Angus crossbred beef. Our family operation incorporates quality genetics to produce high grading, great yielding calves, which will gain weight quickly to harvest. We perform superior animal husbandry practices to ensure a healthy, high quality product that our customers in the cattle feeding industry can trust.

23 Mission Statement Examples Herb Appeal is a retail greenhouse focusing on organic herbs but also providing different types of herbaceous plants and hard goods. We will promote the use of organic plants and materials in the environment. Quality organic plants and knowledge based customer service guarantee a good overall value to our customers.

24 Mission Statement Examples We are committed to producing quality, all-natural, raw dairy products. By sharing livestock ownership, customers have an authentic opportunity to experience agriculture production from farm to table. This partnership creates a niche market providing unique, wholesome milk, beef, and compost. And because customers are part owners in our business, they are guaranteed high value food and resources before they re even produced! We re located on Colorado s central front range, and your milk comes straight from our cows to your family!

25 Activity Creating a mission statement Example page 90 Activity sheet page 98 take 10 minutes

26 Evaluating New or Specialty Enterprises Is there a market for the product(s)? What is the potential for the new product? Do interested customers connect with your values? Why isn t everyone else raising it? Is there supporting marketing infrastructure? Do you have the cash flow to make it through a season?

27 Keys to Success Keep good records production - financial environmental - certifications Have adequate capitalization control debt Provide quality Know what your customers want Keep your team informed and involved Evaluate and adjust continually Practice adaptive management by staying informed and up-todate

28 Resources Western SARE business planning publication

29 Direct Marketing Strategies Kynda R. Curtis Associate Professor & State Specialist Department of Applied Economics Utah State University

30 Direct Marketing Alternatives Farmers Markets Roadside/Farm Stands Pick-Your-Own Community Supported Agriculture Programs (CSAs) Restaurants

31 Why direct market? Opportunity for increased returns.. Reduce marketing costs (trans, retail, packaging) capture profits of middleman Consumer willingness to purchase and pay a premium for fresh, high quality produce improved pricing Large consumer demand now for local foods due to food safety, environmental, energy usage, ag land preservation concerns Number of farmers markets up 65% since 2004, 6132 markets in 2010 Number of CSAs from 60 in 1990 to 3,300 today Provide quantities (smaller) and/or quality differing from commercial markets

32 $ Amount Marketing Bill & Farm Value Marketing Bill and Farm Value Total Consumer Expenditures Marketing Bill Farm Value Year

33 Pricing Example Consumer WTP for locally produced products at Farmers Markets 669 consumers across 12 markets (Nevada), Summer/Fall 2008 Regular Price Local Price Percentage Difference Peaches $ 2.49 $ % Tomatoes $ 1.99 $ % Eggplant (each) $ 2.99 $ % Cucumber (each) $ 0.79 $ % Green Pepper $ 2.49 $ % Cantaloupe $ 0.49 $ % Yellow Squash $ 1.89 $ % In pounds unless otherwise noted

34 Farmers Markets Advantages/challenges Travel time and transportation to market Labor for market Interaction with customers/use of existing customer base Advertising/promotion by market Set day/time Sales/pricing uncertain Need variety of products

35 Farmers Markets Consumer Advantages Freshness, variety, and quality Local products Minimize food miles, energy usage Support local agriculture Socialization/community event Primary customer types Organic and Health Enthusiasts Homegrown Enthusiasts

36 Customer Types Organic/Health Willing to pay premium / less concerned with pricing Eat 70% of meals at home Healthy lifestyle diet & exercise Concerned with food safety Higher education levels

37 Target Organic & Health Enthusiasts Clear labeling for certified & non-certified organics Information Recipes Storage Nutritional / safety benefits Wine parings / meal planning

38 Customer Types Homegrown Less willing to pay premium / somewhat concerned with pricing Eat 90% of meals at home Supporters of local agriculture & ag open space More children in household Home gardeners Canning & storage

39 Target Homegrown Enthusiasts Clearly label product origins state & region Tell farm story with poster pictures & in brochures Family appeal of booth Information Gardening / arid region suggestions Canning / preserving Recipes / preparation / pairing

40 Farmers Market Suggestions Present an attractive booth Use effective signage Employ well-trained staff Create Brand Identity Sell quality products

41 Present an Attractive Booth Clean, tidy, organized Colorful, abundant, appealing Appropriate for your product Signs, pricing, identity Be creative

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43 Signage Easy to read, simply stated Show pricing Be creative Tell your story Banners Utah s Own

44 Staff Represent Your Business Staff should know the rules of each market and how to direct customers Staff should be able to describe your farm, growing practices, upcoming crops, retail outlets Train staff to always acknowledge waiting customers Talk about setting up sales for next week Hire friendly faces Consider name tags or uniforms

45 Create Brand Identity/Tell Your Story Who are you? Why are you special? Where are you from? Consistency from market to market and week to week Learn to say direct from your name Use your name on signs, name tags, handouts, etc

46 Build Return Customers Successful vendors build relationships with their customers Repeat customers are key to success Sell quality products at fair market prices Deliver consistent, friendly service Get to know your regular customers by name

47 Techniques for Repeat Sales Recipes, bags, tips Solicit feedback Collect addresses to advertise upcoming crops and specials Distribute handouts (recipes, tips) Say see you next week Sell reusable containers, offer a discount if they are returned

48 Community Supported Agriculture (CSA) Programs Farmer/group of farmers offer shares to the public A share is a box of vegetables/fruit and other farm products (bread, jam, etc.) Consumer purchase a share - subscription Consumer receives the share - box of vegetables/fruit each week during the growing season Shared risk between farmers and consumers Share in the good (great yields) and the bad (weather, pest or other crop damage)

49 CSAs Advantages Marketing occurs before growing season - predefined market Share payments are made in advance - provides cash flow Develop relationship with customer needs, feedback Usually also do farmers markets and on farm stand in addition to CSA membership

50 CSAs Challenges Production complexity 30 or more crops Shareholder administration and communication CSA manager Turnover in share holders from year to year Need to provide high quality diverse products Consumer desire for variety may need to have several farms working together Cleaning and packaging requirements Consumer education seasonality, weather issues, cooking/recipes - newsletters Provide several drop-off locations volunteer management

51 CSAs Consumer Advantages Availability of super fresh, healthy food Exposure to new veggies and varieties, new cooking ideas Exposure to farms and growing process Develop relationship with farmer - freshness, safety, support local business

52 CSA Consumer Overview Highly educated More fully employed (vs. FM shoppers) Female and primary shopper Complete more home food prep (vs. FM shoppers) Food quality important Supporting local farmers important High incidence of vegetarians Variety and appearance less important (vs. FM shoppers) Organic less important

53 CSA Suggestions Provide recipes with share baskets Hold cooking demonstrations Provide educational information on food preserving and gardening Allow own share packaging, or half shares Include weekly newsletter addressing seasonality and current weather issues Provide home delivery service

54 Restaurants Target high-end or fine dining category Use of locally-produced, in-season, and specialty produce popular Why? Perceived higher quality and freshness Establish relationship with local grower, orders, quality, etc Restaurant customer requests for local products Availability of unique or specialty varieties - heirlooms

55 Restaurants - Advantages Higher return, product pricing Reliable customer base Build relationship with customer/local business Opportunity to grow special varieties

56 Restaurants - Challenges Distribution delivery, availability, variety Limited seasonal availability Low volume frequent sales High turnover chefs move, restaurant closing Product packaging, labeling, processing to meet food safety regs may be costly

57 Approaching Restaurants/Chefs Contact the chef or person in charge of food buying never contact during meal service Research the menu, clientele, food philosophy Understand the key personnel chefs, owners, managers Find out how they wish to be contacted and when (day/time) Invite the chef or buyer to your farm Bring samples of produce to share with the chef/buyer Schedule a winter visit for crop planning

58 Approaching Restaurants/Chefs Prepare a story for your farm Provide overview of your products, volume, packaging, availability (season) Update chefs on availability regularly Grow unique items, select the best product for chefs Make weekly contact at agreed time, provide deliveries on time Immediately notify chef of potential shortages and/or change in delivery

59 Activity Market assessment Page 68 Define one or more markets for your product Who are they, where are they located, why would they want the product?

60 Resources Direct Marketing Guide for Fruit and Vegetable Producers at pdf CSA information for farmers at Local Harvest at Utah s Own at University Cooperative Extension Publications Chefs Collaborative at ATTRA at

61 Thank you Questions?