Friday, March 17, 2017

Sugar Mountains' butcher shop project - year 9 and counting

Just a note - if you're a farmer, and you want some free money, kickstarter seems like a great place to get it.  Here's why I say that:

The project money is offered basically with no, or not many, strings.  That is, if your project is late or has a delay, or just doesn't get done at all, there's very little recourse your backers have.  So from the perspective of the person receiving the money, it's a great deal. 

The idea was to build and operate a meat processing facility on the farm where the pigs were - and by doing so capture some of the money that would normally be spent transporting the pigs to slaughter and then picking up the processed pigs at a later date, and the fees that would be charged for that. 

The basic thinking is that instead of the revenue going to some other organization that it would be retained on the farm.  For any farm, the prospect of getting more of the retail dollars spent on their product is appealing, and the second benefit is that having more control over your process would
allow better and easier scheduling.  You could process when you had orders.  No downside.  

Walter Jefferies also had the goal of " sourced demonstration of how a family can bootstrap their own USDA/State inspected meat processing facility. "

The risk with kickstarter projects is that the average internet user isn't used to evaluating risks and challenges of a small business, and isn't usually given any tools to do so.  when you go to a bank and ask for money they may ask for a business plan, tax returns, revenue forecasts - past and future - and other documentation that shows that you've done your homework and that at least on paper the venture pencils out.  

In this case one of the first things that Walter did was buy a scalder/dehairer for $40,000, which he duly noted as having arrived, but what's funny about that is that there's no mention of that machine for the next 5 years.  No pictures of it installed, no pictures of it in use.  Near as I can tell the machine has been sitting there, in its factory packaging, for the last 5 years.  

I've scalded and scraped more than my share of pigs; takes about an hour per pig for one person do
do a good job, and with the volume of 20 pigs a month that walter claims he's doing, that would cost roughly $400 (figuring labor at $20/hour for 20 hours) per month. 

Which means, on a labor saving basis, that machine will pay itself off in... well, never.  But I understand wanting new stuff myself.  

Here's the latest schedule from Walters website:

I've asked Walter on the kickstarter page if he ever plans to complete the USDA portion of this project; and two weeks after asking no reply.  

Walters kickstarter backers have been complaining about the schedule for the last few years, but as mentioned previously, there's not much recourse.  He'll either complete it (or not) and if you get anything he promised you, well, that's a bonus.    


Dave said...

I gave up following his progress or expecting my sausage years ago, if he ever does send it I hope he verifies the address first as I have moved.

Nick in RI said...

Bruce --
I won't defend the timeline, but I want to add something to the discussion. I've been a long-time reader of your blog, and you've been critical of Walter's idea of building a slaughterhouse for a while. But I can also tell from reading your blog that things are very different where you are than they are here in New England.

For reasons that are unclear, it is difficult and expensive to get animals slaughtered here. Where I am it's a two hour drive each way to the nearest facility. We're excited that a slaughterhouse should be opening this spring one town over. Here's the article:

In the article, it says the facility is going to cost $2.5 million and process 2,000 animals per year. No, those aren't typos. If you figure the cost of capital for something like this is 10% a year, that's $250,000/year to pay for the facility, which works out to $125/animal. That's before any operating costs. I have no idea why it's so much. But if that is really where the market is, then what Walter is doing actually kind of makes sense. (If not the way he's going about it). If a facility that handles 2,000 animals a year costs $2.5 million, then one that does 20 a month -- 240 a year -- makes sense at $300,000. And he's spending a fraction of that.

Now the unanswered question is what makes them so expensive.

Bruce King said...

I'm not critical of walters idea - as I've outlined in this post there are many advantages if you're selling meat to have more control over your product, schedule and revenue.

His choice of building materials in my opinion was driven not by the project but more because he likes to mess with concrete. He would have been better off, and completed years ago, with a standard stick-built building. The risk that you run when you do something like this is that you'll get to a point where you run out of steam; I give him all the credit in the world for getting this far, but getting 50% of the project done wasn't what his goal was. I'd like to see him meet his goal.

Note: I contributed cash to his project. I wouldn't do that if I didn't think it was a good idea.

Bruce King said...

Slaughter facilities appear to be able to attract grants and subsidy money - i've seen it in this area, where they produced a couple of customer slaughter trailers for hundreds of thousands of dollars cost. Sometimes I think that the cost is as high as it is because it isn't the money of the people proposing the project. Who cares what it costs if you don't have to pay the bill?