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Lessons From Our First Harvest

Lessons From Our First Harvest
Knowing what you don’t know

I’ve said it many times, starting a business is a series of giant roller coasters, some of which are not built well and others that, while built well, are scarier than you bargained for. Even for someone like me, the “formula” is more like cooking up chili than baking a cake. If the cake recipe calls for a certain amount of something and you don’t nail it, your cake won’t come out well. However, if you follow a recipe for chili it is going to be pretty boring chili, you have to add your own amount of different spices that you pick.

When working with clients I make it clear the only thing we really know about the plans we are putting together is…they are wrong. They are our best estimates of what might happen combined with what we want to happen. Nailing them exactly is nearly impossible, so we know they are wrong. The question is how wrong?

So, when we funded our farm in Oregon we went in with high expectations, but open eyes. Our first harvest had some bumps along the way, including a late start due to licensing hang ups. But we got close to meeting our goals for the size of our first harvest. And then the real learning curves began. There was a bumper harvest and not having any prior customers meant starting from scratch in an environment of plummeting prices. For several reasons our own sales efforts started slowly and that meant cash flow issues. Cash is king when you are starting a business and while we were well funded there also were expectations for income that lead to some early decisions to hire people and increase expenses.

The roller coasters were roaring in different directions and we were not having fun. Some quick decision making and a big push for sales stabilized things quickly and we got a handle on some of the roller coasters. In the process we learned a lot, refined our processes and learned how to live on a lower level of expense that ensures our profitability even at some of the lowest price points the market hit.

Now we just completed harvesting our second crop. The prices have rebounded a bit, and we have been able to maintain our lower cost structure. As a result, we are healthy business-wise heading into our second selling season. More importantly we are prepared for another price hit when everyone’s crop hits the market this year. We also developed solid storage methods for our product hoping the price would rebound and helping us extend our inventory until our next harvest.

In doing so, we have gained 20 solid customers who have been purchasing our product regularly since we first started selling. It was their input that lead us to plant the strains of product that we chose to plant this year, so they are excited for our fresh crop coming soon. It was their input that helped us develop a plan to maximize our pricing early in the selling season this year. They are also confident our processes can continue to produce high quality product that will meet their customer’s needs. That means they see our product as a critical piece of their own customer loyalty plan.

It should also be noted that we did all of this with virtually no marketing budget other than going to talk directly to clients. In our market it is face-to-face contact and relationship building that truly drives sales. It makes me think about how far other businesses have strayed away from face-to-face relationships towards on-line SEO marketing. Yes, we need to do better branding (we are working on that), but we also need to build more personal one-on-one relationships. It’s those relationships that will drive our growth and success.

Our next goal is to prove repeatability to our customers. To show that our quality will remain high, our processing and storage methods will enable our product to stay fresh throughout the year like it did this past year, and that they can ultimately count on us to help drive their success. If we can do that, we are going to be very successful. Right now, those 20 customers represent about 3% of the total market. If we can keep them happy, as they grow their own base we will grow. If we focus on helping them grow their base, that can only be good for us. Yes, we want to find other new customers, but I would rather have 20 loyal customers than 100 customers who don’t know if we care about them and as a result don’t care about us.

Based on our experiences and lessons learned we have drastically modified our financial models and near-term goals. We have a much better idea of what we can expect this year, so plans have been revised. Are they right? Nope, I know now they are wrong. But going into 2020 we have a much higher level of confidence that our actual results will much better reflect our goals. I am also confident that we will learn a lot of new things and make further adjustments to the plan, models and process to further improve our results.

Your challenge this month is to ask yourself how well do you really know your customers? Your business? Will your next “harvest” go better than your last one? What are you doing to get a handle on some of your out-of-control roller coasters?

I can help…reach out!

Mitchell Bolnick – The Excel Consulting Group