While the specific strategies of farms may be significantly different - some direct marketing to consumers and others selling a commodity product, all producers need to understand how sound marketing decisions are made.
Below is a basic four-step plan that is applicable to any farm business:
At the core of any successful business is a solid marketing plan. This holds true for any agriculture business, from a traditional cash grain operation to a small-scale produce operation, and everything in between. While the specific strategies of farms may be significantly different - some direct marketing to consumers and others selling a commodity product - all producers need to understand how sound marketing decisions are made. Below is a basic four-step plan that is applicable to any farm business:
As the operator of an agricultural operation, your mindset, attitude and knowledge directly effect the decisions made on your farm. Your tolerance toward risk is at the heart of how you approach marketing along with your goals, philosophy and marketing know-how. You need to recognize these factors to determine your readiness to handle marketing on your operation and the next steps.
Know the Markets
After realizing your personal thoughts and values on marketing, it is important for you to make sure that you understand the market situation and outlook. What are the historical prices for products? Are there cycles, trends or seasonality? What drives the price movements of your product? What tools exist to help you market your product? Answering these questions will help you build a foundation to work from.
Know Your Business
Next, take a hard look at your business including: current and projected production levels, cost of production and the point where you breakeven. Also, assess the risk capacity of your business by looking at available working capital, your debt-to-asset ratio and cash on hand. Creating a business plan will help you to better understand your operation's goals and objectives and relate back to all of these points. Most of all, recognize that you are not alone. Your relationships with others such as lenders and consultants, as well as your ability to use other information sources, can help in your quest to knowing your operation.
Know and Work the Plan
Marketing goals for any farm operation should be realistic. You should establish your desired profit margin and trigger points for your business. Execute your plan with discipline and regularly monitor its progress. You should continually reassess your strategy as the markets and your business change to review the total risks to the operation.
Although it is easy to get wrapped up in your daily duties on the farm, it is critically important to make marketing a priority on your farm operation. After all, as an agricultural producer, the success of your business is based on its ability to market and sell its products, no matter if it is corn, milk, beef, apples or fresh-cut flowers. Don't automatically assume that your marketing strategy from 20, 10 or even two years ago still applies. Your marketing plan should constantly evolve and adapt to changes within your operation and marketplace.
Prepared by Gary Anderson, Executive Loan Officer and Ag Business Consultant and Raechel Sattazahn, Marketing Officer with AgChoice Farm Credit.