lesson ten: high tunnel business planning and marketing high tunnel fruit and vegetable production
TRANSCRIPT
Objectives
Identify the key components of a complete business plan.
Develop strategies for business and marketing planning.
Recognize the most ideal methods of organizing and marketing a high tunnel operation based on your individual situation.
Business Planning
More to starting a business venture than coming up with the idea and jumping in feet first
The success of a new venture is often predetermined before project is ever started
Reasonable chance at succeeding depends on careful and thoughtful planning
Business Planning
Steps to Business Planning: 1) Idea2) Organization3) Feasibility4) Planning 5) Capital 6) Marketing
Each step requires thoughtful examination
Allocate adequate resources of time and money
Idea
Is the operation worth the effort necessary to turn it into an enterprise?
Getting started is not worth the effort if you can’t figure out how to make a profit!
Depends on: Level of basic knowledge about the business Ability to turn that knowledge into a profitable
business venture.
Idea
If viewed purely as a business venture: Early and accurate self-assessment of business
climate is critical Builds confidence and knowledge of the
enterprise Helps secure partners, financing and customers
Build strong understanding of enterprise Most affordable risk management available Detailed plans and strategies come later
Organization
Structure is one of most important decisions
Choice can be wise move or costly mistake
Initial legal business structure Important to periodically re-examine May achieve optimum results at start-up phase May require adjustment as business matures
Organization
Common types of formal business structures: Sole Proprietorship Cooperative General Partnership Limited Partnership Limited Liability Partnership Limited Liability Company Corporations
Selection depends on several factors
Organization
Sole Proprietorship Easiest and least costly way of starting a
business Find location and open the door for business Fees to obtain business licenses Attorney’s fees for starting less than other
forms Less preparation of documents required Owner has absolute authority over business
decisions
Organization
Cooperative Belongs to people who use it
(member/owners) Share in control of the cooperative Meet at regular intervals Review detailed reports Elected directors from among themselves
Directors hire management Oversee day to day affairs Serve member interests
Organization
General Partnership Can form simply by oral agreement Legal partnership agreement highly
recommended Drawn up by an attorney Legal fees are higher than for a sole
proprietorship Can be helpful in solving disputes Partners are responsible for other partner’s
business actions, as well as their own
Feasibility
Offers a reality check on merit of a business idea Review of an individual enterprise differs
greatly from review for a large start-up production facility
For accuracy, remove personal emotion Utilize or engage an independent third part
“Getting a second opinion”
Develop an exhaustive set of questions to help validate the core business principles
Feasibility
Identify opportunities, unexpected hurdles and other impacts that may be encountered
Typically includes 5 areas of impact:1) Local Impact2) Market3) Technical Resources4) Final Projections5) Management
Feasibility
Local Impact Are adequate local resources available to support a
high tunnel business? Will there be negative impact/resistance to
operation?
Market Is there a clearly identifiable and measurable
market? Will business location appropriately serve the
market? How far and how often will you have to travel? What are the transaction costs?
Feasibility
Technical Resources Access to quality equipment and service? Can the infrastructure needs be met?
Financial Projections Do market projections and production
assumptions match, and at a profitable level? Adequate resources for different business
climates? Can all potential costs be identified through
detailed production budgets?
Feasibility
Management Enough experience to manage the
operation? Are all area of the operation adequately covered?
Are adequate support services available to assist management?
Planning
Develop a written business plan with all details Helps secure financing Provides road map to keep project on track
Good business plan should, at minimum: Describes business, structure, products and goals Explain the roles and responsibilities of all involved Outline the marketing plan and strategies Illustrate the financial plan
Include assumptions and goals used to reach profitability
Capital
Takes time and effort to research the right sources
Examine needs, plan how funding will be utilized, and study what is available
Securing sufficient funds Need enough to start and grow enterprise Requires significant preparation Capacity to manage funds efficiently and
effectively
Capital
Inadequate or ill-timed financing large reason for business failures
If financing is required, check for local funding first. Many rural development groups Local lenders Some level of local participation
When exploring options, don’t limit the search.
Marketing
Marketing is a “first, last and always” consideration
Have a established market before production starts
Good marketing program is essential to realizing fullest potential and profit Best strategy will yield whatever level of sales it take
to make business profitable Thoroughly understand needs of potential buyers Ability to differentiate and diversify as market
changes
Marketing
High tunnel marketing strategy should capitalize on one or more of the benefits over traditional production methods First to Market Multiple Crops Quality Unique Crop Scalability
Marketing
Critical to have a marketing plan that is adaptable Customers ‘needs’ change
Make marketing plan changes systematically Avoid negatively impacting ability to stay profitable
Ongoing evaluation process including: 1) Identification2) Analysis3) Strategy 4) Action5) Evaluation
Marketing
1) Identification – Constantly scan marketplace for areas of threat or opportunity
2) Analysis – Priorities are set based on ‘potential’ customer demands.
1) How quickly will opportunity/threat develop? 2) How will it impact our products and operations? 3) Is it likely to become of major importance? 4) How would our investors expect us to act? 5) What is our ability to react to
opportunity/threat? 6) What are the costs of not reacting to it?
Marketing
3) Strategy – Develop written strategy to address changes in market place that directly impact or change the original plan.
4) Action – Marketing activities are a synchronized and integrated response to the nature of marketplace.
5) Evaluation – Regularly monitor and measure any change to the original strategy to evaluate the impact of those changes on profitability.
Market Diversity
Strategy should not be highly dependent on one venue or market outlet Can make the difference between profit and loss
Develop and participate in multiple markets Provides significant risk management as well as
market research
Consider a variety of marketing strategies/outlets Key to ensuring the right option is selected
Market Outlets for High Tunnel Growers
Farmers Markets Well suited for small, individual lots of mixed
produce Relatively easy markets to access Rental fee may be required
“U-Pick” (Pick Your Own) Sales Popular for perishable vegetables Not capital intensive, but advertising essential Accident liability insurance may be required Challenge: Coordinating harvest frequency and
customer volume
Market Outlets for High Tunnel Growers
On-Farm or Roadside Markets Works well in areas with high traffic volume Not capital intensive and easy to access Packaging and grading stricter than farmers
markets Rules and regulations must be considered
Wholesale Produce Auctions Shareholders provide startup capital for auction Most buyers purchasing for small supermarkets,
roadside stands or restaurants Commonly commission is deducted from sale price
Market Outlets for High Tunnel Growers
Restaurant and Institutional Sales Selling to chefs and institutional services Most market targets are independently owned
and operated restaurants Institutional services include schools and care
facilitiesMarketing Cooperatives
Growers who produce similar products or have similar growing practices
Can share input costs, labor, equipment Requires marketing agreement between
members
Market Outlets for High Tunnel Growers
Supermarket Sales Regional wholesale to chain or independent
markets Harvest scheduling is crucial
Community Supported Agriculture (CSA) Economic partnership between growers &
consumers Consumers may pay at purchase or for whole
season Stabilize incomes and minimize risk Usually used to diversify funding sources
Pricing
Setting price is crucial component to successProducer can set the price, consumer controls price
What is your total cost of production? What is the competitor’s price?
Closer to consumer = more control over price Gauge the level of competition and consumer
demandPricing Methods
Relative Pricing – Acquire price info from competitors Cost-Oriented Pricing – Best method, must know
costs of production