You have a great idea for a unique agricultural product, and you’ve decided to take it to the next level. You want to start your own business and make your passion a career. But before you stake your claim on that nifty new website, you’ll want to make sure you’ve considered the following five questions about your business.
Is there a need for your product on the market? You’ll want to consider how your product is different from similar options, no matter if you’re producing maple syrup or fresh vegetables. Who is your closest competitor and how are you going to differentiate yourself from that competitor? Determining what makes you or your product unique will help you find your customers.
How are you going to market your product? Now that you’ve identified why you are unique, it’s time to figure how you are going to build your market share. Who are your consumers? How can you get their attention? A roadside stand on a busy road might just need some colorful signs to attract customers, but if you are located on a side road or are relying on internet sales only, you’ll have to determine a different marketing strategy.
Are you priced right for the market? The right pricing model can make or break your business. If your prices are too low, you won’t generate a profit. Price your product too high, and you won’t sell enough to cover expenses. If you’ve answered the first questions thoroughly, you should already have an ideal price range. As an example, consider a producer sells out of a fall décor flower arrangement every fall. Due to the item’s popularity, could the producer raise the price 6% without customers batting an eye? Economics 101 points to supply and demand — if you have the product and market foundation right, this could be a good move for your business.
What is your major skill set, and who else do you need on your team? It is important to understand those parts of the business at which you excel. Perhaps it’s production, marketing or managing the business. Rarely does one possess skills in all areas. Your employees look to you to lead them. If you don’t know the answers, you need to find someone who does. A farmer who knows their product and customers, but does not have the financial skills the business requires will benefit from recognizing this fact early on. One real life example was a farmer who hired and fired himself as chief financial officer three times before finding a skilled CFO! Together, they now work to expand the business and bring the product to a larger market.
What is your risk management plan? Many business plans have very strong sales, conservative expenses and impressive net margins, but if farming was that easy, more of us would do it. How long will it take to ramp up production? How long it will take to sell your product and when will you get paid? If selling retail, you’ll be paid daily, but if you sell wholesale, you may have to wait 30, 60 or even 90 days to get paid. Can you afford that? If your restaurant sales dry up overnight, how quickly can you pivot to offering product to the home consumer? What if you lose your crop to drought or disease — do you have insurance? Evaluating your contingency plans can help you structure your business to succeed in times of stress.
Starting up a new business is difficult but can be very rewarding. As a FarmStart advisor, I suggest new businesses work through these five questions to help evaluate their position from the start and determine the best way to move forward to set the business up for success. To learn more about Farm Credit’s FarmStart program, click here.