May 25, 2017
- 1. The opportunity for your business to compete is better than any time in history.
- 2. We live in a day of unprecedented entrepreneurism.
- 3. Businesses can innovate and grow faster than ever.
- 4. Globalization is “inevitable and irreversible.”
1. On competition, “the most striking business trend today is not competition but consolidation.” A glance through the organic community’s consolidations, available at the Cornucopia website, illustrates how pervasive this trend is.
Not long ago, both Silicon Valley and the integrity food movement were known for start-ups and lots of little brands. Today, behemoths control the brands and Wal-Mart is the world’s largest organic vendor. Here at Polyface we’ve watched a local electronic aggregator in Charlottesville, Virginia, (Arganica) absorbed into a bigger outfit (Relay Foods) and now acquired by Doorto-Door Organics based out of Boulder, Colorado. The nice little local outfits no longer exist and most suppliers lost this local market venue.
Instead, this internet shopping venue services our area with national brand names. The local link is gone, to the chagrin of both farmers and customers. Disgruntled customers want to re-launch a local startup, but it’s not easy.
The market space for this kind of food was not big to start with; now it’s even more crowded and difficult to enter. Rather than creating a climate conducive to competition, it’s a climate of confusing claims and counter-claims. Many customers throw up their hands and go buy organic at Wal-Mart.
This puts new pressure on local branded options. We have to fight harder, be more creative, and spend more time marketing in a confused and crowded customer space. For most of us small farms looking for market share, this means we need to bring on savvy partners who enjoy social media, cold calling, and writing agreements.
2. Entrepreneurism. According to The Economist, both in America and Europe the numbers belie a new trend: more businesses are dying than birthing. Rather than seeing big businesses pushed to remain viable in the face of innovative entrepreneurs, small businesses tend to stay small and big businesses become more insulated from competition.
Part of this is tax and employee regulation policy, but much of it is due to entrepreneurism’s inherent difficulty. The balls an entrepreneur must juggle are myriad. The core product or service must be developed, marketed, and financed. Remember that most businesses fail not because they don’t have a good product or service, but because growth sucks ash, resulting in cash flow default.
The result is tiny mom and pop businesses barely surviving and owners who can’t afford vacations or retirement. Sound familiar? If one refrain exists in the small-scale direct-marketing food movement, this is it. It’s ubiquitous in the general farming community, but more acute in the branded local food sector. This is why I audaciously admonish that unless you have two salaries from two different generations, you don’t have a sustainable farm.
Buckminster Fuller notwithstanding (Small is beautiful), our cultural business context, or climate, requires a certain level of income and scale in order to be viable. A fire is hard to start with just one or two coals. If you want a fire to keep going, you need a handful of coals; even better, some new wood on those coals.
The point for our farms is that while you’ll never hear me encouraging empire building, you will hear me embracing 10-20-salaried operations doing $2-$10 million in business. That’s not an empire; it’s enough coals to keep a fire burning.
I remember well the early days of The Stockman Grass Farmer, when nearly every article was about cutting costs. “Heavy metal disease” was an early Allan Nation phrase. As we drank the SGF Koolaid, we reveled in “least cost producer” and eliminating everything that “rots, rusts, and depreciates.” I was and still am a huge fan of all this, but the flip side is also true: we need to generate income.
You can’t starve profit into a business. At some point, you have to address the income side. That may mean infrastructure. It may mean beyond-family commission-based partners. Successful entrepreneurs understand that although growth is not a be all end all goal, enough growth to get out of diapers and feed yourself is necessary to remain viable.
Many people ask me: “How big is too big?” Certainly our own farm has grown far bigger than I ever imagined, and I don’t have a good answer to that question. Some people think that if you go more than $1 million in annual sales you’ve joined some sort of dark side, becoming a Tyson or Monsanto. Let me assure you that a lot of room exists between $1 million and Tyson. You can go many millions without becoming Tyson.
Perhaps we need to wrestle with the opposite question: “How small is too small?” When Teresa and I started here at Polyface, our goal was simple: “Make a living on the farm.” Nothing grandiose; no market benchmarks. But we knew that making a living on the farm required income generation as well as expense control. So while we lived frugally, we always had our eyes set on marketing and income generation. That resulted in a farm business attractive enough to draw in the next generation, which is arguably the ultimate sustainability.
You can’t just eke out an existence forever. In the beginning, yes. Most entrepreneurs do. But at some point you have to turn a corner and scale enough to buy some wiggle room with time off and savings.
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