The following is an excerpt from The Profitable Hobby Farm by Sarah Beth Aubrey (Wiley Publishing, 2010). Packed with tips not only from an expert author but from the experiences of other small-scale farmers, The Profitable Hobby Farm offers a blueprint for building a sustainable local foods business, from finding financial assistance to surviving your first year in business. This excerpt is from Chapter 2, “From Idea to Inventory: Planning and Assessing the Market.”
When I began Aubrey’s Natural Meats in 2003, I started with a 30-page business plan. It made sense. First, as a writer, being verbose was no problem for me, and planning made me feel like I was doing something. Second, I wanted to borrow money from a local bank and knew they’d want to see projections for returns and cash flow. Yet, though I strongly advocate having a solid plan, newbie ruralistas are not likely to write up a formal document.
The structure and length of your business plan will vary widely depending on what you plan to do, but the basic components are as follows.
Mission statement: This can be one sentence or one paragraph. It’s a formal statement that defines who and what you want to be and your objectives or goals.
Company profile: The company profile describes everything from the name and address to the legal designation (corporation, LLC, sole proprietorship, etc.). For location, it describes the surroundings and the area or setting of the business. It lists who owns what percentage of the company and the roles and responsibilities of the participants. The profile also provides more detail on what the company does.
Product description: In this section, which can be as brief or as detailed as necessary, you define and describe your product. Strong plans also detail quantities expected to be produced and timelines for production, as well as product pricing.
Resource/supply assessment: This section includes a discussion of how the raw materials will be acquired, how steady the supply will be, and whether the supply will have any seasonal interruptions.
Market assessment: A market assessment is a description of the desired or targeted customer and the marketplace for the product. This can include demographic information, such as profiles of people and regions where you will be selling.
Startup costs: This section should include accurate prices for everything from land, equipment and raw materials to permits and legal and accounting fees.
Budget: Put together a budget for the first year to demonstrate how your startup costs will balance out against how you plan to price your product and against projected first-year sales. (You don’t have to recoup startup costs in the first year.)
Growth prospects: Anticipate your growth for the first year, as well as your overall goals for the first through fifth years.
Plan for Growing Seasons
How long does it take for raspberry bushes and grapevines to produce fruit? How long do goats need to roam before they have kids? How long should cheese age? This is where planning for growing seasons comes in.
Brent and Suzie Marcum of Salem Road Farms in Liberty, Ind., advise starting your homework on the segment of small farming you’re interested in long before you dig the first hole and order the first plants. They’re absolutely right. Everything from the region you live in to the breed of plants or animals you buy affects its ripeness or maturity. It’s essential to understand the seasons of growth as they relate to your new venture.
When Brent and Suzie started buying fruit trees at $25 apiece, they already knew what they were getting themselves into. “With our fruit trees, we had to plan ahead three to five years for a crop, so we knew the return on them would be later,” Brent says. Knowing that, they didn’t overextend themselves.
Take courses, read reliable information online, and talk to other people who’ve gotten started recently or have years of experience. “Put the seed in the ground and it will grow” is not going to work.
Plan for the Changing of Seasons
I think you’ll be amazed when you move to the country at just how much more you notice, feel and even sense the seasons changing. You can smell the earth so strongly in the spring, and the hint of rain practically permeates the house. On July days in the Midwest, you can hear the corn stretch and grow in the sweltering, humid air. By fall, the sight of combine headlamps amid the dust and red light of dusk will become a sight you know means harvest. In winter you can feel in your bones a cold that signals a snow squall, and the gray-blue late afternoon light just begs you to finish up your chores early and go inside. Yes, the seasons affect us deeply when we’re out in them rather than just driving through them.
When you’re starting a hobby farm, be sure you’re ready for the changing seasons. Resources like feed and bedding are often purchased early for animals, and in tough years can be hard to locate after the first snow falls. Crops and produce must be gathered before the first frost, and it’s difficult to know what that date will be, even if you’ve bought a Farmer’s Almanac. Do some research about when each season typically begins in your region and what you’ll need at the change of seasons. Make sure whatever work you do for your main income is compatible with the seasonal nature of your farming life.
Planning for Seasonal Cash Flow
Just as the crops and animals and foods such as meat, wine and cheese are seasonal, so, too, is your cash flow. Cash flow is so important if you’re starting a farm-based business. It’s not like your nanny goats will be handing you a regular paycheck every two weeks — but they’ll still expect to be fed every day!
Where you sell your goods may also be seasonal. Evaluate your selling venues and know ahead of time when these places open and close. Then make sure your expenses match up with your markets.
What will you do to cover expenses when your seasonal farmers market closes? Do you have a plan for saving or a place to deliver products in the winter? Will you shut down production totally or save cash, or should you be doing something to create inventory for next spring? Much direct marketing of food items is based around the farmer’s schedule, not the consumer’s. Consider that you’re now on that time frame, and make sure you have a way to stay in business.
Transportation and Distribution
Most business plans include a section on how the product will be transported and distributed. But products produced on hobby farms require special consideration, because your channels for getting the product out there are more limited because of your small scale.
In short, “more limited” means more labor for you. Make sure you understand direct-to-consumer marketing and are familiar with the outlets in your region for your product. Before you make agreements with too many stores, restaurants or consignment shops, evaluate the time it will take to get from one location to the next and the frequency with which you’ll have to replenish products.
In summer 2008, my husband and I hired our first intern to help us run the meat business. We were nervous about bringing someone in and opening our home and business, but the results were fantastic.
Rural life requires more labor than you can imagine. Seasonality and the weather can cause everything thing from droughts to a never-ending crop of weeds. When planning for your new enterprise, seriously evaluate your labor needs and decide whether you can commit to the amount of time the business and its management, marketing, selling and maintenance will take. If you’re not sure, seek out other entrepreneurs who are doing the same thing and ask them to provide a sketch of their day-to-day workload and how much time each task ordinarily takes.
Evaluating the Local Foods Market
Like the planning section, this section is an experience-based discussion of market research that I’ve created specifically for hobby farmers and new foodies. It is not a detailed tutorial on how to do market research. Yet I can’t underscore how important knowing your marketplace is to the success of your new opportunity.
You’re coming at this market from a consumer’s perspective, and that is a major advantage, especially if you’re starting a business to respond directly to a need you feel is not being met. Understanding (and caring about) consumer preferences is an area where many lifelong farmers fall short. You don’t have this problem, so on some level you’ve got a built-in sense of the market. Still, when it comes to knowing what will and won’t make a go, you’ve got to learn the market from the purveyor’s point of view, being conscious of supply, market saturation, price points, demographics, and consumer knowledge and acceptance of your product.
Peruse the Market
Go see where you want to be. This rule is simple, but surprisingly, many people overlook it. I can’t imagine selling in a new farmers market I hadn’t visited before, but many vendors do it. I think they’re making a mistake.
Spend time learning about the marketplace where you plan to sell. Visit stores, boutiques, markets, restaurants or any venue you’re considering. While you’re there, don’t just look and listen — talk to people. Talk to other vendors, talk to customers, meet the managers, and get a general feel for the place.
There are long lists of formal market research techniques you can use to evaluate a particular market quantitatively or qualitatively. I’ve written about these techniques in other places. You can build a questionnaire to e-mail to prospective customers, friends, business acquaintances and others whose opinions you respect. You can conduct focus groups with peers, potential customers or potential retailers. You can interview influential people in your community.
Even if you’re conducting your research informally, you need to be sure to ask certain questions — of others and yourself.
- How long has the venue been in business?
- Do you like the layout and design?
- Is there adequate parking?
- Do customers appear happy?
- What’s the ratio of repeat customers to new “walk-up” shoppers?
- Are people actually shopping or just browsing?
When you’re checking out a particular market, be sure to visit several times. If you’re planning to sell bedding plants — the way Brent and Suzie started out — that’s an early spring buy. Don’t set yourself up at a farmers market nobody goes to until it’s sweet corn and tomato season. And how will you know this if you don’t visit the market more than once?
Statistics also help. Visit local community development offices or the chamber of commerce to find out about traffic patterns and volume for the roads you’ll be located near. You may also find out population data and demographics such as mean income that can tell you whether the local population has the means to buy what you want to sell.
Do Your Own Research
In addition to visiting sites and asking questions, you can and should do some research on your own. There are so many online resources that it would be foolish of me to try to list them all, and the convenience of the Internet is unparalleled. Visit sites that offer the same product you’d like to produce and sites for other vendors in your area. Look for which products are overloaded and which are missing. Fill the gaps and you’ll find business.
Reading this book is another form of market research, by the way, so keep reading and, when you’re done, look for more books. Brent has been studying his market for more than ten years and has no intention of slowing down just because he’s learned a thing or two. Read.
Networking is also a great research tool. Networking is more than shaking hands and eating a mediocre lunch at a conference center. It’s about building a base of contacts you can turn to again and again. It’s about getting answers to questions you didn’t even know you had when peers raise pertinent issues. And it’s about staying motivated when you begin to get weary. Search for local trade groups and attend at least one industry meeting before you start your farm business.
Taking courses can also help, especially if you’re going to raise or plant something you’ve not only never seen before but certainly never cared for as a living thing. Calves are cute, but did you know that it can take as long as two years for a grass-fed cow to be ready to become beef? Get educated — in advance as much as possible.
Just Get Started
Your profitable hobby farm business planning and market research may seem mundane, or even something you’d rather not bother with at all. But this is important work. Let’s relate it to agriculture and the seasons.
Planning, and then waiting for those plans to unfold, is like your own springtime. Just as the grass waits to turn green in the spring, you may be dreaming of blooming flowers and other lovely warm-weather transitions as you lay the groundwork for your business. Thinking of your new venture critically yet creatively will enable you to uncover the fresh grass of prosperity and potential underneath the blanket of snow. So I leave you with the idea that if you’ve worked hard to plan and taken the time to assess your market, you’re almost ready to bloom.
Business planning is an exciting time. I spent a lot of hours planning because I found the process so encouraging. Just learning about the prospects and thinking through the potential challenges that lie ahead stimulated my mind and kept me motivated to prepare to leave behind my career in town. The zip of electricity you feel when you start to set your plan in motion is like a first kiss. It’s so gratifying to be in the process rather than just mulling an idea around in your mind. I encourage you to start planning and investigating, and start the journey.
I’d take the journey again if I could. But it’s your turn now.
Reprinted with permission from The Profitable Hobby Farm, published by Wiley Publishing, 2010.