What Does it Take to be What Does it Take to be Successful in a Successful in a

Producer Owned Business?Producer Owned Business?By Marsha LauxBy Marsha Laux

Iowa State University ExtensionIowa State University ExtensionValue Added Agriculture ProgramValue Added Agriculture Program

Success = Success = ______________ ((youyou fill in the blank) fill in the blank)

Define SuccessDefine Success Is it just $$$$?Is it just $$$$? Know where you are going – be specificKnow where you are going – be specific Goals – timelines – plansGoals – timelines – plans If Profit, then what level, when?If Profit, then what level, when? Specific for your business planSpecific for your business plan Re-evaluate life’s priorities as it relates Re-evaluate life’s priorities as it relates

to your producer-owned businessto your producer-owned business

Unique Selling Proposition?Unique Selling Proposition?

Comparative or Comparative or competitive competitive advantage?advantage? Better thanBetter than Cheaper thanCheaper than Different thanDifferent than _______ than_______ than

Is it all about the PRODUCT?Is it all about the PRODUCT?

Product sell itself? Product sell itself? Better than, different than,…… how?Better than, different than,…… how?

Competitive positioningCompetitive positioning Packaging, labeling, pricing, brandPackaging, labeling, pricing, brand Delivery, ease of transaction, availabilityDelivery, ease of transaction, availability Margins, service, market shareMargins, service, market share Customer relationsCustomer relations Telling a story with your productTelling a story with your product

Food is Big BusinessFood is Big Business

$800 billion spent $800 billion spent on food/US/2001on food/US/2001

Adding 50-80 Adding 50-80 million people in million people in US by 2020US by 2020

Add another $200 Add another $200 billion to food billion to food expendituresexpenditures

“With $800 billion in food sales, I can easily get 1/1000th

of a percent!”

NOT!

Verify & Test Verify & Test

Who are your customers?Who are your customers? Test market – customer focus groupsTest market – customer focus groups Letters of interest from customersLetters of interest from customers Validate your idea Validate your idea

Go sell something --- sales trump Go sell something --- sales trump surveys every timesurveys every time

Specific & quantitativeSpecific & quantitative

Key Questions:Key Questions:

Can you make a business case?Can you make a business case? Is this fad, growth or highly competitive?Is this fad, growth or highly competitive? Will you have revenue diversity?Will you have revenue diversity? Can you execute a good business model?Can you execute a good business model? Will your actual business structure make Will your actual business structure make

sense?sense? Can you convince a stranger to buy or Can you convince a stranger to buy or

invest in your product or idea?invest in your product or idea?

Know thy competition!Know thy competition!

Research, research, Research, research, research…… PLANresearch…… PLAN

Who are you going Who are you going to replace in the to replace in the market?market?

Identify parallel Identify parallel customer choicescustomer choices Time, Money, Family, Time, Money, Family, Social & culturalSocial & cultural Eat out, dine inEat out, dine in

What is the value of your What is the value of your product?product?

Priced comparatively…Priced comparatively… What is your What is your

advantage?advantage? Know yours and Know yours and

competitors margins, competitors margins, costs, pricescosts, prices

Constantly scan other Constantly scan other products – how do you products – how do you compare?compare? Review & modifyReview & modify Be ready to adaptBe ready to adapt Revisit your business planRevisit your business plan

Be paranoid about the Be paranoid about the market!market!

(at least adopt a (at least adopt a healthyhealthy paranoia) paranoia) Listen to what the Listen to what the

market is telling market is telling youyou Great marketers are Great marketers are

great listenersgreat listeners Don’t ever assume Don’t ever assume

you know it all or you know it all or enoughenough

Be tenaciousBe tenacious

What is your business What is your business model?model?

How do you make money?How do you make money? By being the most efficient By being the most efficient

producerproducer By buying cheap inputsBy buying cheap inputs Deliver cheaperDeliver cheaper

Perception is REALITYPerception is REALITY Value is created in Value is created in

distribution and via distribution and via marketing, NOT in marketing, NOT in PRODUCTIONPRODUCTION

Know the “Numbers”Know the “Numbers”

Have a sound knowledge of the Have a sound knowledge of the financial dynamics of your financial dynamics of your businessbusiness

Don’t need to be a CPA, but Don’t need to be a CPA, but know& focus on key results areas:know& focus on key results areas: Gross margins, return on investmentGross margins, return on investment Monthly fixed costsMonthly fixed costs Sales/employeeSales/employee Cash flowCash flow

Plan to which business measures Plan to which business measures you will manage to!you will manage to!

Cash is LIFE & Cash is LIFE & Lack of Cash is DEATH!Lack of Cash is DEATH!

Know and understand your cash flowKnow and understand your cash flow Plan for the ebbs & flowsPlan for the ebbs & flows Work with your banker, your CPA, Work with your banker, your CPA,

revisit your business planrevisit your business plan

Have enough capital!Have enough capital!(and then some…)(and then some…)

It doesn’t work without enough It doesn’t work without enough working capital…….. working capital……..

Plan for the unexpectedPlan for the unexpected The biggest cause of failure is The biggest cause of failure is

inadequate capitalinadequate capital Go accrual – review your ratiosGo accrual – review your ratios Don’t do this for the bank, do it Don’t do this for the bank, do it

for for yourselfyourself and and your your businessbusiness!!

Your business is a reflection of Your business is a reflection of YOUYOU

True entrepreneurs take things True entrepreneurs take things personallypersonally

Take the Take the blameblame and the and the creditcredit Success or failure Success or failure

Determined by what you do, how Determined by what you do, how you planyou plan

Your willingness to adapt, to fight Your willingness to adapt, to fight for what you wantfor what you want

Refusal to make excuses – make Refusal to make excuses – make it happenit happen

Plan, Plan, …. Plan, Plan, …. EXECUTE!EXECUTE!

Create action plansCreate action plans Strategic objectivesStrategic objectives Know where you are goingKnow where you are going How are you going to get there?How are you going to get there? Detailed budgetsDetailed budgets Assign responsibilityAssign responsibility Work on timelines --- “DEAD”-linesWork on timelines --- “DEAD”-lines

ANTICIPATE!ANTICIPATE!

Anticipate what will Anticipate what will happen --- plan for the happen --- plan for the unplannedunplanned

Do you have a fallback Do you have a fallback plan?plan?

ContingenciesContingencies will will help make your help make your business a successbusiness a success

If you If you failfail toto planplan you you plan to fail!plan to fail!

Get your mental Get your mental focusfocus right right Focus on prioritiesFocus on priorities Is your ladder leaning Is your ladder leaning

against the wrong wall?against the wrong wall? Peter Drucker: replace Peter Drucker: replace

“achievement” with “achievement” with “contribution”“contribution” By contributing, you are By contributing, you are

keeping your focus where it keeping your focus where it should be – your should be – your customers, family, customers, family, employees, shareholders & employees, shareholders & industry.industry.

Be Be PASSIONATE!PASSIONATE! Without a fire in Without a fire in

the belly, you the belly, you will not be will not be successfulsuccessful

Passion – be Passion – be willing to fight willing to fight for what you for what you must believe in:must believe in: YOU YOU YOUR BUSINESSYOUR BUSINESS

Contact Information:Contact Information:

Thank you!Thank you!

Marsha A. Laux mlaux@iastate.eduIowa State University Value Added Agriculture

Agricultural Marketing Resource Center1111 NSRIC

Ames, Iowa 50011-3310Phone: 866-277-5567

Fax: 515-294-9496www.agmrc.org