What Makes Farms Work: The Business Side Episode

Episode Overview

• This episode of Growers Daily dives into the business side of running a farm, focusing on marketing, market research, and financial management.
• Host Farmer Jesse discusses the changing landscape of farm marketing and how to decide how much time and energy to dedicate to it based on your sales outlets.
• Farmer Jesse outlines practical strategies for conducting market research as a small-scale farmer to identify unfilled niches in your local community.
• Guests Mikey and Kez from Five Tales Farm share their experience using the "Profit First" system to manage cash flow, pay themselves, and plan for expenses like taxes and wages.

Key Concepts

• Sales Outlets Dictate Marketing Strategy: The amount of time and effort you spend on marketing should align with how you sell your products. If you run a CSA or online store where customers must go out of their way to buy from you, consistent year-round marketing is essential. If you primarily sell at farmers' markets where you market and sell simultaneously, in-person marketing (signage, presentation, personal connection) is more critical than online marketing.
• Niche-Focused Market Research: For small-scale farmers, market research doesn't require complex technical data. Instead, it involves looking at the existing sales channels in your area—CSAs, retailers, farmers' markets, and restaurants—and identifying what is missing. Finding a gap in the market, such as a lack of flower CSAs or a shortage of summer lettuce, is often more valuable than trying to compete in a saturated market.
• The "Profit First" Cash Flow System: Traditional accounting often leaves farmers with a single bank account where all revenue is deposited and all expenses are paid, making it difficult to understand the farm's true financial health. The "Profit First" system advocates for dividing revenue into multiple, dedicated bank accounts (e.g., Income, Operating Expenses, Materials & Supplies, Employees, Owner's Pay, Tax, and Profit) based on set percentages. This prevents the illusion of having more cash than is actually available for spending.
• Proactive Planning for Spring Cash Flow: Spring is the most expensive time of year on a farm and typically has the lowest cash flow. To survive this period, farmers need to conduct cash flow projections in the autumn and winter. This involves looking at past expenses, estimating weekly revenue for the upcoming season, and ensuring there is enough cash reserved to cover critical upfront costs like seeds, compost, and early-season wages.

Quotes

• At 4:07 - "Any time you are asking a customer to go out of their way to buy something from you, especially where competition is involved, marketing isn't just a thing you should do. It's basically essential." - Farmer Jesse, explaining why CSAs and online stores require a much heavier marketing lift than farmers' markets.
• At 6:12 - "What the advertisers want to do is to make sure you see that ad right around the time you do decide you need a car... Also, people need nudging, which is why repetition is key." - Farmer Jesse, emphasizing that marketing is about building brand recognition over time so you are the first choice when a customer is ready to buy.
• At 12:34 - "Research does not inherently give you the results you want, but it can save you from not getting those same results after you grew the food, which is not great." - Farmer Jesse, highlighting how market research prevents the costly mistake of growing crops that have no local demand.
• At 19:50 - "I open my bank account, bam, $90k, and I was like 'Yes, I've got heaps of cash'... But the truth is that that number has a lot of hidden things in it that we've already committed to." - Kez from Five Tales Farm, explaining the psychological trap of looking at a single bank balance without accounting for upcoming expenses like taxes and wages.
• At 27:14 - "I did not think hard enough about when we started having employees is having enough cash to cover them for an extended period of time... getting that stress off your back so that it's just like, 'we know this person is covered for the next month,' that is a huge goal." - Farmer Jesse, reflecting on the peace of mind that comes from reserving a month's worth of employee wages ahead of the busy spring season.

Takeaways

• Allocate at least 15–20 minutes daily to marketing if you run a CSA, farm store, or online shop. Focus on high-conversion channels like email newsletters, Instagram, and Facebook rather than platforms like TikTok or X, and consider trading produce with a local photographer to secure high-quality brand imagery.
• Conduct honest market research before planting by visiting local grocery stores to talk to produce buyers, eating at target restaurants to review menu items, and visiting farmers' markets to see what crops are overrepresented and what niches are left unfilled.
• Set up multiple bank accounts using the "Profit First" model to split your income immediately upon receipt. Prioritize transferring a set percentage (e.g., 10-20%) to a dedicated, high-yield tax savings account and reserving at least one month of employee wages before allocating cash to general operating expenses.