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Agritourism, Education and Economics on your Farm -
Tools for Risk Management Centered Decision-Making
Dee Singh-Knights (Ph.D.), Extension Specialist
WVU Ext. [email protected],
304-23-7606
Cindy Martel, Marketing Specialist
WV Dept. of Ag. [email protected] 304-541-9756
Daisy Bailey, Extension Agent WVU Ext. Service
[email protected] 304-462-7061
Have a good and safe product that consumers want and are willing to pay for.
Promote your product to the right set of customers.
Sell the right amount to be profitable.
Offer product/service at the right price.
Being in the right location.
All of the above
Rationale: Successful Small Agritourism Businesses Must See the
Big Picture?
Why are you Interested in the Agritourism/Farm-Based Education
Sector?(WV Agritourism Internet Survey 2014,
n=144) Diversify the income
stream Generate new
income Improve cash flow Help community
development Educating visitors Work at home Social rewards
0
10
20
30
40
50
60
70
80
90
100
Rank of Critical Success Factors in Agritourism
(WV Agritourism Internet Survey 2014, n=144)
Proportion (%)
0
10
20
30
40
50
60
70
80
90
100
Rank of Priority Area in Designing an Agritourism/Farm-Based Education Short
Course(WV Agritourism Internet Survey 2014,
n=144)
Proportion (%)
Module 1Assessing your Agritourism Potential
What experience can I offer the public that will make my operation unique and profitable?
Does my region have the necessary characteristics to draw people to the area?
Does my farm have the necessary resources/characteristics to draw people to this enterprise?
Do we have the necessary personal characteristics to make this enterprise successful?
How to Evaluate My Potential Agritourism SitePART A: REGIONAL CHARACTERISTICS SCORE
1. Natural Beauty2. Cultural and Social characteristics3. Recreational Offerings in Your Region4. Shopping and Commercial Characteristics5. Public Infrastructure to Support Tourism6. Attitudes Towards Tourists7. Accessibility of your Region8. Existing Tourism Activity
Max. Score 25Max. Score 25Max. Score 25Max. Score 25Max. Score 25Max. Score 25Max. Score 25Max. Score 25
Gross Total Max. Score 200
Divide Gross Total by Standardizing Factor 20
NET REGIONAL CHARACTERISTIC SCORE MAX 10
PART B: PROPERTY CHARACTERISTICS SCORE
1. Natural or Farm Features2. Built Features and Cultural Artifacts3. Site Infrastructure and Safety4. Business Potential and Human Resource Features
Max. Score 25Max. Score 25Max. Score 25Max. Score 25
Gross Total Max. Score 100
Divide Gross Total by Standardizing Factor 10
NET PROPERTY CHARACTERISTIC SCORE MAX 10
Adapted from the “Farm and Country Tourism on your Property: Assessment Tool” of the CRC for Sustainable Tourism Development, Queensland, Australia.
Module 2Place = Convenience
The Region is the Destination
This module provides questions for you to think about as you explore “who am I in business with”?
Choosing your Marketing Strategy Based on your Tourism Grid Placement
(Partnerships/Collaboration)
The Agritourism Package – Collaborations and Partnerships!
Link offerings - The region is the destination.
Make it easier for travelers to locate options
Make a connection with already established trails, groups, packages, etc.
Collaborate!
Work to create the entire tourism experience or the tourism ―package!!.
Similar businesses or nearby communities aren‘t competition, they are part of your tourism product!
◦ The more there is to do, the more appealing a place becomes.
Module 3Understanding your Target
Market (Customer)
Discover your Customers Needs and Preferences
Authentic Farm or Ranch Experience
Memorable Social, Recreational and/or Educational Experience
Effective Customer Service
Adequate Public Facilities
Safe and Accessible Environment
Meaningful Community Relations
Source: Agricultural Marketing Resource Center, Iowa State University, http://www.agmrc.org
Agritourism
Agri-EntertainmentSpecialty Market
(price premiums for value-added, unique value)
Understanding your Customer Market Position
Module 4Assessing your Agritourism
Enterprise Profitability
What is the economic feasibility of this enterprise?
What are the potential returns relative to the costs from this investment?
Are there considerable upfront costs to be incurred?
Do I have the necessary financial resources to make this successful?
When a farm business borrows money it has an obligation to repay debt.
If you invest in this agritourism business:◦ Can I afford the interest (cost of capital)
◦ Can I meet cash obligations when due
◦ Can I make a profit and grow equity
◦ What is my cost of production relative to my revenue - will my business pay for my inputs and give me enough to live on
◦ How many visitors/customers must I pursue to meet financial goals
◦ How much should I charge for my product
◦ What does it take to make a living with this business
Is your Agritourism Enterprise Economically Viable?
Stand Alone versus Integrated Agritourism Operation – What is your PROFIT CENTER?
Farm
Goats
Petting and play area
Gift Shop (clothing, cheese,
milk, meat)
Sheep
Farm Tours
Agritourism
operation only –
Petting zoo
Sample Enterprise Budget – On Farm Festival/Activity
Sample Enterprise Budget – Christmas Tree Farm
Sample Enterprise Petting Zoo
Stand Alone Agritourism Enterprise
Start with Main Enterprise Budget (main profit center)◦ Sweet Corn Enterprise Budget
◦ Maple Syrup Enterprise Budget
◦ Strawberries Enterprise Budget
◦ Meat Goats Enterprise Budget
How will my main enterprise change if I add an agritourism enterprise – Partial Budget◦ Changes in returns
◦ Changes in costs
Integrated Agritourism Enterprise
Partial Budgeting - Adding agritourism enterprise to existing sheep, goat and value-added farm
Increases in Net Income Decreases in Net Income
Increase in Income Decrease in Income Entrance fees $10,000 $0 Gift shop sales $4,000 $0
Total Increase $14,000 Total Decrease $0 Decrease in Cost Increase in Cost Eliminate need for one employee
$3,000 Adding seating, washrooms, signs $500
$0 Play area for kids $500 $0 Construction and utilities for gift shop $1,000
$0 Liability insurance $100 $0 Employ one part-time employee $6,160
Total Decrease $3,000 Total Increase $8,260 Increase in Net Income $17,000 Decrease in Net Income $8,260
Change in Net Income $8,740
Module 5Assessing your Agritourism
Enterprise Market FeasibilityWhat is the economic feasibility of this enterprise?
Can I deliver this product at a reasonable cost?
Can I attract enough people to my enterprise to make it profitable?
Example: Evaluating number of visitors needed to offset investment in
infrastructure
Total Fixed Costs (TFC): $4,000 Insurance - $1,000
Parking Lot Improvements - $1,000
Farm Market Improvements - $1,500
Child play area - $500
Break-Even Point (BE) = TFC/(P - VC)
BE = $4000/($120 - $40) BE = 50 farm tours to
cover Wages and Promotion
Total Variable Costs (VC): $80
Wages/hour (5 workers @ $7/hr.) - $35
Desired proprietor income - $40
Giveaways/Promotion - $5
Cost charged per tour (P):
$120
Break-Even Point (BE) = TFC/(P - VC)
BE = $4000/($120 - $80) BE = 100 farm tours to
cover all Variable Costs
Sensitivity Analysis Example: How will my number of farm tours change as I
make other changes?
Changes in Cost per Tour:◦ Cost per Tour $100 = need 200 tours
◦ Cost per Tour $120 = need 100 tours
◦ Cost per Tour $140 = need 67 tours
Changes in Proprietor's Income:◦ Proprietor's desired Income/Tour $20 = need 67 tours
◦ Proprietor's desired Income/Tour $40 = need 100 tours
◦ Proprietor's desired Income/Tour $60 = need 200 tours
Module 6Assessing your Agritourism Cash
Flow
Will I be able to generate enough cash on a regular basis to pay daily operating expenses?
Can I pay my bills when they come due - Liquidity?
◦Provides information on the farm’s ability to meet financial obligations when they come due
◦Helps to identify the sources and uses of cash in the business
◦Early warning system for cash flow shortages
◦Does NOT provide an estimate of profitability
◦Helps plan for cash fluctuations in the business
Financial Statements – Projected Cash Flow Statement
Module 7:Should I
Develop a Farm and/or Food Safety
Plan?
Uncertainty due to legal actions. Civic responsibility – serious health issues, even
fatal Required in some instances What regulations apply depends on:
◦ Type of product/service
◦ Level of interaction with hazards
‘Another petting zoo, another e-coli outbreak’◦ http://www.foodpoisonjournal.com/tags/e-coli-lawyer/
Why you Need Farm and Food Safety Plans
Developing an on-farm food safety plan◦ Familyfarmed.org food safety plan
Agritourism General Farm Safety Plan◦ Agritourism General Farm Safety Assessment
Checklist
Agritourism Emergency Response & Legal Liability◦ Agritourism Emergency Response & Legal Liability
Assessment Checklist
Should I Develop a Farm, Food and Emergency Safety Plan?
Module 8 – Marketing“To sell Jane Smith what Jane Smith
wants to buy, you have got to see your destination through Jane
Smith’s eyes!
Understanding the market Who is the potential customer? What is the potential market size? Knowing your competition What is your unique marketing position/advantage? How you will reach your potential customer? Making the sale Remember, selling is just one part of marketing!
◦ Customer follow-up and retention
◦ Building a brand and creating community
◦ Continuously monitor and enhance your firm’s reputation and image
Your Marketing Plan
Online marketing goals mirror those of traditional marketing.
You are trying to:◦ Reach the customer
◦ Give your product pitch
◦ Make the sale
◦ Provide customer follow-up and support
◦ Retain customers
◦ Establish and maintain your business image
◦ Build a brand
Online Marketing vs. Traditional Marketing
Trying to do all of this PROFITABLY!!!
Module 9: Should I
Develop a Business Plan?
This module provides questions for you to think about as you explore the question of ‘should I develop a business plan?”
A business plan help you to: ◦Identify an opportunity
◦Understand how you can meet that need
◦Determine if you can do it profitably
◦Determine how you will let customers know you are in business and how your business can benefit them.
Getting the Big Picture – Your Business Plan
Planning does not begin after production, but
well before the first seed is planted.
Business Planning- Five Planning Tasks
Where are you and what have
you got?
Where do you want to go?
How can you get there?
Identify Values–What’s
important to you?.
Which routes will you take? How will you
monitor progress?
Module 10: Learning from
Successful Models
This module provides a 3-day of successful agritourism operations in North Carolina
Dee Singh-Knights, Agricultural Economics Specialist,
WVU Extension [email protected]
(304-293-7606)
Cindy Martel, Marketing Specialist
WV Dept. of [email protected]
304-541-9756
Daisy Bailey, Extension Agent WVU Ext. Service
[email protected] 304-462-7061
