The meat program at Six Sigma Ranch started with a customer request. There were cattle in the pasture and people wanted to know if they could buy the meat. So, Christian started a waiting list. The first year he processed 4 steers for customers who had asked. The news spread in the tasting room and more people signed up for the waiting list. He later added lamb and pork to the offerings.

Last year we processed 30 hogs, but that is not how we started. What Christian had created with the processing of 4 steers was the minimum viable product. What is that, you ask?

“A Minimum Viable Product is the smallest thing you can build that delivers customer value (and as a bonus captures some of that value back)“ http://leanstack.com/minimum-viable-product/

Too often people get caught in the big investment trap. Thinking you need to go big or go home can either keep you from ever starting, or leave you spending a bunch of money in an un-wise way. Creating a minimum viable product allows you to start up and fine tune without the expense. It’s much easier to turn a small boat than a cruise ship.

“A minimum viable product is therefore not a product. It is a minimum viable go to market step.” – The Lean Start-up

If you have a hankering to start something, try asking yourself these questions:

1. What is it that you love to do, create or talk about?
2. What kind of product could you make based on your passion?
3. What is the most basic version of this product?
4. How can you make it with minimal investment?
5. What is the required investment?
6. Do you have resources to available to build/produce some?
7. What is the required price to cover the cost of production plus overhead?
8. How many do you need to sell to break even?
9. How long will it take you to have one ready?
10. How fast can you make them?
11. Who are the people that love this kind of product?
12. What do the people who are most likely to buy it think of your idea?
13. Where can you sell it?
14. Where can you market it?
15. When will you launch your product?

After the launch:

1. What is the customer feedback on the product?
2. Can improvements be made?
3. What kind of funds does it take to increase production?
4. Start again with #5 from the top, only with increased production.
5. And repeat

If you love the idea of agriculture, here are some ideas to get you started.

1. Get chickens and sell the eggs to neighbors and friends.
2. Sell live chickens that you have raised and offer to process them for a fee.
3. Make “non-hazardous” food goods through your state’s cottage food law.
4. Get a goat and start a natural thistle and weed removal service.

If you are already farming, apply the same principles when adding products or changing your marketing scheme.

1. Stop selling all your steers at auction and use 1 or 2 of them for direct sales to customers.
2. Take some of the wheat that you usually sell to the co-op, grind it for flour and sell it to your neighbors.
3. Get sheep to graze under your orchard trees, sell some of the lambs to auction, but keep a couple to process for direct sale.
4. Have the wool from your sheep spun into yarn . . . sell directly to customers.

-Rachel

I recently met the owner of a local business.   While sharing about his company, he told me that they now have 50 employees. The same figure came up in casual conversation later that week with one of his employees.

It amused me that both men shared this seemingly arbitrary figure. (A company likely would do better to measure growth based on revenue, or club members, or subscriptions, just to mention a few.)

Several business experts, including Jim Collins (author of Good to Great) and Jack Stack (author of The Great Game of Business), emphasize the value of what Stack calls a “critical number,” a metric that represents the success or failure of an entire organization.

The value of such a number, one that unifies the effort of the team in a single direction, is obvious. And it’s interesting to observe that humans are programmed to pick such a metric, whether on purpose or not, and use it as their measure of progress.

With that in mind, one may be well advised to think that “critical number” through, and make it official, before a figure like “employee count” (and a bloated payroll) takes over as the key measure of success.

Christian

A toy store is selling the last dream doll this Christmas, and 5 customers in line have expressed their desire to buy it. What would be the fair way of deciding who gets the doll? Options include: An auction to the highest bidder, a lottery or selling it to the first person in line?

From an economist’s perspective, the answer is an auction to the highest bidder. We are, after-all, trying to make a profit, and theory suggests that the person who wants the doll the most will be willing to pay the most for it. Supply will equal demand. That answer will get you an A in your business class, but is it the best way to run a business?

Of the persons who took a survey organized by Kahneman, Knetsch, and Thaler*, 75% considered an auction to be the “least fair” option. Thaler, in particular, is an economist that studies how people really behave as opposed to rational business behavior.   If you said “to the first person in line,” you agree with 68% of the people surveyed.

People seem to have deeply seeded rules of fairness. The rules may vary from place to place, but as a business owner it is important to know them. If a business makes a decision that is wise and efficient, but violates the generally accepted rules of fairness, they will lose customers.

Don’t get me wrong; it is important to know what maximizes profit. Not knowing that information will close business doors pretty fast. But every decision should also be balanced by a look at what is best for your customers and the little girls that would love to get that amazing doll for Christmas.

-Rachel

*Kahneman, Knetsch, and Thaler. Fairness and the Assumptions of Economics. Chicago: Journal of Business, 1986.

Dear Friends at Modern Farmer Magazine,

Rachel and I read your publication with enthusiasm.  From stunning photography to witty prose, each issue is an encouragement to our agricultural ventures.

With that in mind, may I humbly share a concern in your September 2015 issue?

We couldn’t find the old-fashioned “letter to the editor” box, so we will share it here instead, and tag you on Twitter.  This is, after all, Modern Farmer Magazine. =)  

On page 47, David Zuckerman writes about his experience running CSAs.  As a fellow direct-to-consumer farmer, I’m not so sure about his recommendations on pricing:

“See what other area CSAs charge and study the price of seasonal produce at…and supermarkets. Then try to undercut them all.”  

That strategy may grow a customer list, but it defies the laws of microeconomics to expect that a small-scale producer can compete with supermarkets on price, and still make a decent living.  Supermarkets, and the corporate farms that supply them, are designed to be efficient and price competitive.  They are machines built for volume over profit margin, and it isn’t possible for a small farmer, taking all costs into account, to get properly compensated for her work while fighting them in a price war.  That would be like asking a one-man, hand-made furniture producer to compete with prices at IKEA.  He simply can’t do it.

A small farmer provides a completely different customer experience.  She replaces the soulless supermarket with a transparent production system, a smiling face and a compelling brand.  On that playing field, she is untouchable.  She should talk up the clean and safe production practices, show pictures of happy grazing animals, and then let customers draw conclusions about those “other” producers.  Fortunately for her, a growing crowd of customers are figuring out that food decisions are too important to be left up to price.

Sincerely,

Christian

      Imagine with me that a friend in 1942 told you “Hey, I want to start a diner in the town of Sikeston, Missouri.” You might respond by asking a few questions, like “where is Sikeston,” and “how does that possibly sound like a good idea?”

Imagine now that your friend said “it is on a lonely stretch of highway north of the Oklahoma border,” and “because I expect that Elvis Presley, Jay Leno and Morgan Freeman will visit it.” Ignore for a moment the anachronism that your friend in 1942 would have little knowledge of Elvis Presley (who would have been 7 years old,) much less Morgan Freeman or Jay Leno. You would likely tell your friend “you are insane. Stop it.”

And you would be wrong.

In 1942, the Lambert family opened Lambert’s Café in Sikeston, Missouri. In 1976, Norman Lambert threw the first roll at a waving guest across the crowded restaurant, launching (no pun intended) the “throwed rolls” for which Lambert’s is now world famous, as proved by the all-star guest list including the three above and many more.

To be clear, Lamberts is not just a diner with rolls flying across the room. It is also a very well-managed restaurant with a focus on creating an overall remarkable experience for guests.

The point is that, while the obvious answer to “let’s build a diner on a lonely highway in Missouri” would be “no,” it’s not always about the location, or even the concept of a diner. It’s about the power of a family and team determined to create something remarkable, and the effort the world will go through to find them when they do.

Christian

As pathological encouragers of small agricultural business, Rachel and I are occasionally asked a variation on the following question: “Can I survive on a cottage business that sells scented candles? How about Merino wool, lavender oil, or bee’s wax?”

The answer is: “Maybe.”

Consider the following: How many dollars does the average American household spend on your future product? The answer to that question will help you figure out how many customers you need. For example, if you plan to sell pastured meat to customers who spend $500 per year, you need 400 customers to gross $200,000, netting a decent living wage after expenses are paid. That’s 400 names, addresses and Christmas cards you need to keep track of.

Meanwhile, a purveyor of fine candles might be lucky to sell $50 worth of product to a given household, requiring instead 4,000 customers to make a living wage.   That’s a lot more Christmas cards.

Local cottage business is easier with products like beef, dairy or jam, items that represent hundreds of dollars spent in a typical household.   Scented candles and other products that claim a smaller percentage of household income will require more customers, either from a high-volume store-front (think city) or a story-based online store with great photography.   If those appeal to you, you’re ready for the candle business. If you would rather sell to friends and family at the farmer’s market, you’re better off making cheese or bacon.

Christian

(PS.  Thank you all for following along with our ag-ventures on this blog.  We’re happy to see the growing crowd subscribing to learn from our mistakes instead of making the same mistakes at home!  Rachel and Christian)

It was a drizzly day at the Dallas airport. The last man aboard a Southwest Airlines flight did little to hide his frustration with the seating process, elbowing his way across a row to the last open seat. In the process he left an oversize suitcase sticking out of the luggage compartment.

A flight attendant approached the man to suggest checking his bag. The suggestion stirred a debate that escalated until the troubled passenger punched the flight attendant, laying him out across a row of seats.

Was that customer “always right?” The answer is obviously “no.” It’s a scenario often described by former Southwest CEO Herb Kelleher to prove the point that the customer is NOT always right.

Other companies including Disney have followed in Southwest’s footsteps, acknowledging that the customer might be wrong. The result is a better, safer work environment for employees who, in turn, can create a great experience for the customers who ARE right, and gracious accommodations for the guests who aren’t.

Christian