Stephanie Plaster, a farm management outreach specialist with the University of Wisconsin – Madison Division of Extension, talks with lots of farmers who want to diversify their farms with a value-added enterprise.
She uses several tools and exercises to help them plan what they want to do and how to do it. Here is her advice on how to get started on a successful side business.
- READ MORE: Side hustles for farmers
1. Visioning
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What are your values, vision and mission? This can be done as an individual or at the farm and family level. “It can be helpful to make sure everyone is aligned with what they actually want for themselves, their business, farm, family and their future,” says Plaster. “That then helps them figure out what is going to help them achieve those things.”
2. Identify strengths and weaknesses
Again, do this for the individual and the business. “I always encourage people to ask other people to provide feedback, because other people — whether it’s business partners, family members, employees or friends — might be able to tell them what they excel at, or if they see their farm being a leader in something that maybe they didn’t recognize themselves,” says Plaster.
3. Look for opportunities
What opportunities are out there and what are the possible impacts (positive and negative) on the farm if you pursue them? Plaster says, “It all starts with figuring out what you are good at, what you are passionate about, what opportunities are around you, and then being able to identify and pull all those things together into something that you are going to enjoy doing, and that is not going to place an additional burden on either you or your resources. Ideally you want to focus on something that is an opportunity that you just need to take advantage of.”
4. The business model canvas
The business model canvas (BMC) is a tool used to move new venture ideas to an action plan. Plaster has adapted the open-source BMC (developed originally by Alexander Osterwalder and Yves Pigneur, Strategyzer.com) specifically for agriculture (farms.extension.wisc.edu/articles/using-the-business-model-canvas-to-refine-your-farm-business-idea/). “The BMC has components that are easy to understand. It’s essentially a one-page business plan which becomes your elevator pitch. What’s important is answering those key questions so whether you are talking to your business partners, people you want to do business with, customers or lenders, you can clearly and succinctly communicate your business idea and be able to tell your story,” Plaster says.
5. The value proposition
Central to the BMC is your value proposition. What problem will your product or service solve or what need will it meet? What is unique or different about it and why would a customer choose to purchase it over something similar?
6. Key partners, activities and resources
The left side of the BMC has questions to help you identify key activities and resources — including people and skills — needed to deliver the value proposition.
7. Marketing
The right side of the BMC has questions to help you identify who your customers will be, what marketing channels you will use and how you will communicate and connect with your customers. These questions are often the most challenging to answer, especially for farmers who are in commodity agriculture, where markets and prices are generally well defined. Both of those things are much more fluid in an entrepreneurial-style value-added business. “I find the hardest thing for people is talking about their customers and market channels,” says Plaster. “These questions are focused on what do you know about your customers and how do you want to interact with them? What opportunities exist to sell the product? What market channels are going to be best for your specific situation?”
8. Identify your customer
Think deeply about who your customers will be and try to define them in as much detail as possible. Ask yourself questions such as: What do you think is the most common age range of your typical customer? Will they be men or women, families or individuals? What are their motivations to buy your product? Are they looking for a healthy lifestyle choice, family fun, a local connection or do they have some food challenges, for example, gluten sensitivity? “If you can be very specific and understand the motivations of your customers, you can better market to them, and create a product that customers are willing to buy, at a price that they are willing to pay,” suggests Plaster.
9. Setting prices
Know your exact cost of production for the product or service you want to offer. Do some market research into the prices of similar products from competitors. If your product doesn’t exist, compare it to other products that someone would buy instead of your product. Will you have different pricing levels for different markets, e.g., direct to consumer, discounts for grocery stores, distributors? Will you offer further quantity discounts? Consider your markets when setting prices. “Pricing can be a really big issue if you are creating your own food product, or if you are opening a farm store and serving your local community,” says Plaster. “For example, if you are selling beef directly off the farm, you can offer premium prices, but if you are selling to friends and neighbours with budget constraints it can be hard to ask the going market price. It can be a big stumbling point to balance the cost with the relationship you have with your local community.”
10. Marketing channel fit
The default market channel for many farmers launching a new product is the local farmers market, but does it fit your personality and resources? Do you like talking to the public? Do you enjoy bartering? Do you enjoy telling people about your business? Are you available when the farmers market is open? Do you have employees to work at the market? “If that’s not for you, that’s okay, there are other options,” says Plaster. “For example, grocery stores, corner stores or gas stations can be good places to get your product into, and for some people being able to connect with one gas station manager will be more attainable than having 50 or 60 people coming to them within a one-hour period.”
11. Learning new skills
Generally, nobody has all the skills they need to run a successful business, especially when it’s a departure from the kind of business they are used to running, such as a farm. The BMC helps identify what skills you may need to learn (or bring in), but how will you learn them? Start by finding someone local to speak to. Potential sources for contacts include economic or business development offices, such as community futures organizations, chambers of commerce, government extension specialists or universities. The internet can be a good place to look for low-cost or free courses and support programs, but often the challenge is finding them, so be prepared to do some research.
12. Communicate, connect and network
Talking to people is always your best resource, whether that’s to gain information about pricing and what people would pay for your product, or to identify potential customers and market segments. “A lot of these questions can be answered by just talking to potential customers, business partners or stakeholders,” Plaster says. “If you have some trusted people that you work with, have a conversation and ask them to refer you to resources or another person that might be able to help you. Networking connections can get you so much further than just going it alone.”
13. Attend conferences and tradeshows
This is another great way to connect with people in the industry and build a network that can be useful to your business. Plaster advises, “When you go to a conference, have a goal to connect with three to five people that you will follow up with after. If you can make that your goal, it’s more manageable and achievable.”
