Entrepreneurship, Marketing, Strategy

How to Get Destroyed by Wal-Mart and Amazon.com (or not.)

IMG_2025.jpg

Our recent Airstream acquisition has allowed me to patronize stores that I hadn’t considered before. “Black water” tank sanitizer tablets, for example, were not part of Ahlmann family vocabulary before last week, nor had I ever installed a brake controller or shopped for a locking hitch ball, a clever device intended to keep unapproved folks from hitching up your rig without your permission. (This is particularly relevant if you’re sleeping in it.)

It was the locking hitch ball adventure that made me wonder if local shops in small-town America stand a chance. I first purchased said device at Wal-Mart, because I was in a hurry and already picking up diapers, but the hitch lock didn’t fit. Sensing a need for expert advice, and frankly for emotional support, I pulled into a local RV Service and Parts purveyor. “Yeah, we don’t sell a lot of those,” said the man behind the counter, clearly more interested in replacing a black water tank than helping me solve the problem. “Of course you don’t,” I thought to myself on the way to the door. “You don’t sell them when you don’t carry them!” But I saved this insight for a more receptive audience, and went to the second RV shop where…

…they didn’t carry them either. I was apparently the only one in town concerned that someone would hitch up and steal my house, except for the folks at Wal-Mart who carried the item for “houses” of a different size. But at the second shop they offered to order one. Fine, I thought. Never mind that I can order one from Amazon myself. Here I can at least get help to find the right size, and still have a chance at that emotional support I came for in the first place.

But alas.

To the owner of this store, it wasn’t clear from the catalog which size would be most appropriate either. And the frustration this caused him eliminated all chances of emotional support. So I politely excused myself after 20 minutes of strolling dusty aisles of tank valves and pre-LED RV lighting fixtures.

Amazon.com, you win.

Or do they?

In a nearby town, the 3rd owner of the local bike shop greets his customers at the door. He creates community by offering guests a soda while he works on their bike. He leads rides from the shop, and coaches the high school bike team. He offers professional-style fitting sessions for a fee, and builds customer relationships like a refined politician.

Are local shops in small-town America toast? Not until Amazon.com learns how to build community, fix bicycles and coach the local bike team. In the mean time, opportunities are alive and well for small shops that do business right.

Christian

Advertisements
Standard
Entrepreneurship, Strategy

Finding THE Way to Success… Maybe.

Long Meadow Ranch in Napa Valley sells high-end agricultural products directly from the farm, from honey and lavender to meat and wine. They run a popular farm-to-table style restaurant, with classy wait staff dressed in brand-consistent plaid shirts. Long Meadow Ranch is polished all the way through, proving that success in direct-to-consumer agriculture requires significant investment, business planning, branding and marketing,..

Maybe.

Polyface Farm in Swoope, Virginia also sells high-end agricultural products directly from the farm. But they don’t run a restaurant , and they certainly don’t spend a lot of money on branding. In fact, founding owner Joel Salatin and his son Daniel often wear work shirts from a thrift store with other people’s names on them.   Still, the Salatins make $2 million in sales from his local, direct-to-consumer farm operation per year.

So, who’s right? Should direct-to-consumer agriculture be elaborate and polished, or scrappy and simple? Long Meadow Ranch certainly looks fancier, but I wouldn’t be surprised to learn that Joel makes a higher profit on his simpler setup. In any case, both are successful by most standards.

It’s tempting to see a success, and assume an organization succeeded because they found THE right way to do things. But that’s rarely true. What those success stories DO have in common is they picked a direction, and kept on working at it.

Christian

Standard
Strategy

Stop Day Dreaming and Take Your Creativity to Market – A commentary on Eric Ries’ Minimum Viable Product

mvp-pick-two.jpg

 

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

Standard
Strategy

What’s Your Number?

audio-Front-Cover-FINAL

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

Standard
Strategy

It’s Not Fair

Itsnotfair

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.

Standard
Strategy

Letter to the Editor

csa-giving

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

Standard
Strategy

“Home of the Throwed Rolls.”

home-of-the-throwed-rolls      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

Standard