Wednesday, November 18, 2009

The business of small farming

I was reading another blog that I follow, and there was a posting about a seminar.  In the pitch for the seminar,  Rebecca Thistlewaite made two statements that caught my attention. 
"...Our business has grown by an astonishing 3,500% in 5 years — ridiculous, I know! — but somehow we have yet to see a net profit at the end of the year."
[of course your business is growing -- you're selling goods at a price lower than the cost of production.  Freebies are really popular!]

and

"...Am I in the wrong line of work, or do we just need to learn how to get better? Since we are not ready to give up yet, I vote for getting better at what we are doing: that is, more profitable and fewer-than-80-hour work weeks."
[the solution for not making a profit is to get bigger, work harder and longer and lose even more?]

I'm going to skip over the seminar, if you want to read the pitch, you can here, but I want to focus on those statements.

First, at some level, farming isn't different than any other business.  You have costs, goods you produce, challenges in producing those goods, inventories, taxes and books.  There's a misperception that somehow farming businesses aren't really businesses.  That by virtue of being a farm somehow you're immune (or should be immune) from the normal challenges that any business faces.  I just don't get the view, but it's' mostly folks who seem to want some sort of magic solution.   Maybe having a seminar will help us produce the magic solution.  I like a party, too!

My suggestion?  Enlist the help and viewpoint of someone who understands business and can, from that viewpoint, analyze and suggest different ways to do things, and often for free.  I suggested SCORE. 

Rebecca responded: 

 "...Now, I doubt a SCORE retired businessman who doesn’t understand agriculture would be able to reverse these trends that even expert agriculture economists can’t figure out. But I do think we can learn from each other and from the handful of farm businesses that are thriving and making a profit. "
Wait a sec -- someone with training and experience in business cannot understand agriculture?      Only people in agriculture can have any possible, useful input into a business which happens to be in agriculture?

 That's a pretty standard sort of response.  Dismiss data or input that doesn't match your own viewpoint.  Even if it's free.   Why can't people experienced in business understand agriculture?  Aren't most of the farms by sales volume run by people with business experience and expertise?    

What I see is that people who get into farming after having the experience of running some other small business tend to be more successful at making their business a going concern than those who don't have that body of experience.  Selling products you produce is a business, whether it's trucks or turnips.  If you cannot make a profit, which is a standard business problem, and you've run out of ideas, getting someone to take a look with a fresh viewpoint might be just the ticket to solve your problem. 

Rebecca also made the point that farmers income averaged $15,603 a year.  I don't know where she got her numbers from, there's no attribution, but when I looked it up here I didn't see that number, but I did notice that farm households, on average, earn 108, 110 or 113% of the household wage average.  Farmers earn more than the average income, probably mostly because they work two jobs. 

Which, by the way, is what Rebecca does.  Her second job is apparently to put on seminars.

11 comments:

sheila said...

Taking business advice from someone who admits they can't make a living at the business of farming. Yeah, sounds like a rip off. I'd rather take my advice from Lucy in the Peanuts comic strip. Hope the $45 get together makes everyone feel better about going broke farming. I see CSA's in my area thriving. Maybe that is a model they should be looking at.

Rebecca Thistlethwaite said...

The $15,603 was USDA NAS data from 2005 on net farm income average across the U.S.
If you look on our website (www.tlcrancheggs.com) you will be astonished at the prices we charge. They are probably higher than you have ever seen. We are trying our darndest to pass all the costs onto the consumers, also being realistic about what people can afford these days. For example, our higher end cuts like tenderloin and chops are not moving at all.
Most farmers have second jobs. Perhaps you don't, but it looks like you had the blessed fortune of making a lot of money in the tech industry prior to farming.
I met with SBA and SCORE many years ago when I was first starting out. They told me to talk to Cooperative Extension because they did not understand agriculture. They also would not give me an SBA microloan because they wanted to see 10 years of experience. So much for their help.
So if you want to quibble with me over costs of production, you might want to open up your books to your readers to see if you are doing what you profess, which is passing ALL the costs of production onto your customers and making a net profit.

Anonymous said...

mathasshole here: I think people like to think of farming as some sort of "perforamnce art" carried on for the benefit of their consumers, and not an enterprise that produces edible stuff (commodities or otherwise).

When people see that farming is a business, it bothers them. Hence you see attacks on Joseph Luter III, that focus on him living in NYC in a mansion:

http://www.encyclopedia.com/doc/1P2-703286.html

He runs a gigantic farm. People don't want to think of him as a farmer and businessman. So they attack him and say he isn't a "real farmer".

Anonymous said...

I think you are being a bit harsh on someone who is trying to educate and promote small farming, which, frankly, needs all the help and promotion it can get in today's society.

Anonymous said...

I dont see the unfairness in pointing out (rigthfully so) that if you dont treat your livelihood as something to live off of, you most likely wont be able to make a sustained living, or turn a profit.
Educating people is all well and good, but if you arent educating them into understanding how to actually survive as a farmer, your teachings are lacking in my eyes.

Rebecca Thistlethwaite said...

For some reason my earlier comment did not get published, but anyways I just wanted to make few things clear.
The $15,603 net farm income figure comes from USDA NAS statistics for 2005.
I did attempt to work with SBA & SCORE about 10 years ago. They told me to go talk to Cooperative Extension because, frankly, they did not understand the business of agriculture. They (SBA) also denied me a small microloan because I did not have 10 years of experience. So much for their help. Thus I look to others for advice.
I do find it odd that you would berate other small farmers as much as you do. Perhaps you want to take your anxious energy out on big agriculture who distorts the entire market.
Additionally, perhaps you want to check out our website (www.tlcrancheggs.com) and see what we are charging. I would venture that our prices are the highest you have probably seen, so no "freebies" here. You can only pass your costs onto consumers so much before they balk and stop buying. For example, with the economy in the shape it is in, our sales of high end cuts like tenderloin and chops are moving like mud.
As for the second job, the majority of family farms in this country have off-farm employment. You had the blessed luck of earning all your money in high tech prior to farming so now you can blow it all farming. Before you cast stones, perhaps you can open up your books to your readers so we can see all the net profit you are making after accounting for ALL of your costs.

Anonymous said...

Reality is harsh. If you don't make enough money you lose your farm, home, livlihood.

Farmers should pay more attention to their income than employees because often they have more to lose. It's not so easy to relocate or go find another farm and start all over again.

Bruce King said...

Rebecca, the first one may not have published because I hadn't approved it yet; my policy is to approve all comments unless they're spam, agreeing with me or not.

Bruce King said...

Rebecca, regarding books and scrutiny, I'm open to that idea -- with the condition that I get to see your books, too. Fair enough?

I'd be willing to sign a non-disclosure if you're concerned about the data getting to a competitor.

Bruce King said...

Rebecca, I've looked at your site and prices, and $6/doz isn't out of line with farmers market prices in the seattle area. In fact, the seattle farmers can't keep their eggs on the shelf, they sell out every time, which to me means that they've priced lower than they could. It seems high to you, and in fact, compared to factory-farm eggs, it is, but the market appears to support the better prices for better practices.

There are customers that are paying the prices on your site for meat every day -- have a whole foods market near you? Finding qualified customers is a standard business problem.

If you cannot sell what you produce at a price that makes sense, yes, you should get out of that market. That's business.

People who are successful at a business are also adaptable. You do what works, you discard what doesn't. You do what needs to be done.

Gold Forest Farms said...

Farmers are notoriously bad marketers. They want to farm, they don't want to sell stuff. Bad decision. We make damn good money at what we do on our farm and now we are attempting to expand slowly all the while working hard at selling. Anyone can do it, few actually do.