AdAgrA 2021: Hidden Treasure

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AdAgrA: Adventist Agriculture Association

The Business of Farming

Kevin Brown

01 Business Basics

Father God, we recognize as we begin to talk about business basics that all the things that we talk about, all the things that we manage are really yours, you're the owner.

So I pray that as we go through this class and have this conversation this morning, you will be with us.

Help us to learn what is appropriate for our situation.

I've put up on the screen for you just a little bit more about my history, my stops along the way.

So I'm an accountant and a finance person by training.

These are the, these 6 bullet points are the companies that I have worked for over my 30-year career.

The point that I want to make about this slide that will be obvious to all of you in the room probably is that none of them are in agriculture, right?

I'm definitely a newcomer to the agriculture field And so the engagement that the Silers and I have had together over the last 9 months on the Better Together Farm constitutes the majority of my exposure to the agriculture industry.

The thing that's been really fun about that for me, We've done some business work, and you're gonna hear much about that during the course of this morning's conversation.

But most of the time that I spent there, I actually got into the dirt and into the weeds, so to speak.

And through the course of that 9 months, I began to kind of catch the vision or the energy that I know drives a lot of you and brings you to conferences like this and to consider or invest in agriculture in the way you have.

I put my contact information up there on the screen as well, so if you have questions or want to contact me for any reason after the course is over, please feel free to do so.

Okay, so I'd like to just check a little bit about who's here, and basically what I'm trying to understand is the level of, I don't know, engagement or how deep you've gone into the agriculture as a business model.

The first 1 is, do you consider yourself, or are you in a situation where your farm, your agriculture business, is your primary source of income?

Primary source if it contributes more than half your household budget.

So yeah, go ahead and raise your hand if you're in that spot.

Okay, if you're not in that spot, but you're seriously considering being in that spot or you're on your way to being in that spot, just not quite there yet, please raise your hand.

Okay, so probably a quarter to a third of you.

And the rest of you presumably are here for some other reason I want to ask you to raise your hand and hopefully the presentation is geared for those 2 groups of people.

Hopefully you find something useful and valuable even if you're not in 1 of those 2 groups.

The format and the method we will be using today is a case study approach.

I want to explain a little bit about the case study approach because it's not necessarily the same as other presentations you might hear and I just want you to know what you're getting and what you're not getting in this approach.

So the case study approach uses a real-life story to demonstrate the relevance and application of selected principles.

A case study approach is not like a textbook where you're going to get a survey of all the concepts, all the theory, a list of all the things you have to think about.

That's a very valid approach to learning and instruction.

In a case study approach, we're going to take selected principles and apply them in a real life setting.

And the benefit of doing that is you get, it's a little easier to connect sometimes if you have a live story because you can put yourself in that person's shoes.

And it's also a little, you know, deeper.

You spend more time on a narrower set of principles, so you probably have a better chance of understanding and assimilating them.

But just so you know, it's not going to be a comprehensive list of all the things you need to think about in business basics.

The other thing let me mention at this point, this slide, I gave a few things in the handout or the, I guess it's a handout that was circulated in advance.

Those, I have a lot more slides than just that, but if you see slides like this 1 that has underlines and then words fitting in the blanks, usually they're associated with the handout.

So if you're following that, you can take note when you get those slides and make notes as you like.

Okay, let me introduce the group that we'll be using for our case study, the family.

This is the Seiler family, and let me introduce the family to you.

You'll see some of them here during the presentation today.

And you may have bumped into him in some other way.

Alan is what I would loosely call the founder of the farm.

It was his energy and drive as a teenager that kind of steered the family in this direction.

By the way, like all small businesses that are run by families, everybody does everything, right?

So the roles are kind of the things I'm going to use in introducing each of these folks, just describe things that they spend most of their time doing, but they're not rigid roles, you just can't survive in a small business having rigid roles.

I would also describe Alan as the soil scientist manager.

Occasionally, we call him the soil scientist fanatic because he thinks about it so much.

But most of the time, we just call him the soil science manager.

But he's really into soil fertility, also the construction manager and designer.

Next to him is, you've already met Alan, next to him is Aubrey.

She's also the customer service manager, so whenever a customer has a, you know, a complaint or question they want to ask, Aubrey is usually the 1 that they talk to.

You'll get to meet Aubrey a little bit more, but she's here as well.

That's Elias and Amelia Lopez, but they live on the farm as well in a separate house.

Elias comes down on market days and maybe other days too, but at least on market days he'll come and help put the orders together.

I also refer to Elias as the chief storyteller.

He's got a story for every occasion and it's just a riot to listen to him, so I really appreciate Elias.

She makes lunch on market days for the entire crew.

And she has become 1 of my very favorite people over the course of my time there because she makes awesome lunches.

Then following across the screen, Ricky is also here.

And Ricky is primarily the, I call him the operations manager.

He's kind of taken over the whole, you know, getting the field work done and getting the beds cultivated and planted and all of that.

That's a loose definition, but that's where he spends a lot of his time.

So he's done, particularly with like restaurants and grocery stores, those relationships are the ones he's cultivated.

You'll hear from him a little bit about that later in today's presentation.

And Vivian's not in the room, but she will be shortly.

She keeps the family books and the family budget.

She's also spun up a flower operation just in the last year.

She's the flower tender, which has been a real interesting twist and a nice addition to the Better Together Farm.

So, let me tell you a little bit more about the farm, having met the people.

This is an organic vegetable farm, and I say plus because they also grew strawberries, I believe for the first time last year.

There are strawberries in the ground this year.

And then the flowers, which I mentioned just a moment ago, are in addition to the product mix.

And they have about a 10-year history, depending on how you count the start date.

But Approximately 10 years they've been doing this in some form or another.

They're located on 15 acres in South Central Oklahoma.

So from here it's actually just about 3 hours north.

It's right up the road from Dallas to Oklahoma City, about 50 miles north of the Texas border into southern Oklahoma.

02 Business Basics

Okay, let's go ahead and get started here on module number 2.

Module number 2 I've entitled, Demystifying the Budget.

This isn't the first time I've talked about budgeting.

And 1 of the things I've noticed over the years is that there's a certain reaction when I hear the word or when I say the word budgeting that kind of mimics the look on this tyke's face.

Any of you confess to having that reaction to the budget?

So this poor soul has just got, I can't tell if that's a his or a her, but anyways their first exposure to what looks like a lime in the hand there.

I thought it was particularly colorful and thought it might be interesting to share at the beginning of this module.

So what I'd like to do is tell you a tale of 2 companies.

Both of these companies are companies at which I've worked, and they had very different approaches to budgeting.

So let me tell you the story first, and then I'll tell you the point of the story.

The first company is Simpson Timber Company.

Simpson is located in Shelton, Washington and it was in timberland.

It had several thousand acres of timber property that it owned.

It also had manufacturing plants related to forest and wood products.

2, 000 employees, it was a fairly sizable company, had a 100-year history.

It was family-owned, but it actually started back in the late 1890s with the founder, Saul Simpson, acquiring Timberland property near the current headquarters of Shelton Washington.

And in Simpson Timber Company, what they did was they had an annual budget.

And in addition to the annual budget, they had rolling quarterly forecasts, which is just a fancy way of saying a quarterly budget.

And every month when the financial statements came out, all of the division controllers and whoever was responsible to help them with their jobs had to come up with reasons why the actual results varied from the quarterly budget and the annual budget, and they had to give updates.

And so at Simpson Timber Company, there was 1 person on the corporate staff, which was where I worked, was in the corporate staff, whose entire job was the budget, The budget and the rolling quarterly forecast.

That was a level of investment in budgeting that I have never seen anywhere else.

There was a lot of commitment to making the budget right and communicating all the right numbers and words to explain the numbers and all of that.

And it took 1 person full-time plus, you know, the commitments of several of the operating staff in order to maintain that system.

Then there was Delson Lumber Company, which is where I worked immediately after I was done at Simpson.

Delson Lumber Company was also located in the Pacific Northwest, just down the road in Olympia.

It was a lumber producer, much smaller company, about 120 employees with a single production facility right in the area where they were.

It had been in business for I don't remember how long, at least 30 years, and I can't remember if it had a history beyond that.

The family unit that owned and controlled it was much tighter than the Simpson family, because the Simpson had multiple generations, and you know how the family trees expand over generations so their group was actually much larger but still it was all family-owned.

At Delson Lumber Company we didn't have a budget.

The owner of the company knew his operation He was out in the mill every day and then in the office with us, you know, numbers types people in the afternoon every day and he didn't think he needed a budget.

So he just managed the operation by walking around the floor and seeing what was going on in the production facility and then coming back to the office and asking us questions about numbers and, you know, should I buy this piece of equipment or whatever.

And we never had a budget in the 4 years that I worked there.

So, Dells and Lumber Company was kind of on the opposite side of the spectrum.

So you have no budget and then you have what I call like the most complicated budget, nuanced, thorough budget I've ever seen in the world.

For most of us, most of the time, budgeting that's useful and helpful is going to be somewhere in between those extremes.

What I'd like to do now is just draw a point out of that, and this is the key point of this whole module.

Remember that budgeting is a process that produces a product.

So there's both a process that you go through and a product that comes out the other end.

Sometimes you learn more from the process than the actual product that comes out.

But the budgeting process and product are tools whose proper use is determined by the present need of its users.

So the point of all this is that the question you should ask yourself about your budgeting practice is not, am I doing it right, but rather, Is it helping me to meet my goals?

There's not some monolithic standard or ideal budget that works across all people in all situations.

The way to understand it and use it is to understand your business needs, your business objectives, and then say, how can I use a budgeting process, or how can I use the budget that results from a budgeting process to help me achieve my goals?

So in just a minute, I'm going to make sure you all had a chance to take shots of the slide.

I'm going to go through a list of a few things that a budget could be used to do.

This is not a comprehensive list, it's just a few things.

And as part of that planning process in the budget, you will anticipate or provide the details to support decision making about limited resources.

So when you go through a budget, usually you have less money than what you want, right?

Every budget I've ever gone through, we wish we had more money to spend on certain things.

So you have to start thinking what's most important.

That's a capital allocation process where you decide what's most important, what's most likely to help you achieve your business objectives.

That's a use of a budget if it helps you think about that and get those priorities clear in your mind so that when those distractions come throughout the year you will remember why you chose what you did and then you'll have you know that direction and that focus.

Sometimes opportunities come up during the year that are actually more valuable than what you anticipated and you make a change but it's that process of deciding where can I spend my money in the way that it's going to best help me achieve my objections, my objectives?

So thinking about what's most likely to get me to the point that I'm headed towards.

This can also include non-financial stuff, right?

So we talk about budgeting often in the context of money.

I find, honestly, that budgeting works very well at potlucks.

So when I approach a potluck table, 1 of the first things I like to do is walk down the table from the beginning to the end and see what's there.

I put in my plate I said boy that salad looks great and I fill the whole plate with salad and then I get down to the lasagna and there's no room.

Okay well that was a little bit of fun but anyways it does work in non-financial settings too.

It can be helpful for communicating efficiently and that was 1 of the reasons Simpson had such an elaborate budget, right?

So the management was located up in Seattle, they had manufacturing places in Shelton, They had 1 in an outlying part on the Olympic Peninsula, and they had some in Northern California.

So communicating efficiently about the results of each of those places was an important piece of them being able to manage the company.

So it can actually help with communications in certain settings.

So sometimes it might be educating a family.

In my last job, I would use the budgeting process regularly to educate our board about the particular financial dynamics that affected our company and what things they should be paying attention to, at least in my my vision.

It can also be used to answer a specific question.

So sometimes there will be a budget not about the whole company but a budget for a project.

There's usually a budget, at least a contractor if they're a good 1 will have some sort of a budget to support that or any number of things.

So it can be you know narrower in scope and just answer a specific question.

I'm gonna give you a little bit of case history on Better Together Farms, just so you have something in real life that can guide your discussion about a question that I'll put up following that about knowing the score in your own situation.

So, as you remember from the last module, the record-keeping that the family had had been spotty and had mixed records.

It was similar in the farm until about 2018 when, as Vivian shared earlier, they made a commitment to more contemporaneously recording their transactions.

They adopted QuickBooks for farm operations in 2018 and 2019.

In 2019, they achieved break-even operations at about $40, 000 plus or minus a little bit in sales.

So that gives you a little bit of a sense for the scope of the operation.

There had been up to that point no written budget, no specific concrete financial plan for the farm.

Okay, so that's kind of the the case history that we had with them up to that point.

03 Business Basics

Okay folks, we'll go ahead and reconvene and begin the third part of our three-part workshop here.

And what we'll do to begin this section of the workshop is to complete our module, module number 3, which was getting paid or the selling and marketing effort.

So hopefully you had some good conversation in your groups and generated some good thoughts or had some good progress there.

We're going to skip the sharing that we would normally do after this just because of how much time is getting away from us.

But I'd like to introduce Ricky and Ricky's going to talk to you a little bit about what happened on Better Together Farm in the last year.

Well I was just talking to this group up here for a few minutes and they gave us a really good idea of what we could have done but we ended up not doing.

So I just wanted to start off with a little idea about kind of our farm vision.

This isn't something we have in concrete, but the reason why we even decided we wanted to get into agriculture, especially on small scale farming.

And I will just mention 1 thing because I asked, I keep on mentioning that we have 15 acres, right?

Technically we have 20 acres, but the question was how much do we actually grow on?

Okay, and our current growth space right now is we have 92 100 foot beds that are 30 inches wide each beds 30 inches wide 92 bits so averages out to about 3 quarters of an acre, So we're not growing on 15 acres.

We're growing on about three-quarters of an acre.

And I don't know if any of you plan on tending any of the market gardening track, where you meet the farmer and stuff like that.

But Each 1 of those farms are going to tell us a little bit about their schematic and their layout.

So if you're coming to those, we'll learn a lot from a variety of farms who are currently doing something.

Develop personal connections with customers.

We feel like that's a big part of the mission.

We would love to be able to have people out to the farm more often.

We'll talk a little bit about that in just a second.

That didn't happen much this year because of the whole COVID thing.

Just changed a big part of what we were hoping to do this year.

And so we felt like in order to do that, we need to go direct to customer.

That just felt like the best way for us to do it.

We do a little bit of restaurant, not much.

You'll see here in just a minute as we break that down.

And then we were hoping to be able to do some on-farm events and I'll share with you a couple ideas that we were planning on doing heading that direction as well.

So in new in 2020 this is actually what we did this past year.

We actually wanted to do more online market access, which means before we would have available to people, we had we'd have 2 drop sites as Keven was mentioning before.

We had 1 drop site in Murray County, kind of a farm pop-up stand that he mentioned, right?

And we had 1 pop-up site in the Carter County area.

And so basically if somebody lived in, say, 1 of the towns is named Davis, Oklahoma.

If you lived in Davis, Oklahoma, you could purchase from us 1 time a week.

And we had 1 farm stand that was open for 2 hours, 1 time a week.

So we felt like we needed to open up the market so that people, if they wanted to purchase more frequently from us than 1 time a week, they could do it.

A lot of people are conditioned to, oh, we need to pick up something, something.

Well, if you have to say, oh, we need another head of lettuce.

That little online thing is that's Better Together Farm.

Oh, but I'm going to have to wait till Monday at 4 o'clock, and it's Wednesday.

So how do we make it more accessible for people?

In other words, have more pickup sites that are closer to people where they can access and make it more convenient for them to stop in and pick up their veggies.

Before it was like we would send 2 people from the farm down to 1 pop-up market for 2 hours and they would just sit there for 2 hours.

Yeah, you're meeting people, there's some things there, but it felt like, how do we scale this?

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Series

The Business of Farming

02 Business Basics

Transcript

Parent Series

Parent Conference

Sponsor

Recorded

Attachments

The Business of Farming

01 Business Basics

46m

Things to Know Before You Become a Farmer

Equipping Yourself Mentally

57m

Intensive- Market Gardening: A Lifestyle and a Lesson Book

5. Market Gardening: Small Farm Irrigation

1h 6m

Online Marketing

Laying the Foundation

52m

Market Gardening Track

3 Keys to Juggling Your Market Garden Like a Pro

1h 7m

The Entrepreneur's Toolbox

Entrepreneurial Finance

45m

Market Farming/Gardening

6- What to Market and How

1h

Sound Doctrine