building a successful maple business jamie fortune fortune farms maple sugar bush ltd. ompsa summer...
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Building a Successful Maple Business
Jamie Fortune
Fortune Farms Maple Sugar Bush Ltd.
OMPSA Summer Tour Workshop July 17, 2009
Overview
• Planning and business objectives
• Maple business strategy map
• Key business elements
• Risk management
• Business indicators
• Trends affecting Ontario Maple
• Discussion
Building a business – Harvard Model
• Develop a Formal Business Plan• Finance your Plan using others’ money• Gain market share through customer focus,
increase scale, eliminate competitors• Build brand and image• Control supply chains, drive efficiencies to
increase profits• Maximize financial efficiency – structure• Go global • Cash in and move on (publish a book)
What is success?
In business success is defined by solvency, profitability and equity growth
Maple operations are unique businesses which reflect the values of the owner
Bottom line: Building a successful maple business
depends upon how you define success
Fundamental Rules
• To be recognized as a business you must be able demonstrate a reasonable expectation of profit from business operation
• To receive farm status and it’s tax advantages you need $7,000 in annual gross revenue from farming operation
• The farm income test does not imply that you meet the business test.
• Document your plans and assumptions (Business Plan) and keep accurate and up to date records
Typical Maple Business Evolution
Start as a hobby or in a family business.Learn through trial and errorStrive for efficiencies Overcome limitations
Expansion driven by markets/customersMajor decisions revolve around investingBusiness reflects Owners’ values
Success at Fortune Farms Vision:
An ecologically sustainable farm-based business which is a focal point for family and friends
Priorities:• Family focal point• Business • Sustainable Forest
Family Focal Point
• Purchased in 1972 as a cost neutral hobby by Ray and Ruth Fortune (4th generation)
• Provided lots of healthy work, fun and rural experiences for a suburban family
• Family developed pride and ownership of the “Farm”. Subject of many school projects for 5th and 6th generations.
• Made life-long friendships and keeps us in touch with extensive networks of people
• Keeps us active and learning together
Business• Makes a profit and meets cash flow needs• Enables income splitting• Tax sheltered equity growth (life time
capital gains exemptions)• Diversity in investment • Conversion of labour to cash and equity• Property value grows based on land
values, timber volumes, the market value of products (sap, timber, hunting rights).
Sustainable Forestry
• Harvest maple sap, wood products and wildlife (deer, fur, plants, grouse)
• Lowest possible ecological impact
• Encourage biodiversity – tree species
• Experiment, learn and share what we do
• Long term view on the property and the business
Profit
Revenue
Retail Sales Wholesales
Capital
Maple Forest (Taps)
Sap Collection and Storage
Sap and Syrup Processing
Products
Marketing
Bulk Sales
Labour
Maple Experience Sap purchase
Syrup purchase
Forests and Sugar Bushes
• Sugarbush Management Guidelines exist
• Forest Certification Standards are available
• Site quality and size are key (productivity)
• Location and zoning affect your options
• Purchase or rent?
• Check out surrounding lands
Sap Collection and Storage
• Practices are documented in manuals
• Vacuum systems are critical– DTS and Leak free = daily maintenance to
maintain highest possible (20” of Hg)
• Research is ongoing – stay current!– Good science is key
• Be wary of anecdotal evidence
Sap Processing
• Based on scale – labour costs, access
• Lots of innovations within sugar camps
• By products – RO water, “niter”
• Practices are well defined in manuals
• Federal and Provincial standards
• Equipment suppliers are key sources
• Technology is ahead of independent science
• Think about health and safetyh
Maple Products
• Value-added products (sugar, butter, taffy)
• Create unique labels for your farm
• Buying and re-sell in case of short crops
• Pricing is key – know your costs
- know your market
- low prices hurt profits
• Selling the maple experience
Bulk Sales • Selling in drums to others who process
and re-sell. Price based on grade, weight, and crop size. Prices fluctuate.
• Typically deal through agents of Quebec Packers.
• Equipment dealers are often involved• Production contracts and standing offers
to purchase exist.• 50% of retail price
Wholesaling• Selling product which is packaged and bears
your label to re-sellers.• Local, regional and commercial markets• UPC – bar coding required for large outlets• Need a stable supply of quality product • Commitment to relationships with sellers• Year-round packing• 75% of net retail price including delivery
Retail Sales• Direct sales to customers.
– “Farm Gate”– Outlets – Markets, Trade shows– Mail order/WWW sales
• Network sales through agents• Differentiation is key – generic containers• Build a brand for your farm• Attracting and retaining customers
– Connect with your customers - www
Changes are driven by constraints• Attracting customers
• Lack of market
• Quality of production facility
• Capacity of production equipment
• Availability of quality maple forest
• Availability of skilled workers
• Meeting market demands - product
- experience
Risk Exposure and Management
Acts of natureLand use changesAccidentsActs of man – including RegulationsMarkets
Insurance is a necessity
Use Business Indicators
Production efficiency = Total syrup produced (litres or pounds) Number of taps or acres
Cost of production = Total Cost ($) Total volume in litres
Revenue efficiency = Total Revenue ($) Volume sold (litres)
Profit Margin (%) =
Gross Profit ($) Gross Revenue ($)
Good records and consistent documentation providedata that you can use to track your business
Return on Equity = Annual Profit ($) Invested Capital
Trends Affecting Maple
• Local food movement• Healthy lifestyles • Changing demographics of customer base• Disappearance of local outlets • Emerging markets and economies• Continued urbanization of society• Agriculture and Market Policy in Quebec• Climate change adaptation