Business Trajectory

written by

Anonymous

posted on

May 25, 2017

By Joel Salatin

As the new local, pastured, carbon-based food movements converge, consolidation and collaboration are in the air. The days of the single-family farm servicing 100-400 customers may be harder and harder to maintain.   A fascinating article in The Economist magazine addresses the current state of affairs in business generally, but these observations are prescient for our food and farming platforms as well.  The article debunks four basic assumptions that permeate today’s business world:

  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.”

Read almost any business book or article today, and you will find permutations on these themes throughout the text. But this article argues that all four of these axioms are wrong.  Let’s take them one at a time.

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.  

3. Fast business. While electronic innovation today might seem to corroborate this, the article points out that “over half of American households had motor cars just two decades after Henry Ford introduced the first moving assembly line in 1913.” That’s impressively fast.   

Today, how many businesses slog through the day dealing with third-party audits, compliance and licensing issues, government regulations, insurance, and litigation protection? In his wonderful book The Speed of Trust, Franklin Covey notes how our litigious and risk-averse business climate slows down innovation and business development.   

For those of us farmers trying to get into larger institutional buyers an endless parade of paperwork, second-party insured, hold harmless agreements and licenses accompany what used to be a simple handshake followed by delivery of product. Here at Polyface, our intern program that used to be simple is now complicated with immigration paperwork, workmen’s comp audits, and housing licenses.   

This means that in order for farmers to stay viable, we have to spend an inordinate amount of time talking with bureaucrats, attorneys, accountants, and third party auditors. It’s maddening when all we want to do is go out and move cows or water thickens.  I have said for a long time that one of the best opportunities in business right now is someone who will launch a small business paperwork/compliance company.   

I’d gladly pay a $10,000-$20,000 annual fee to an outfit that would happily fill out forms for me. Every time a form comes from the government or some institution, I can just forward it to this outfit; they fill it out, send it in, done.  

 If you value your time at all, it doesn’t take many of these to eat up a day a week just poring over forms and licenses, trying to figure out what applies, what doesn’t, and get through the legalese.  When people ask me what keeps me up at night, it’s not whether the cows get out or a predator gets in the chickens - those are easy. What keeps me up at night is wondering if I filled out that government form correctly.   

I see the drag in my own life.  Decisions that used to take a day now take a month, checking and rechecking, consulting and requesting more information. I agree, business is definitely much slower. That means we have to think strategically much farther in advance; our brainstorming business sessions need to be far more anticipatory than reactionary. I don’t know who said it first, Allan Nation or Dave Pratt of Ranching for Profit, but here’s their advice: plan for what you want more than planning against what you don’t want.  

 4. Globalization. All you need to do is read some political commentary and you’ll quickly realize that populism (Trump) and localism (Brexit) are on the rise. As Joel Arthur Barker pointed out in Paradigms, every paradigm eventually collapses under its own success.  In other words, geo-political pendulums swing too far and eventuallycorrect themselves. This is the story of civilization.  

Do not think for a minute that imported food will displace American farmers. Those who think so understand neither trends nor history. The current bio-regionalism interest in America’s food climate is growing. Those of us who embrace our communities, who produce for our neighbors, and who offer better tasting and more nutrient dense fare are well positioned to cash in on this new anti-globalization train. Let’s enjoy the ride. 

Joel Salatin is a full-time grass farmer in Swoope, Virginia, whose family owns Polyface Farm. Author and conference speaker, he promotes food and farming systems that heal the land while developing profitable farms. To contact him,email polyfacefarms@gmail.com or call Polyface Farm at 540-885-3590. 

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