Follow the ABCs. But first a trip to the zoo!
Bulls make money.
Bears make money.
Hogs get slaughtered.
Sheep get sheared.
Hold those thoughts.
A. Know YOUR COST OF PRODUCTION.
That means your cost per unit of production. That does not mean per acre or square foot (units of scope), it does mean dozen eggs, per cwt of calf, per weaner pig, per bin of apples (which are units of production).
Sins of ommission can hurt you here. Make sure you have all your costs. Break them into a list of Variable Costs (those that change in proportion to the size/scope (acres, head) and/or with the number of units (bushels, tons, bins, cwts) produced. These might include feed, fertilizing, pest control, veterinary, fuel, repairs.
Some expenses or cash outflows will not be vary in proportion to scope or production. These are the Fixed Outflows (some are not purely classified as expense because they include payments of principal or draws from the business). They can be grouped as Overhead (general insurance, utilities and communications, professional fees, office, etc), Payments (principal and interest) or capital lease payments for equipment, land, or other intermediate or long tem debt, Family Living or Other Draws from the business. The Fixed Cash Needs must be covered, but the trick is how you allocated them among your enterprises.
Do this for every enterprise/product that you might market. A word of caution. You can use industry or other (Great sources are WSU Extension or an area Farm Management program) estimates to help you build your cost estimate, but you must DO YOUR OWN COST ESTIMATE. I will never forget the farmer came to a meeting on wheat costs and stood up to complain, “I’ve been here an hour and nobody has told me MY cost of production.”
You must do it. But as Louis “Satchmo” Armstrong used to say, “If you don’t know what you are doing, why don’t you ask somebody?”
B. Study your MARKET.
1. Fundamentals: Who wants it? How do they use it? In what forms, grades, quantities? Who are your competitors? What are they doing right? What are the annual production, useages, typical carryover inventory? Make up your own questions.
2. Technicals: What are the prices and number of buyers over the past three years? Learn to chart or buy charts from those who do them. Find reliable price and price history sources. Compare the prices to the fundamental supply and demand in the same time periods.
c. Make YOUR Move.
Remember the Bulls and the Bears.
Remember the Hogs. Read Proverbs 11:26. They were talking grain, but you get it. I have lots of good stories to learn from but not to imitate.
Speaking of Sheep: Deciding to do nothing is a choice. But is only a GOOD choice if you know WHY you are doing nothing now. Always know your why before you choose what to do when. The IDEAL time to sell is before you plant. The ideal PRICE is one that covers all your costs. Remember the cost categories above. Get to work finding what works for you and your product. But think on this:
Cover all your costs.
Land must get fair RENT. Or are you telling me your land is paid for? Does that mean I can rent yours for free?
Labor & Management get wages and salaries. Or are you saying your time is free? Will you come work for me?
Capital gets Interest. So you don’t borrow, does that mean I can borrow your money for free?
What/Who is Left to be paid? RISK !!!
What does Risk get paid? PROFIT (LOSS) !!!
Yes, MS/Mister Owner, we may have to talk about insurance and hedging sometime.
In your search for fundamentals and technicals, you should find out how your product is contracted and marketed. You are not a victim here, however. You may need to take the initiative to offer marketing ideas to your customer. The usual outcome of this reaching out is (1) collaboration to find win/win opportunities for both of you, or (2) finding out that for that particular person, their character or ability to communicate are not what you can work with. Go find a winner and be sure you are not the problem.
So there you have it, A,B,C.
But maybe we should close by getting aquainted with The FIVE FACES OF BUSINESS.
The Customer The customer is not always right, but the customer is always the customer. If your customer is not most important, go get in another business where the customer is first, or get out of business.
The Worker The hand that picks that apple sets the quality for your customer, so she/he is next in importance no matter what language is spoken. If you can’t treat your worker like you would want to be treated, pick your own damned apples!
The Owner Are you an inventor, an innovator, an early adapter, or just a stockholder? You take the risks. Take care of the two folks up above and you will prosper. The Little Red Hen has it right. NFL actually means NO FREE LUNCH.
The Competitor You gotta love this guy! They (1) give you great ideas for free and (2) scare your fanny out of bed every morning to keep your customers.
The Regulator When this guy is doing it right she/he works for all of us: keeping the playing field level for all of us, keeping us from poisoning each other and Mother Nature. Basic rules in force: Golden Rule and Law of Gravity.
There is Your ABC Marketing Plan if you do it. It fits in as page three in your PROFIT PLANNER/PERFORMANCE TRACKER Business Plan/Budget. More on this later, if you are interested.
Liam AKA Wild Bill