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

Have you ever heard of a company called Two Tunics? Don’t worry, no one else has either. It was an idea I had that flopped. I was going to make and sell scarves made with ‘up-cycled’ fabric and give a portion of the profits to help women in India start their own sewing businesses. Very Tom’s Shoes-esque. As I began to make the scarves, I realized that I didn’t enjoy sitting at the sewing machine all day and that a scarf is not all that original. As with many ideas, this never really took off.

Now imagine if I had taken out a business loan to start this company, and invested in a bunch of equipment and materials. Then imagine I didn’t like what I was doing, or the product simply didn’t sell. I would be either stuck in the company with the bank as my boss, or I would go bankrupt.

Mark Cuban, billionaire investor and owner of the NBA Dallas Mavericks, once said “if you start a business and you take out a loan, you’re a moron.” That’s a little intense, but I think he is right. It is much less expensive to fail small, and it gives you a lot more room to grow.

If your product really is amazing, the customers will begin to pay for your growth and experience. And, you get to be the boss instead of the bank.

Rachel

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What Walmart CAN’T do.

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As I write, a familiar battle rages here in the community of Lake County (50,000 residents, 7 stoplights and one Starbucks). The battle is between small-town America and the dreaded (or loved, depending on whom you ask) Walmart Super Center. 

Supporters of the blue folks from Arkansas say the big-box retailer supports the local economy by creating jobs and increasing sales tax dollars available for local government. Opponents say that Walmart kills local business, doesn’t actually create new jobs, and is a leading cause of small-town America’s decline to insignificance.

I propose a different viewpoint: I don’t think there has to be a battle at all.

Of course, if I’m running a generic grocery store next to the proposed Walmart, I’m facing a challenge. In that case I am selling the same products, but with poorer selection and at higher prices. But who says I have to do that? What if I instead focused on specialty products, local farm suppliers and great customer service? Then, suddenly, Walmart is of no concern to me. Then I’m in a different line of business, one where Walmart can’t compete at all.

Here are a few things Walmart CAN’T do:

-Provide a customer experience.

-Build customer relationships.

-Give advice on purchasing a home appliance, lawn tractor or power tool.

-Service a decent bicycle. (They can only sell you another cheap one.)

-Introduce you to a farmer.

-Repair a tire rated for a sports car, even if it’s installed on a Volvo station wagon. (Believe me, I tried. “It’s against policy.”)

-Let your children pick a pumpkin straight from the pumpkin patch, or a Christmas tree straight from the stump.

-Advise anyone on tomato plants or fruit trees.

Those things, and many others, are impervious to Walmart impact. But those things are way more fun, more important and more representative of what small-town America should be.

If, in the meantime, Walmart wants to sell me a cheaper box of Corn Flakes, I don’t have a big problem with that.

Christian

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The Purpose of Wealth

In 1996, professors William Danko and Thomas Stanley published a book revealing the habits of America’s super wealthy. The Millionaire Next Door is a collection of surprising discoveries about the affluent, including the observation that, according to extensive interviews and data collection, real millionaires don’t look or act like millionaires.

On average, millionaires wear regular clothes and inexpensive watches, and drive Fords. Yes, Fords. That was the preferred brand of transportation for the group surveyed. Mercedes made the top-10 list of auto brands, but otherwise the favorites were American cars and a few Japanese automakers.

So what did the super-wealthy have in common?

Most of the crowd was down-to-earth. Most were self-employed. Most were in a single industry for decades. Most also kept the same spouse for several decades.

Most of the millionaires kept detailed budgets for their companies and households. In fact, only a small percentage was wealthy from having large incomes, while many with large incomes were not wealthy. In summary, becoming a millionaire requires discipline and planning, but not a large income.

Why are we talking about personal wealth at YouHaveThreeCows.com? (This is, after all, a blog about changing the world via successful agricultural business.)

The reason is that the habits required for success in small business (like agriculture) are very similar to those required for accumulation of personal wealth: Discipline and planning.

Obviously, the purpose of farming is not to become wealthy. (If wealth is your primary goal, I recommend a different line of work!) But wealth, accumulated through sound business practices and healthy habits, does open some real opportunities to serve.

Consider, for example, this sandy plot of land in Mexico near Valle de Guadalupe. The site was inherited by a wonderful lady whom we will call Maria.

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Maria has dedicated the property to feeding orphans near a drug rehab center in a particularly poor area of Mexico. A Christian church full of privileged individuals from the United States has helped her construct the building with a kitchen and a well.

Rachel and I got to meet Maria last Monday at her property to help design a landscaping plan. Her goal is to plant gardens to create a calm, beautiful environment for the children. The plants will be mostly fruits and vegetables so they also help feed the kids.

Meeting Maria and her husband reminded me that wealth has no purpose except to serve others. And for that purpose, it can be a powerful tool.

Christian

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80/20 Vision

When I first took a sales job at a retail plant nursery, it came with a list of existing accounts.  Some accounts were great (easy to work with, profitable and great providers of referrals).  Other accounts were a real drag (difficult and unprofitable.)

My first reaction was to appreciate the good accounts, but spend most of my time “fixing” the bad ones.

That was a bad plan.

In any given company, 20% of the customers will likely account for 50% of the business.  It goes without saying that the remaining 80% account for the other half of the business.  My reaction was wrong for two reasons:

1.  It assumes the “Top 20” are already having all their needs met, and won’t generate more business.

2.  It assumes that there are no other customers available in the world.

Both assumptions are obviously silly.  But strangely, sales people (and small business owners who are by default sales people) make my mistake all the time!

A much better response to a list of 100 customers is:

1.  Who are the top 20? (Based on sales, but also factors like the quality of the relationship and referrals.)

2.  How do I rock their world with remarkable service and products that solve problems?

3. Where can I find 80 more like them?

Note that spending more time on the “Top 20” means taking attention from somewhere else.  Take that time away from the bottom 20%, the grumpy ones that don’t buy much anyway.  What would happen if your worst customers stopped buying?  Very little.  Please consider this permission to ignore them.

Side Note:  The idea of the 20% assumes that a small farm or business has multiple customers.  That’s on purpose!  Selling to a single customer, or selling at an auction where Mr. Market dictates the price, is scary business.  Finding multiple customers is the only way to run a stable business.

Christian

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The Finest Burger in the World?

If you visit Queenstown, the self-proclaimed Outdoor Adventure Capital of New Zealand’s South Island, it won’t be long before a local or fellow visitor suggests that you eat at Fergburger.  Image

The person recommending the establishment will likely include the fact that Fergburger claims to serve the world’s finest hamburger, and the recommender will likely submit his or her opinion as to whether or not the claim is true: “yes they do,” or “no they do not” actually serve the world’s finest hamburger.  In my experience, there is no correlation between the likelihood of the dinner recommendation and the recommender’s personal opinion of the quality of the burger;  lovers and haters will both point you in the right direction to try it for yourself.

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Queenstown attracts 1.9 million visitors per year for skiing, biking and hiking in the mountains surrounding a giant, beautiful lake.  That’s not bad for a city of 16,000 people.  And most of the visitors seem to visit Fergburger.  Needless to say, the city and the burger place  do very well for themselves.

So how do the owners of Fergburger do such a fantastic job?  I don’t know them, so this is speculation, but here are a few observations from my own visit:

1.  Location. Fergburger is in a fabulous location in a fabulous town.  And why not?  If I were to start a burger joint, (or berry farm, or brew pub or equestrian center), shouldn’t I put it where the people are?  With 1.9 million tourists, its likely Fergburger would get some guests by pure chance.  And they increased the odds by setting up shop at the bottom of the gondola leading to Ben Lomond, Queenstown’s most significant hiking, skiing and biking trail.

2.  Basics.  Fergburger has a great staff, great ingredients and a classy interior.  They get you in and out in a hurry.  The restrooms are clean and the cook is smiling.  No failures on the basics inhibit the experience.

3.  Focus.  The moment Fergburger claims to have the world’s finest burger, something happens.  Hint: This is often what makes the difference between a good company and an extraordinary one.  Suddenly the staff has a focus.  The guests have a reason to visit.  The owners know where to invest.  “Do we spend money experimenting with new salads, or displaying modern art on the walls?  NO!  We make the world’s finest burger!”  And the only purpose of the restaurant is to connect the world with that magnificent fact.

Now for the burning question:  Does Fergburger actually serve the finest burger in the world?  That is a very personal matter, really.  In this humble farmer’s opinion, after scaling Ben Lomond to 5,300 ft. and landing back down at Ferg’s front door, the answer was definitely yes.

Christian

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Creating Life Baaaah-lance

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Steven Covey wants us to balance P vs. PC.  What on earth does that mean?  He speaks of Production vs. Production Capability in his book, The 7 Habits of Highly Effective People.

Focusing only on Production Capability is like the life-long student who keeps getting more degrees but never applies them, or the well-fertilized garden with nothing planted. 

An example of focusing only on Production (that I am very experienced with) is overgrazing your pastures in order to raise sheep. 

When the sheep first arrived at Six Sigma Ranch, we had no experience with sheep.  What do you do with no experience?  Learn from Youtube . . . .  oh, and read books and seek the advice of experts.  Still we were not prepared for the experience of watching pasture.  We moved them from pasture to pasture as they ate the grass . . . . . all the way to the ground.  The next year, what were once healthy pastures had become full of unpalatable weeds, star thistle and foxtails.  We broke the balance of Production vs. Production Capability.

 The same is true of myself.  If I cram my schedule to the brim, I squeeze out ‘Production’ from myself but hurt my Production Capability.  It is not long before I realize that I am doing lots of stuff, but nothing really important.  By giving myself enough time to hang out with my family, read good books, exercise and pray, I maintain my own personal balance of Production vs. Production Capability.

Rachel 

 

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

I met with a discouraged farmer recently.  Let’s call him Farmer Jones.  In summary, Farmer Jones was concerned that “there ain’t no money in farming!”  We talked about options for increasing margins and decreasing risk (both good topics for another day), and then I left him leaning on his pick-up truck, pondering the impact of increasing feed prices on his bottom line.

As I got home, a thought struck me.  One simple change would have re-written the financial fate of the Jones Farm, and we were leaning on it the whole time:  The freshly-financed 2014 Ford F250 Lariat Diesel 4×4 pick-up truck.

A quick search found an identical truck at a local dealer for $73,526 (See burgundy truck below.)  Farmer Jones had financed the truck, but let’s give him the benefit of buying it outright, for the sake of a simple calculation.  The same dealer listed a nearly identical 2009 version of the truck (without the fancy Lariat leather seats), showing 50,000 miles on the odometer  (See white truck below.)  The price was $24,324, for a difference of roughly $49,000 between the 2014 and the 2009 with fewer options.

Let’s imagine now that Farmer Jones had been in the habit of buying the 5-year-old truck for his entire career, starting at age 25.  He had replaced it after 5 years each time, with another 5-year-old truck.  Again, using rustic math, we divide the $49,000 difference in price by the 5 years of use, and find that he saved about $10,000 per year.

If Farmer Jones had invested the difference into the US Stock Market, he would have made 12% interest every year on average, during any 40 year period (his career) since the great depression in the 1930’s.  That figure comes from Dave Ramsey, America’s financial planning guru.  We’re farmers, so let’s use a slightly more modest 10%

A sum of $10,000 per year, invested at 10% for 40 years, results in $4,425,925.  Yes, that’s 4 million, thanks to the power of accumulated interest.  And if that money were re-invested into a well-managed farm, the return would be similar.

Its safe to say that Farmer Jones isn’t aware of to the real cost of his fancy transportation, and not sure why he retired with a shiny truck but very little money.  In Texas, they call that “all hat and no cattle.”

Christian

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Dream. Big.

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I was admittedly surprised when Ken Grossman called my cell phone.  I had sent him a few bottles of wine, with a polite letter asking for his input on a school assignment.  But I knew very well that the founding owner and CEO of America’s second largest craft brewery wouldn’t have time to connect with every college student who wanted his attention.  And yet, there he was:  “This is Ken at Sierra Nevada.  What did you want to talk about?”

The assignment for class was to profile a “sustainable business.”  Sierra Nevada is certainly that, with everything from solar panels and fuel cells to a hybrid Peterbilt, but what I really wanted to know was this:  How did Sierra Nevada, founded in 1980 along with hundreds of breweries during the same decade, create a mob-like following of consumers who now support production of one million barrels per year?  Fortunately for me, Mr. Grossman withheld little information on that topic.

What followed was a great business leader’s humble recollection of starting a company in a barn, and growing it into a national brand.  It included all the expected, the focus on hiring and retaining great people (the brewmaster is the original, the company’s second employee) and a quest for quality over profits and growth.  It included being at the right place at the right time.  (Have you ever noticed how great leaders take very little credit for success, almost as if they stumbled upon thousands of great decisions by pure luck?)

And then came the most interesting answer to a question I had hesitated to include.  “What would you do differently, Ken, if you were starting again with a small brewery at age 30?”  (He must have guessed that I had a personal connection with the question.)  “What would I do differently?”  He repeated the question.  “I would have dared to believe that Sierra Nevada could become what it is.  From the start, I didn’t believe it.  And so I didn’t plan for it.  If I had dared to dream it from the start, imagined that we would physically outgrow the block with buildings for the brewery, I would have planned it better from the start.”

Christian

http://www.SierraNevada.com

 

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New Strategy: Ignore the Competition

Mr. Brown finished his career in software at age 50 to start a farm.  He bought a plot of land in Smalltown, Kansas, and moved his family to live on the 40 acres.  Observing the neighbors, Mr. Brown, saw that they were growing corn, wheat and soybeans, and selling their crops to the local Co-op.  He considered that strategy, therefore, to be what his previous industry would have called “best practices.”  

Mr. Brown (now Farmer Brown!) bought a 60hp John Deere Tractor, planted his fields and began to farm.  After the first harvest, he saw that the profit margins were tight.  He realized that he had to become very efficient, as his neighbors were, to have a profit left over after covering expenses.  His neighbors were familiar with that strategy, and also became more efficient.  Prices went lower, as efficiency increased.  Farmer brown eventually took a job in town to support his farming habit.  

Hold the story there for a minute.  Lets try a different, daring and possibly dangerous strategy from the start.  IGNORE THE NEIGHBORS.

Take it from the top:

Farmer Brown bought 40 acres of land in Smalltown, Kansas.  He looked around to find some potential CUSTOMERS.  A half hour drive from Smalltown, he found Middlesize, Kansas, with a population of 400,000 people.  Farmer Brown planted 2 acres of pumpkins and a small apple orchard, and advertised both in the local paper in the fall.  Many of the folks in Middlesize had never seen a pumpkin growing on a plant, and found it fascinating.  Parents were happy to pay full retail price for both pumpkins and apples, especially if the kids got the glorious experience of picking the crops themselves.  (And Farmer Brown was happy to let the kids do the work, and save him the trouble of storage, shipping, and loss of margins to a wholesaler.)  For his second year, Farmer Brown added a corn maze and a hay ride, and expanded the pumpkins and apple orchard.  The local paper wrote an article on Farmer Brown, because NOBODY HAD EVER SEEN A BUSINESS LIKE HIS in Middlesize before.  

In 2004, Authors W. Chan Kim and Renee Mauborgne published a book called Blue Ocean Strategy: How to create uncontested market space and make the competition irrelevant.  The idea, in summary, is that existing markets are “red oceans,” bloodied by the competition of companies fighting for the same customers (market share).  The authors encourage a search for “blue ocean,” wide open markets uncluttered by competition.  Blue Oceans take a little effort to discover, but they reward the adventurous with open waters and endless opportunity.

Christian 

 

 

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Good to Great

Have you read Good to Great by Jim Collins? It would have been so awesome if I had read this book in High School, though, I may not have understood it. Jim says that all highly successful companies have figured out three things: 1. What they are passionate about, 2. Where they are talented, and 3. What they can make money doing. I had not figured this out for myself when Christian and I moved to Denmark. 

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My first job out of college was in the accounting department of a humanitarian organization in Denmark. This was challenging for a number of reasons.

  1. I don’t speak Danish
  2. I passionately dislike accounting (and I’m not good at it)
  3. I was paid very poorly

I loved the organization’s mission, and that is why I stayed.   What I was missing is Jim Collins’ three circles. Of the three circles, talent, passion and economics, all I had was passion.

Finding a passion that can support your economy and that you are actually good at is not always straight-forward. I love chocolate, movies, sewing, eating, running, graphs, saving the world and, on the top of all of that, Jesus. Where do I start! I decided to start with my passion. I started with poverty. I’m deeply moved to participate with man-kind in improving the situation of those in need. That’s my passion. That organization in Denmark was working on relieving poverty in Africa. I could do something I hate and didn’t understand because it supported my passion.

Knowing what I’m passionate about was the over-arching piece of my three circles. I can now figure out how to apply my talents to my passions.  I do have talent with grazing animals and organizing projects. And farming is the place to supply the economy. Can we change the world with farming? Oh yes we can!

And when you do something you are passionate about, talented at, and that provides an income, well, it’s a beautiful thing!

Rachel

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