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

Here’s a small secret of business: You need a problem. To be more clear, somebody ELSE needs a problem, and the purpose of your business is to solve it.

One of my first business ventures was a lawn mowing company that I started in college. The business plan was very simple: I bought a mower, borrowed a trailer and leased a garage in exchange for mowing the lawn in front of it. Then I printed fliers advertising my services, and distributed them to mailboxes in the fanciest neighborhood in town. This seemed like a good plan, until a wealthy-looking fellow in a Dodge Viper pulled up to my parked Jeep to give me a little insider info: “The homeowners association mows our lawns, son. You’re wasting your time.”

In that neighborhood, there was no problem to be solved. They already had a GOOD mowing solution, and it even happened to be free.

A problem can be local, like a lack of decent Mexican restaurants in small-town, Kansas. Or a problem can be much larger, like a lack organic wine grapes in Northern California. But if there is no need for a better (or first) Mexican restaurant, or no need for more grapes, there’s no reason to build a business that provides either of those things.

I’m surprised at how often this “secret” gets ignored. How often do you see a new restaurant, surrounded by other restaurants, close in 6 months? Was there a need for another restaurant? There may have been, if the others were poorly run. Otherwise, a new restaurateur is wasting his time. (Also, he should start with enough cash to survive more than 6 months without revenue, but that’s a blog for another day.)

Brewing beer or making pizza is a hobby, if it doesn’t solve a problem. If I start a brewery because I like to brew, but nobody has a lack of excellent beer, it won’t be much of a business.

Some of the best companies in the world solve problems people never knew they had, like Henry Ford’s Model T (horses were too slow), Apple Computer’s iPod (MP3 player’s were awkward and bulky), and Garmin’s Vivofit (fitness bands had terrible battery life and limited water resistance.)

Fortunately, there are plenty of problems to be solved, needs to fill and variations of existing solutions to invent. For every one neighborhood that doesn’t need a better lawn service, there are 10 others that do.

Christian

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