The Skills for Success

Math, along with numbers in general, scare many small business owners. Rather than deal with this fear, they often stick their heads in the sand and ignore the hard truths and opportunities that come from understanding the financials. Helping farmers understand numbers, and feel empowered by them, has been the focus of my work for the last 8 years, and the impetus for The Farmer’s Office.

As important as the numbers are, successful businesses need more than just a good handle on them. A few weeks ago I visited with two different farmers; both lamented the drought conditions and the bone dry ground. While both farms experienced painfully low production volumes, one was in danger of going out of business; the other was just suffering a bad year.

What struck me most was that one farmer (let’s call him Slavo) generated $1,400 per acre in revenue, whereas the other (Moppet) was earning $15,000 per acre. Both farms suffered the same drought and both farms had comparable soil conditions. Yet, one is decidedly more successful and better positioned to weather an off-year.

Many farmers, and entrepreneurs in general, go into business because they’re good practitioners… Good farmers, good chefs, good architects, good designers, etc. But that’s not enough to succeed. You must also manage your finances and know how to sell your product. Successful businesses excel in three different areas: business management, marketing, and operations.

In Slavo’s case, he was a good farmer. However, he was not able to make effective business decisions. When we sat down and talked, he lamented that he never purchased a much needed $6,000 irrigation pump. it would have saved him $2,000 on his annual water bill. Had he know at the beginning of the season that this year’s drought would have killed all his crops, it would have saved him even more.

If the pump lasts 5 years, then it will save him $10,000 in water bills over the life of the pump; and a net savings of $4,000. At first blush, this seems like a wise purchase. Beyond that, he needed to make sure he had the cash to make the purchase (or was able to get a loan) and it didn’t put himself into a cash crisis in another area of the business. But he didn’t have the financial records to evaluate if he could afford to make the purchase, or to apply for a loan if he needed financing.

This kind of thinking doesn’t come naturally to all farmers. And it can be the difference between surviving and thriving.

For Moppet, he was able to make these types of decisions. He had the infrastructure in place so that he could effectively irrigate his crops. Certainly, it’s not as good as a good soaking rain; but it was better than the alternative.

I can’t judge if Moppet is a better farmer than Slavo, but Moppet did have the infrastructure in place that came from making good business and investment decisions. Let’s say, for arguments sake, that they are both equally talented at farming and equally skilled at making investment decisions. There’s still one more piece of the puzzle. Can they effectively market and sell their products?

At the farmers’ market, many farmers sell almost the same product mix. And to the untrained palate, their products probably taste pretty similar. Yet some farmers will come home with lots of leftovers, which get fed to the chickens, while others will sell out. Some stands have long lines, and others have a trickle of customers.

The difference is in marketing — how does the farm-stand look? Is it clean and inviting? How are the products priced? Are they competitive? Does the line move efficiently? Are the sales staff friendly? None of this has to do with the taste of the vegetables… It all has to do with sales and marketing.

To succeed in business, you need to have good operations (production), solid financial management and effective marketing and sales.

Most business owners stumble in one of these three areas. I’ll admit, I’m not great at marketing. And I rely on Good Egg Marketing to help me. Other business owners struggle with financial management. This doesn’t have to be a death sentence to your business. It means that you need to round out your team with staff and consultants who can complement your skills. Slavo struggled because, not only did he not have the financial and marketing skills, he didn’t recognize the need for them until it was too late. Had he sought out partners sooner, he probably could have weathered this drought. For Moppet, he was good at a marketing and had a business partner to help with the business management. Between the two of them, they had all their bases covered.

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