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Choosing Products (that Create Profit)

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A friend asked this week about picking products that balance customer needs with his own farming interests. We don’t have all the answers, but we’re happy to take a stab at it!

Here are 6 things to consider:

Grow something you like! I would make a terrible lettuce farmer. I think it’s boring. For that reason, I have no business growing lettuce! Picking a product you enjoy helps you to produce it well, sell it with enthusiasm, and enjoy the leftovers.

Grow something people eat. This is obvious, but often missed. Don’t start emu eggs or badger-hair brushes unless you have a strong conviction about them. Instead, pick something people are already buying and create a brand and quality that outperforms existing options. Hint: Check out your local grocery store to see what gets shelf space. If there is a giant cooler full of eggs, they’re likely a hot item. If there is no section for pomegranates, they’re likely less popular.

Consider cash flow. Some products sell seasonally (think turkeys), while others grow seasonally. Obviously, a turkey farmer has to plan for the influx of cash during Thanksgiving to last the rest of the year, while an egg farmer has to acknowledge that chickens produce less in the winter. Financial discipline, or a mix of seasonal products, will keep seasonality from causing problems.

Consider your climate. Merino wool sheep hate hot weather (for obvious reasons) while California grows terrible coffee. So, if you’re settled on a location, pick crops or livestock that fit there. Or, if you’re settled on a product, move to where it will thrive.

Consider perishability. Before planning a business around a product, remember that some products have a great shelf life (think honey) while others don’t (think lettuce). While neither is necessarily better, it’s worth keeping in mind, to make sure your product fits your schedule and temperament.

Consider consumption rates. At Six Sigma Ranch, we sell beef by the quarter (100 lbs.) because people eat a lot of beef. For that reason, we can do a lot of business with a few hundred customers. If we were selling only olive oil, we would need to acquire and maintain more customers to hit the same sales numbers.

Christian

Ps. We love writing on topics from blog guests, so keep them coming!

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Best of 2014

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Thank you all for an AWESOME first year at YouHaveThreeCows.com!

Here are the top 3 most popular topics from 2014, in case you missed one:

1. “If you start a business and take out a loan, you’re a moron.” –  Mark Cuban

2. Trading in the $4,425,925 Pick-Up Truck

3.  Marriage, Work and My Personality Issues

Finally, do you have any topics you would like to see in 2015? Anything related to the business of agriculture (or, apparently, marriage and personality issues =) is fair game.  Shoot us an email or a comment below, and we will cover them in this new year.

Rachel and Christian

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A Tale of Two Choices

fork-roadBy nature, I make decisions slowly. I like to research options and compare. While that works for big decisions, it wastes time for simpler matters. Through interaction with more efficient decision makers (various mentors including my father), and reading of great books (authors John Maxell, Dave Ramsey and Andy Andrews come to mind), I’m learning to make short work of simple decisions.

Lee Cockerell, a former executive with Disney, also suggests a great question for making decisions. In his book, Creating Magic, Mr. Cockerell asks:

“Can we undo this if we change our mind?”

The question forces all decisions into one of two categories, those that CAN be undone versus those that CAN’T. The first category allows for faster processing, because there’s a way back.

Imagine, as an example, the following two topics that we get to consider at Six Sigma Ranch:

  1. Should we increase vineyard planting by 20% to keep up with demand?
  2. Should we increase pastured pork production by 20% to keep up with demand?

The first question falls in the CAN’T category. If we plant 10 more acres of wine grapes, we have the privilege of farming them for a long time, whether we want to or not. For that reason, the decision requires a lot of consideration.

The second question is a CAN question. Since we source piglets for our pastured pork from small family farms, and then raise them on our property, we can grow production with less risk. If we were to produce beyond the interest of our waiting list, we could take the excess to auction and recover the investment.

Before reading Creating Magic, I would be tempted to agonize equally over both decisions. Now I can save some energy on one, and use it instead on the other.

Christian

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Marriage, Work and My Personality Issues

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This post applies to marriage and work. Lets kill two birds with one stone! When Christian and I got married, I had a lot to learn about our personality differences. Hanging out with people all the time sounded good to me, but he preferred to stay home. He kept a grocery list and I just bought whatever I felt like when I got to the store, that is, if I remembered to go to the store. Different doesn’t mean wrong, and work relationships turn out to be the same.

There are certain tasks at work that are just loathsome for me to do. I, for one, don’t enjoy accounting. I would also rather work in groups than by myself. But there are others that love the details and would really prefer for their office door to be shut. These personality differences make a company complete. No one wins if the sales team rocks at selling, but all the goods are priced incorrectly. So, I’m trying to harness the strong parts of my personality so I can enjoy my work and be successful. And I need to surround myself with people who are good with details and vision.

If you’re not sure what your strengths are, you might consider taking a personality test.   My favorite is the DISC test that Dave Ramsey uses. This test helps you understand your positive attributes.

Oh, and taking a personality test helps at home too. For example, after taking the DISC test Christian and I found out that we are opposites in every way. I have myself a guy who is awesome with vision and details. Our differences really do provide balance in our marriage, and make for some lively debates.

Rachel

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Death of an Advertiser?

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This year, Rachel and I took the kids to a Christmas tree farm. I wasn’t familiar with the local options, so I turned to Facebook for recommendations. After a half dozen responses, several friends pointed to the same establishment, and we went on our way to cut a tree.

From the viewpoint of a small business owner, that’s a significant story. Why did we choose that specific Christmas tree farm? It was purely based on recommendations from friends. I had never heard of the place, or seen any advertisements for it. But I trusted that it was a good choice, and wasn’t disappointed.

Now, why did several people recommend the same place? It seems simplistic to say it, but it must be because they themselves were happy with the experience. And they were confident enough in the establishment to recommend it.

With that in mind, where would a small business in agriculture best put its customer-acquisition efforts? I don’t think the answer is yellow pages or advertising anymore. I would venture to say that the product (whether its bacon, apples or a tree-felling experience) is the key, now more than ever. I would suggest sampling ones own products (and the competition’s products), and surveying all the guests who do the same thing. (Most important survey question: Would you recommend us to a friend?)

Figure out how your products (experience) impact your customers (the good and the bad), and make them better. Once your brand clicks with your guests, it will spread like wildfire.

Christian

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Outsourcing Responsibility

We got a call on Monday evening that changed our schedule. The event manager for one of Six Sigma Ranch’s best customers announced that the wine for an event hadn’t arrived as promised. The event was to begin in Las Vegas at 8:30am the next morning, and our customer meant to use the wine as welcome gifts for his own top customers. He was, justifiably, disappointed.

The glitch was caused by another company, one that Six Sigma Ranch relies on for part of the shipping process. Our own team had executed perfectly, and so it wasn’t our fault.

Or…

That’s the trouble with outsourcing. We can’t tell our customer “so sorry, someone else messed it up.” Why? Because OUR customer trusted US to get him the wine. And so WE are responsible when it doesn’t arrive.

In fact, the title of this blog post is an oxymoron:

You can’t outsource responsibility!

Thus, our only options on Monday evening were to apologize and take responsibility for the error, or fix it. Fortunately Rachel has a real sense of adventure, so we put the sleeping kids in the car along with the wine, and drove all night to Las Vegas. We got there at 8:15am, 15 minutes before the beginning of the event.

As an unexpected bonus, the event organizer mentioned this gesture to our customer, who mentioned it to everyone else. Conveniently for us, we got to turn a bad deal into a real crowd pleaser.

But, the trip delayed our weekly blog post, a situation for which I apologize and take full responsibility =)

Christian

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Survey Says…

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I’m not sure which made me the most anxious, the 500 spectators, or the morning’s flawless presentation by keynote speaker and U.S. Air Force Lieutenant Colonel Tony Kern on the elimination of human error in the workplace. (Tony published his first book while I was a freshman in high school.)

Either way, it was with a healthy dose of focus and humility that I took the stage at the American Society for Quality (ASQ) conference in Phoenix last February.

The invitation to speak at the conference came with a request that I share about Six Sigma principles in an “unusual environment.” Six Sigma principles, of course, are the business -improvement practices made famous by giants like Motorola and General Electric.

Thus my home base at Six Sigma Ranch and Winery made me well qualified for the topic, and even more qualified as an “unusual environment.” (According to the organizer, there would be no guests from the business of agriculture. Excellent!)

I share all that only to share what happened after the presentation.

The organizers handed a survey to each spectator on the way in, and each survey was collected on the way out. (Bouncer-looking characters were placed at the exits to insure thorough collection of data.)

The results from hundreds of surveys were sent to the speakers, which gave me a review of everything from my presentation format and content to the quality of slides and my personal posture. (According to several folks I apparently gave more attention to one side of the room than the other. Who knew? Otherwise, the marks were positive.)

I learned from all of this (in addition to several unsolicited but valuable comments on my presentation skills), that surveys are an incredibly powerful tool. With them, the conference organizers now know exactly who the crowd wants back, whom they don’t want back, and why. And the presenters (whether they are invited back or not) have great feedback to improve future presentations.

I was so amused that I created a simple survey for our wine distributors at Six Sigma Ranch. The result? Most were happy, but most asked for more printed marketing materials. That’s an easy fix, and we were happy to provide it. But if we hadn’t asked, we wouldn’t have known.

Christian

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Pondering Product Prices

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When we first started selling pork at Six Sigma Ranch, I really struggled with pricing. Pork at the grocery store was just so cheap. I ran the numbers and there was no way that we could cover the expenses of pasture raised organic pork at grocery store prices. It took a real leap of faith to set a price reflecting what the meat is actually worth.

It’s tempting when starting a farm business to price the same as what people can get at the local supermarket. Here’s the problem. The brands that sell to your local supermarket are often (but not always) large companies that sell huge amounts of product all over the country and, sometimes, the world. They compete with low-priced high-volume goods. When you set your price the same as theirs in an effort to get customers, you could be on the right track to go out of business. You may never make enough to break even as a small farmer.

But here is the awesome news: I found out that there are plenty of customers out there who are looking for high quality, amazing food and willing to pay for it!

Rachel

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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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The Farm in Alsted Mark

My great grandfather founded his family farm in the 1920’s in Alsted Mark, just outside Vonge, Denmark. There, 20 miles from Billund (later the birthplace of Lego Group in 1932), he and my great grandmother raised 7 of their children and an adopted son on 23 acres.

A few things strike me as interesting about this family-based case study:

First of all, the farm fed and financed the rearing of 8 children, meanwhile employing the two proprietors plus 2 male and 2 female apprentices, all on 23 acres. That’s 14 total people, or 1.6 acres per person.

Secondly, it was farmed according to organic principles, by default. (Nobody had considered chemical fertilizer until it became a by-product of bomb manufacturing during the Second World War.) Thus, fertility and bug control must have been supplied by the resident pigs, chickens and milk cows. In the same fashion, the operation never included a tractor; horsepower came from two Belgian beasts, obviously powered by grass. It’s fair to assume that the operation was also “carbon neutral.”

And lastly, little money was spent on education. That’s not to say that education wasn’t happening, only that it had a positive impact on cash flow instead of a negative one. Through a formal system of apprenticeship, young men and women could learn the trade under the guidance of a “master,” while performing valuable work.

The farm in Alsted Mark operated profitably this way at least until 1955, when my father remembers visiting as a youth. After that, my great grandfather sold it at a nice profit and retired to a job in town, brokering hogs at the Vejle Export Market.

While these observations obviously don’t translate directly to American culture in 2014, I find them interesting to dwell upon.

Christian

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