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How to save the Family Farm: “Put Your Name on Your Work!”

That phrase, commonly associated with frustrated elementary school teachers, is also priceless wisdom for any entrepreneur.

On the contrary, ignoring that idea results in the death of the small farm.

Allow me to illustrate with two stories:

In the first story, Farmer Sharp has three cows. He feeds them well and milks them efficiently. A truck from a generic milk brand (let’s call them Dairy Inc.) picks up his milk daily.

In the second story, Farmer Donaldson also has three cows. He also feeds them well and milks them efficiently. But, instead of selling his milk to Dairy Inc., Farmer Donaldson has it processed according to local regulations and sells it in grocery stores and at farmer’s markets using his own label, Donaldson’s Dairy. Farmer Donaldson puts his name on his work.

I oversimplify the dairy industry here to make a point: One business model has the capacity to be profitable, while the other doesn’t. Why?

When customers buy milk from Dairy, Inc., it doesn’t matter much to them who produced it. To them, the brand they know and trust is Dairy Inc., not Farmer Sharp. For that reason, Farmer Sharp is in perfect competition with the other farmers supplying Dairy Inc. (Perfect competition, according to my dear economics-trained wife, means that he is selling a good that is identical in quality to everyone else.) Subsequently, Dairy Inc. has the luxury of selecting suppliers by price, which means the price goes as low as it possibly can without driving every supplier out of business. The least efficient do go out of business. The most efficient (think big guys) may make some money. But everybody else (that is, every dairy supplying Dairy Inc. that isn’t the most efficient) is working on slim or zero profit margins.

Meanwhile, Farmer Donaldson has his own customers that know his brand. He is in especially good shape if his brand is distinctive in quality, story and appearance. That distinction may be as simple as being the only small, family-run dairy in town.

In summary, Farmer Sharp is forced to grow big (efficient) or go broke, while Farmer Donaldson gets to create value for his customers with a friendly brand.

That may make the difference between the beginning or the end of the family farm.

Christian

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