Transcript Who are you marketing to?

Business Management
and Enterprise
Development
Shannon Dill
Maryland Cooperative Extension
Talbot County
Objectives
Business Planning
 Marketing and Sales
 Customer Service
 Resources

Business Plans


No matter how large or small it is necessary for
you have a written farm business plan
Business plans help with
 Supporting
a loan application
 Defining a new business, goals and steps to achieve
those goals
 Evaluating the effectiveness of business and
marketing strategies
 Set a direction for the business in the next five years
 Growth and development for established businesses
Business Plans

A good business/marketing plan should be
realistic, simple, specific and complete.
 Is
your plan realistic? Are your goals, dates and
objectives realistic to your farm operation?
 Is your plan simple? Can you and others read and
understand the farm business plan?
 Is your plan specific? Are goals, objectives and
finances measurable?
 Is your plan complete? Does your plan include all
aspects of your farm business?
Contents of a Business Plan





Executive Summary
Mission and Goals
Background
Information
Farm Strategy
Marketing Strategy
and Plan





Enterprises Analysis
and Plan
Financial Plan
Implementation
Strategy
Human Resource
Plan
Resource Inventory
Executive Summary
It is in the front of the document BUT the
last task to be completed.
 Overall summary of your business goals
and objectives and how you plan to meet
them.

Mission and Goals

Mission Statement: purpose of your farm
operation (1 or 2 sentences)
– Why does your business exist, what
purpose and where are you headed.
 Answer

Goals: Specific and measurable
statements of what the business expects
to achieve. Can include production,
marketing, financial, etc…
Mission and Goals

Use them in marketing
MISSION
GOALS
Background Information





Logistics: Name, address, ownership, advisors,
employees
History: A Summary of the history of the farm
operation/business
Operation Layout
Legal and Contractual Situation: Assets, contracts,
insurance, estate plan, retirement, conservation
programs, other
Production: Acreage, yields, livestock
Farm Strategy





Step 1: Gathering information and market research.
Step 2: Analyzing the external and internal components
of your business using the S.W.O.T. analysis.
Step 3: Creating alternative plans of action and
identifying areas of competitive advantage.
Step 4: Formulating a strategy is selecting the best plan
that fits your overall farm mission.
Step 5: Implementing and evaluating the strategy.
Step 1: Gathering information and
market research.
Market Research: Research your current
and potential markets to identify trends,
competitors, needs and buyers.
 Focus groups, demographics, surveys,
observation, interviews

Step 2: Analyzing the external and
internal components of your
business using the S.W.O.T.
analysis.

S.W.O.T. is an acronym for:
 Strengths
 Weaknesses
 Opportunities
 Threats
Strengths and Weaknesses

Evaluation of the Internal Environment
 Financial
resources
 Management capability
 Human resources
 Location
 Facilities
Threats and Opportunities

Evaluation of the External Environment
 Competitor
analysis
 New/expanding markets
 Regulations
 Technology
 economics
S.W.O.T.
ACTIVITY
Step 3: Creating alternative plans
of action and identifying areas of
competitive advantage.
Pulling it all together – Internal Strengths
with External Opportunities
 Plan of Action
 What is unique, what is your competitive
advantage, what will your consumers
value

Step 4: Selecting the best plan that
fits your overall farm mission.




It is now time to select the plan that best fits your
overall farm operation
Keep in mind SWOT
Can you see yourself doing this in 5-10 years?
Include marketing, production, finances and
management along with your competitive
advantages.
Step 5: Implementing and
evaluating the strategy

How are you going to get it done!

Following the financial plan there is a
section that focuses on implementation
Marketing Plan

Market research – Completed during the SWOT analysis

Target Market - It is important to understand who is
purchasing your products so that your marketing efforts will
reach that segment. You cannot be everything to everyone. In
order to effectively market, you need to cater your product
and services to the set of customers who will see value in the
product you are offering. Who are you marketing to?

A target market can be developed by:
 Demographics – age, gender, family size, education,
occupation
 Geographic – location, city, urban, rural
 Psychographic – behavioral patterns, lifestyle similarities,
common interests, beliefs and hobbies
Marketing Strategies

The 4 P’s of marketing
 Product
 Price
 Place
 Promotion
4 P’s of Marketing - PRODUCT


What sets your product
apart from others?
What are the products
main attributes
Includes – Market
research, logos,
slogans, sizes and
packaging

Physical/service

Features vs Benefits
4 P’s of Marketing - PRICE








How much value does
your product offer? How
are you going to make
pricing decisions?
Cost of production
Break even point
Market position
Re-price and evaluate
Perception
Location
Supply and competition
4 P’s of Marketing - PLACE



Where will you sell
your product?
Where does your
target market shop?
Locations and
logistics
Transportation and
distribution
4 P’s of Marketing- PROMOTION




Where is the best value for
your promotional money and
efforts and how will you
determine if they are
working?
Unpaid – Positive, PR,
newspaper
Paid – Advertising, publicity,
sales promotions
Be creative!
Positive?
Positive
Marketing Budget
Research
 Communications
 Networking
 Promotions
 Advertising
 Public Relations
 Distribution

MARKETING
ACTIVITY
Enterprise Analysis and Plan
Divides costs and returns for each farm
enterprise
 Helps to determine the productivity of
enterprises and if a farm should continue
or change enterprises

Components of an Enterprise Budget
Gross Revenue: The total sales of product or services from the enterprise. Revenue can be calculated
with the following formula: Price x Units Sold= Gross Revenue
Variable Cost: Cost items that vary with production volume. Examples of such items
include fertilizer, seed, fuel, electricity, piece-work labor charges, pesticides, packaging
cost, and custom charges.
Fixed Cost: Those cost that you will incur regardless of whether you produce any output.
These costs are determined using the DIRTI 5 method which includes Depreciation,
Interest, Repairs, Taxes, and Insurance. Often a piece of equipment or building will be
used for more than one enterprise. In these cases it is important to estimate the
percentage of use for each enterprise and allocate the cost accordingly.
Net Income: Net income is the money left after subtracting variable and fixed cost.
This is the bottom line. NET INCOME = Gross Revenue – (Variable + Fixed Costs)
Financial Plan

Very important and necessary component
of the business plan
Sheet – Net Worth
 Cash Flow – Liquidity
 Income Statement – Profitability
 Pro Forma Statements
 Balance
Balance Sheet




Summarizes Assets, Liabilities (Debt), Net
Worth
Net Worth = Value of Assets – Value of
Liabilities
Current (< 12 months), Intermediate (1-10
years) Long Term (>10 years), Non-farm
“A Balance Sheet is a snapshot of the farm’s
financial position”
Cash Flow


Summarizes all cash in-flows and out-flows for a
period of time
Checkbook Accounting
– crops & livestock sales, receipts, sale of
capital assets, borrowed money
 Out-Flows – production, capital expenditures, loan
payments, living expenses
 In-Flows


Important on farms because of seasonality
Projected and Actual Cash Flow
Income Statement







Summary of revenues and expenses for a
specific time period
Revenue – Receipts from sales, government
payments, dividends
Expenses – Production expenses, interest,
taxes, insurance, loans
Inventory Changes – Accrual adjustment
Depreciation and Capital Adjustments
Revenue – Expenses = Net Income
Main purpose is to determine how much
income was generated by the farm operation
Projected Financial Statements
Lender, farm operation or other factors
may require projected financial statements
 To do this review enterprise budgets and
financial statements

Implementation Strategy
Research completed, finances in order
 Time to implement

 Production
 Management
 Marketing
 Human
resources
 Finance and accounting
Exit Strategy
Agriculture includes many risks. These
should be considered
 What are your exit signals

 Farm
profit
 Set age
 Estate plans and farm/business transfer
 Change of markets
 Property value
Human Resource Plan
The people part of your plan
 Does not matter how large or small your
business
 Parts of the Human Resource Plan

 Position
and duties
 Organizational chart
 Skills and training
Position and Duties

Include
 Position
or name of who is responsible
 Duties and responsibilities of the position
 Skills and talents
 Salary and wages
 Works schedules

Seasonal, part time, full time
Organizational Chart
Skills and Training
Continuing education and advancement in
technology is very important
 Includes

 Skill
Needed
 Training available
 Who in the farm business is responsible
Resource Inventory
Gathering resources whether physical or
an expertise is very important
 Resource Inventory Includes

 Building
and facility requirements
 Building and structure inventory
 Equipment inventory
Building and Facility Requirements

Physical Resources
 Land,
Livestock, Equipment, Facilities,
Transportation

Expertise
 Computers,
production

Other
marketing, record keeping,
Building and Structure Inventory
Building
 Purpose
 Square Feet
 Required Features
 Location

Equipment Inventory










Equipment Name
Model
Size
Year Purchased
Age
Condition
Ownership
Book Value
Market Value
This keeps valuable information needed for your
financial statements
Appendix
Can include maps
 Contact sheets
 Budgets

Marketing and Sales
Direct Marketing
When a farmer sells commodities in a
traditional marketplace the main concerns
are producing the crop, selling it for a good
price, and then getting paid.
 In direct marketing farmers have these
same concerns plus the added
responsibility of marketing.

Direct Marketing
Responsibilities
You will have to prepare your product in a
form that can be sold.
 You will have to find your customers
either by going to them or having them
come to you.
 You will have to choose a location for
your marketing efforts.

Direct Marketing
Responsibilities
You may have to advertise your products
or operation to attract customers.
 You will have to deal with individual
customers.
 Since you are selling food for human
consumption you will need to address
customer satisfaction and perhaps deal
with a few customers who are not
satisfied.

Direct Marketing




Profits: potentially higher
Cash flow: customer pays you directly
Marketing control: can produce what you want
and set your own profits
Diversity: works well with small farms
Direct Marketing




Volume: less product is usually sold than with
other marketing ventures
Time: requires more of a time commitment
People skills: you are dealing directly with
people (need to always wear a happy face)
Marketing skills: its competitive, you are going to
have to sell your product
Farmers Markets





Form of direct marketing
Preparation: requires little
preparation by producer;
public enjoys convenience
Startup: minimal costs and
marketing skills are
needed
Direct interaction: best
feature is contact between
customer and producer
Weather: at its mercy for
rain, heat, & cold
Farmers Market




Comfort: you are out in the weather all day
Time: you will spend the better part of a day at
the market
Direct competition: competing producers are all
together in a small area
Regulations/policies: you have to be able to
follow rules set by market management
Pick-Your-Own





Has long been a successful direct marketing
venture
Customer pays to pick: if it was just that simple,
everyone would be doing it
Cost reduction: biggest advantage
(transportation, handling, storage), labor for
harvesting is offset by the cost of people movers
Customers buy more: PYO pickers typically
purchase more than other markets
Lack of privacy: you are allowing the public on
your farm
Pick-Your-Own





Liability Insurance: insurance companies get
“twitchy” about PYO and having people roaming
your farm
Damaged crops: customers and their kids will
pick-over and damage crops
Bad weather: will chase away customers; this
can be a problem with limited season crops
Labor costs: need cashiers and people movers
Price: PYO prices are often lower; customers
expect compensation for their labors
Roadside Markets
Attracting repeat customers: this is key to
the long term success of your market
 Save costs: there is cost savings in
transportation, packaging, and middlemen
 “Catchy” signs/displays: are necessary for
attracting customers to stop at the stand
 Overhead costs: are higher due to the
facilities

Roadside Stands should look
neat and clean with fresh, ripe
produce.
The appearance of your
facilities and grounds reflect
on your management skills.
Roadside Markets



Planning and Zoning: government red tape,
signage etc…
Location: key to success (needs to be near
enough to main roads to attract customers and
repeaters
Facilities and buildings: first thing people see of
your market (you want to put the best possible
look on your stand)
Community Supported
Agriculture




CSA’s are new, fast-growing direct marketing
venture
Members purchase shares of the farm’s harvest
and accept production risks
As the crop matures, it is harvested and divided
up among shareholders
Shareholders get a fresh supply of produce and
support local agriculture (urban-rural linkage)
Community Supported
Agriculture
Shareholders have input into what is
grown, varieties, and how it is grown
 Fees are paid in advance, this guarantees
the farmer a market for everything
produced, the crop is sold before it is
planted
 Advanced payment creates working
capital for the farm operation

Community Supported
Agriculture
CSA’s allow better off-season planting
 CSA’s help to spread out risks, everyone
shares in the good and bad times
 Shareholders sign a contract
acknowledging the risks to anticipated
yields
 CSA’s have reduced labor costs
(customers help with production)

Wholesale Marketing




Profits: selling directly to the retailer, bypassing
the middleman, is best
Product identity: you can develop your own logo
or packaging to enhance the product
Opportunities: they are out there, if you are
interested (specialty crops)
Specialty crops: retailers are especially
interested in crops not produced by the larger
farms
Wholesale Marketing






Transportation costs: you will have to deliver your
product to the retailer
Special handling and grading: some retailers have
particular requirements and standards for products;
these vary by retailer
Special packaging: some retailers are very “picky”
about how you deliver product
Prices: wholesale is usually 50% less
Limited diversity: less diversity is risky
Pooled production: small farmers will need to work
together to meet production demands
Wholesale Marketing






Selling to Restaurants
Comfortable Marketing: you will develop
relationships with chefs and others
Consistent income: price is established for the
season
Frequent deliveries: lack of storage at
restaurants may require more transportation
Liability: a law suit on a restaurant could reach
you if your product was involved
Out of business: the turnover is high in the
restaurant business, so be careful
Wholesale Marketing
Producer responsibilities to retailer
 Retailer’s reputation: it’s on the line with
your product
 Be reliable: retailer needs to count on you
 Consistency: deliver a consistently high
quality product for the retailer to sell
 Time: be on time with deliveries

Rules and Regulations





Zoning and covenants: check with the county
Planning & Zoning Dept.
Permits and licenses: county and state (private
applicators license, nutrient management plan,
farm plan, more)
Sign limitations on roads: roads dept.
Labor laws
Health Department regs: affects some value
added products
Rules and Regulations
Sales tax: you may be expected to collect
taxes on sales
 Liability insurance: you will want to talk to
your insurance agent about liability
insurance
 “Certified Organic”: you can sell organic
products, you can only use the “Certified”
term when you are approved by the state

Customer Service
Farm Business: success will depend
largely on how you treat your customers
 Customer service: reduces loss of current
customers, gains new ones, and makes
current ones happier
 Data: shows that caring about customers
can reduce the number of lost customers
by two-thirds

Customer Service

Dissatisfied Customers can ruin your business

Unhappy customers will relay their unhappiness
to 9/10 of their friends

Usually 12% tell
more than 20 people

30% will stop buying
your product
Customer Service
Basic building blocks of customer service:
 Find out what customer wants or needs
 Build a relationship with your customers
 Always help your customers
 Always keep work area neat and clean
 Recognize customers at once

Customer Service






Some more customer building blocks
Tell customers what you can do, not what you
cannot do
Angry customers should always be handled with
care
The owner/operator should always set the
example for customer relations
All employees should be familiar with the
customer service policy of the business
Remember the customer is always right
REVIEW
Personal, Family and Farm
Considerations
What are your business qualities
 What are your family needs and
preferences
 Risk Taking
 Hopes for the future
 Preferences

Where do
you want to
be?
Identifying Alternatives

Look at resources
 Physical
 Marketing
 Management
and Labor
 Financial

New Enterprise ideas
What are the
possibilities?
Production



Production Information
Budgets
Actual Production
 Climate
 Soil
 Water
 Building
and Facility
 Machinery and equipment
 Labor
 Quality and Production Rate
 Legal, regulatory and liability factors
Can it be
done?
Profitability
Income Statement
 Estimating Receipts
 Estimating Expenses
 Enterprise Budgets are helpful

Will it make
Money$$$$
Financial Feasibility

What is Cash Flow
 Seasonal

Financing
 Capital
and startup costs
Can you
afford to
do it?
Making the Decision
Yes
 No

Will you start
the new
enterprise?
Good Luck on your
New Enterprise!
Resources
Poole, Terry: Ag Agent, Fredrick County
 Farming Alternatives, NRAES
 MDA
 USDA
