In the afterglow of a can-do workshop, when everyone feels comfortable enough to explore inferior decisions I’ve made, someone will ask, “What have been your biggest business failures?” Failures don’t inspire, so I tend not to dwell on them. But they sure can be instructive. Here are my biggest “failures” from a lifetime of farming.
1. Not collecting payment right away. My mentor Allan Nation used to say this about being in the food sales business: “It’s good because it’s a consumable, and people have to keep coming back for more. It’s bad because you can’t repossess yesterday’s meal.” Truer words were never spoken.
The No. 1 reason businesses fail has nothing to do with their products or services; it’s their cash flow. Just because a venture is profitable doesn’t mean it’ll succeed. Money coming in the front door has to be just ahead of money going out the back door.
Farm businesses do cartwheels to find customers. When a new patron oohs and aahs over our eggs or tomatoes, the endorphin high dulls our senses to the harsh reality that praise and gratitude don’t pay the bills. Those grateful customers need to pay, because all the platitudes in the world won’t make us economically viable.
Since we’re desperate for a sale, though, we don’t dog the slow pay. We want to believe the best of people. After all, they love our products. So we put off the difficult conversation. We’re struggling; they’re struggling. If we act hard-nosed, then we’re not being empathetic enough. Extending credit and letting accounts receivable build up is much easier than being perceived as mercenary and unloving. But that path can lead to financial hardship.
Until you have a track record of trust with a customer, keep everything on a pay-today status. After you have a year of good relations under your belt, then a “net 30 days” is OK. Because those of us in the integrity food space inherently deal with more startups, we’re more vulnerable to dishonest business characters. Keep your accounts receivable short.
2. Working with an incompatible client or partner. When you’re developing a business relationship, whether it’s with a partner, employee, or collaborator, you must be mindful of the Three C’s outlined by business guru Simon Sinek: character, culture, and community. Every business has these three distinctive elements, and when we work with people who violate any of these C’s, we regret it.
Entrepreneur Tai Lopez says the biggest business mistake he’s made over the years is not firing someone soon enough. Once you start having misgivings about your future relationship with someone, the prudent thing is to cut and run. Trying to fix a situation that doesn’t fit your character, culture, or community isn’t worth the effort. Don’t rub shoulders routinely with folks who sap your emotional energy.
You don’t have to be nasty about it; just explain that it doesn’t fit. We rented a property from a woman who died two years into a five-year lease. When her three children (who were in their 50s) took over, we found ourselves in the midst of a family squabble. Instead of trying to help them work it out, we should’ve walked away the first time we smelled a rat. Ditto with another landlord who wanted his pastures to look like a golf course. We’re not in the golf course business. We walked away from that one partway through the agreement.
Poor partnerships are far worse than no partnerships. When it starts to smell bad, don’t try to salvage it. It’s not worth the effort. Part company and move on.
3. Encouraging runaway growth. Trends reach credibility over time. A one-season statistic does not a trend make. For a couple of years, we were extremely short on eggs, so we offered a fellow the opportunity to grow eggs for us. We built him a portable hen house on skids and raised 1,000 pullets for him. We guaranteed him a price per dozen, and the eggs began rolling in. If we’d expanded by only 400 pullets, we probably would’ve been fine. But this flock added 400 dozen eggs per week, and we couldn’t grow our customer base fast enough to accommodate that rapid expansion. We ended up paying $10,000 for eggs, many of which we fed to the pigs.
If a market opportunity presents itself, of course you want to jump on it. But overrunning your headlights, as my dad used to say, isn’t wise. Better to be short in inventory than long in waste. The problem with direct marketing is that if you produce one egg beyond your market, its value is zero. The commodity market is big enough to absorb growth as fast as you want to bring it.
Don’t worry about speed. Just worry about trajectory. The hare loses; the tortoise wins. As long as you’re progressing in the direction you want to go, don’t get frustrated with the pace. Just enjoy the ride, however fast it goes.
4. Paying hidden commodity costs. Many years ago, I had to replace several hundred yards of a boundary fence at the edge of the woods. The trees on our side of the fence were massive and growing toward the pasture (daylight) on the neighbor’s side. I figured if I was going to invest time and money in replacing the fence, I might as well harvest the trees overhanging from our side, not only to protect the fence, but also to make some money in logs.
Working with just a saw and a tractor, I spent free time in winter pecking away at the project. When I finally finished, I didn’t have a way to haul the logs to a sawmill, but I knew a fellow who had a log truck with a knuckleboom loader. I called him, and he agreed to load the logs and take them to the mill. When we got to the mill, he set them all out in the yard, and someone came out of the scale house with a ruler to tell me how many board feet I had, the quality of the logs, and what the price was.
He wrote me a check, and it came within a few cents of paying for the haul fee. I vowed then and there that I’d never again take a log to a sawmill. I would’ve made more money if I’d cut them up for firewood. Some of the knot-free red oaks were veneer quality. What I learned later was that any weathering on the ends automatically marks a log down to “utility.” If I’d gone along and cut an inch off the ends right before taking them to the mill, I might’ve doubled my money.
But such are the hidden nuances of the commodity business. If you’re a small outfit, be careful playing footsy with the insiders who run the game.
5. Pursuing hotshot genetics. Early on in my farming career, I became enamored of genetic development for our cow herd. I tried some artificial insemination and bought a bull that was top of its test group in the state-graded seedstock sale. Well, guess what? None of that stock lasted more than a couple of years. The heifers wouldn’t breed. They got pink eye. They were completely unacceptable. I learned that a healthy backwoods animal beats a hotshot industrial stud any day. My advice to anyone wanting to upgrade their livestock is to buy solid stock from neighbors and upgrade gently with the kind of bull from the kind of herd you want. The bull or ram is 50 percent of your genetics. Be content with slow improvement; fast genes stall quickly unless you’re ready to dump lots of money into medications and feed. The animals have to work for you; not the other way around.
There you have it: some of my biggest business and farm failures. I hope what I’ve learned from my failures will help you avoid the same missteps. That way, you can have a different list of useful farm failures to share. Keep on keeping on.
Joel Salatin’s family owns and operates Polyface Farm in Virginia’s Shenandoah Valley, producing salad bar beef, pastured poultry, pigaerator pork, and forage-based rabbits. The farm services 6,000 families and 50 restaurants, and offers many educational opportunities for people wanting to learn these pasture-based systems.