Focused Prioritization Helps Good Food And Farm Businesses Reach Break-Even

Goal Setting

One of the axioms of successful businesses, or successful anything, is “start with the end goal in mind,” and this is true for food businesses. It is essential to start with the end goal because that affects strategic decisions like business model design and the capitalization to support the business model’s growth path. For example, if a food entrepreneur has ambitions to be a national brand, there are many investments that need to be made up front to make that business model successful, and the likeliest capitalization path involves outside investor funds with an “exit” or sale of those investor’s shares of the company. Every entrepreneur is on a path, and it is better when that path leads to his or her goals.

However, given that food entrepreneurs have many “big, hairy, audacious goals,” it is worth noting that certain goals should have more priority over others, depending on the stage of the entrepreneur. For example, many food entrepreneurs want their business to reflect their social impact goals. But they shouldn’t do this to the exclusion of the brand building necessary to tell that impact story (and capitalize on it with a premium price) or the long-term financial viability of their business. Sometimes getting more sales so you have enough cash to make payroll takes precedence over longer-term goals like creating social and environmental change. Thus, we always encourage entrepreneurs to take the long view, prioritize goals and to not pursue goals or lines of business that are distracting from the business’ current priorities and financial health.

On our podcast this week, Beth LaShell describes how the Old Fort at Hesperus (in Durango, Colorado) uses this approach of setting priorities (like their all of their programs breaking even) as their team builds a continuum of farmer education programs to support new and beginning farmers. Their sustainable agriculture program includes an educational garden internship, a farmer-in-training program and a market garden incubator. Their programs were built one at a time to suit specific needs of farmers depending on their stage of development.

Beth and team developed the Farmer in Training (FIT) program as a stepping-stone between their internship program and owning an independent business in their incubator after those other programs were already established and the need presented itself. Building discreet programs over time around the larger goal of farmer education has allowed their incubator program to have a high success rate in “graduating” farmers as well as allowing all of their programs to be mostly self-supporting. And, because they practice open book management, everyone knows the impact certain actions have on the bottom line, and thus, are able to make informed decisions as managers with the goal of breaking even in mind. As a result of this focused approach to their operations, they were able to prioritize what is important and build successful programs one at a time that now make up a full suite of offerings to new and beginning farmers.

Food and farm entrepreneurs (and those groups trying to make a better food system, like farm incubators) will always have lots of goals competing for their attention. The good entrepreneurs and managers know how to prioritize goals and optimize their efforts for the goals they have prioritized. This allows them to build financially successful companies and programs and, over time, pursue many more “big, hairy, audacious goals” than they would have otherwise


And now, our roundup of the best food and beverage finance news, events and resources from around the web…

Food and Beverage Business Models

Business Model Insights

  • 8 key business learnings from growing Stonyfield Farm to what it is today (New Hope Media) – “When it comes to building your business, you must have some kind of unique selling proposition. Especially in today’s marketplace, product or service superiority is an absolutely prerequisite to success. Any existing competitors will have existing customers, a following and probably more capital than you. In our darkest days, when we were losing ridiculous amounts of money, I created a daily cash flow so I could understand what was financially coming in and out each day. I also learned during this period that we entrepreneurs are pathological optimists and thus most of us, including yours truly, initially tend to minimize expenses and maximize revenues when putting together pro formas. I learned to cut whatever cash income I was expecting by 30-50 percent and conversely to increase my projected expenses and outflows by 30-50 percent. In this way, I built a kind of insurance policy to balance my optimism, and I cannot tell you how many times that saved me from making potentially fatal commitments.”
  • When Should Entrepreneurs Write Their Business Plans? (Harvard Business Review)
  • Deciding on a co-manufacturer: Insights from one thriving partnership (New Hope Media)

Raising Capital

Raising Capital

  • A Few Good Fundamentals (Entrepreneurship.org) – “The single most important tool for building new companies or saving dying ones is the deft management of cash flow, that stream of money pouring continually in and out of your company. Your accountant may say your business is profitable. But he or she could be assessing only the profit-and loss statement (which tracks non-cash items as well as dollars) or the balance sheet (a snapshot of a company’s assets and liabilities at one point in time). Just because you are making a profit does not mean you will be successful unless you are generating cash or have access to cash. It’s as fundamental as that.”
  • The Psychology of Money (Collaborative Fund)
  • Basics of Company Valuation (Entrepreneurship.org)

Grocery Store Shopping

CPG/National Brands

Grocery Store Produce Section

Market Trends

 Regenerative Agriculture

Farming and AgTech

Mergers and Acquisitions

Deals/M&A

Events

Industry Events

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