Lessons from farmers in “growing” your profit

OldStoryImageI recently returned from an agricultural conference where I learned that farmers have a number of insights and practices that apply to all types of businesses. Here are some.

1. A business must be sustainable. This not only includes agricultural practices, but also general business practices like these:

• Maintaining equipment so that it will be operational after it has been paid for. For many years, Certified Grocers in Ocala kept its fleet of trucks going even though the trucks were decades old and had several million miles on them. Parts were replaced before they caused a breakdown; trucks were repainted and renewed every few years. The result was a paid-for fleet that operated like new, while also contributing to the company’s higher-than-average profit margin.

•  Diversifying to retain existing customers. Recognizing that customers won’t eat only beef, chicken, pork or fish all the time, many farms have added organic products, ready-to-consume items (like apple cider) and entirely new items.

 

2. A business will only be profitable if it knows its costs. Farmers are in a commodity business where sale price is determined by the market, so they have to maintain profitability by controlling costs.

A nurseryman described how he tracks the costs of the plants he is growing on a weekly basis. This is done to the half-cent and includes labor, materials and operating costs like heat and water. Knowing this allows him to monitor the market and determine whether to sell to distributors, garden centers or retailers, or if he should invest more in “growing out the plant” to sell a larger plant at a higher price in the future.

 

3. Businesses increase sales by using every distribution chain possible. One farm that sells both livestock and produce found eight ways to they sell product, including directly to restaurants, to buying clubs in nearby areas and directly to customers at the farm. And they are considering adding flash-freezing equipment to sell meats online!

4. Brand your business. Some farmers have begun branding their product—even that sold at wholesale. They have found that when confronted with a bin full of cucumbers, customers will choose the labeled ones over the unbranded one, especially if they have a previous good experience with the product.

5. Successful businesses create cheerleaders.A number of farmers referred to the book Raving Fans: A Revolutionary Approach to Customer Service by Ken Blanchard and Sheldon Bowles. They recognized that without customers, you don’t have a business, and that satisfied customers are the best marketing program. They strive to create “cheerleaders”—customers who work on their own time to promote your business.

6. Successful businesses love their customers.Another favorite book is The 5 Love Languages by Dr. Gary Chapman. Written as a self-help guide to help you understand relationships, it deals with understanding the motivations of others. Farmers noted that they use the lessons from the book to identify and segment their customers by type of motivation. They then design their marketing plan to provide each type of customer with a personally satisfying experience and appropriate reward scheme. While I had never thought of this book as a marketing text, it does work in that application.

7. Sell a customer what they don’t want. One farmer, whose wife runs the retail store, noted that she knows her regular customers and can guess what they will purchase when they come in. She makes a point of showing the customer an item they don’t normally purchase, and will give them samples. Many times, when the customer returns, that “new” item has been added to their normal shopping list.

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