Business Basics for Niche Cattle Ventures

Oct 22, 2007 9:48 AM

By Sarah Aubrey

Get this widget!

If your beef cattle operation is sandwiched somewhere between ‘huge and hobbyist,’ you may have at least considered starting some sort beef business off the farm. No better time seems to exist for the establishment of such ventures as consumers are actively seeking local foods and organizations such as USDA are offering grants to aid ag-based initiatives.

Truly, it’s exciting that there are opportunities in today’s marketplace to remain viable, thrive, and even build wealth that don’t include surviving the commodity market system. Yet, it’s not as simple as taking out an operating loan and buying a few cows.

Success in direct-to-consumer marketing takes a high tolerance for risk; the trial and error of entrepreneurship (reader’s of this website are no doubt already familiar with these); and a solid understanding of niche marketing.

A lot of good ideas are plotted out in the small notebook that often accompanies a shirt pocket, and putting pen to paper is a good start. But if you’re serious about building a company-the first step is drafting a business plan.

Business plan templates are a good place to get ideas and help with structuring the document. Before starting on your own, go to http://www.sba.gov to take a look at several sample plans.

Basic Business Plan Components
1. Company Name, Location, and Business Type
Start off by noting simply on the front page the name and location of your company, including complete physical address, phone, fax, and e-mail as well as the owner’s names. It’s like a title page. You’ll also include here the type of business you have decided to organize such as a sole proprietorship, corporation, partnership, or Limited Liability Company (LLC).

2. Mission Statement
The mission statement is a series of sentences akin to a résumé's Career Objective statement. It’s difficult to summarize who you are and what you do in a few short words, but it’s worth the effort.

Ask yourself these questions as you create a mission statement:
· Am I an innovator and building a completely new product offering?
· Am I selling an existing branded product or creating my own farm brand?
· What's my niche?

3. Business Vision/Executive Summary
The business vision is a bit like an expanded, more detailed version of your initial mission statement. Here you’ll clearly define who’s involved and why, what you’ll be selling, and who you’ll be selling to. This is like an opening statement in a speech or the chance to make a first impression.

4. Product Description
You must clearly define what products you’ll sell and how they will look. In the branded beef business, for example, you’ll need to include information on packaging and labeling and any specialty claims such as ‘pasture-raised,’ ‘natural’ or ‘organic.’ Define known competitors and point out how your brand will be different. As you describe your farm’s product, note also how and where you will sell it and the prices for every single, including if there are different wholesale and retail prices.

5. Market Segments and Target Customers
Creating market segments is vitally important for small beef ventures and branded beef products because it’s paramount that you understand what your brand is and why the buyer identifies with it. This is a broad subject; we’ll cover more in an additional column. Start by gathering basic demographics such as:

Age
Gender
Geographic location
Education and income
Buying habits
Goals

It’s effective and motivating to divide sales and marketing goals into both short and long term goals. Short term can be up to the first six months to one year in business. For long term goals, think broadly and forecast out three to five years. This area of the plan is highly changeable, especially during a year-end review.

6. Start-Up Capital
Every business no matter how small needs some start-up capital. Estimating initial dollars is a forecast, however, so while it’s changeable, it still needs to be as accurate as possible to avoid the pitfalls of over spending or growing too fast without the dollars allocated to meet demand. Consider the costs associated with acquiring the following items:

Equipment
Raw materials (such as fat cattle)
Marketing and sales materials
Licensing and regulatory fees
Professional services (such as processing and packaging)
Insurance
Transportation
Lease or property costs
Subcontracted labor and employee costs
First Year Budget

I’ve learned from experience you’ll be on sounder financial footing if you build a budget that you can stick with. One way to help stick with a business budget, just like the one for your family’s household, is to build in extra dollars for unexpected items and additional purchases. This may require trial and error and changes, but work hard to keep the budget accurate and manageable for your operation. Budget for the costs of each item needed in the start up capital section.

7. Company Management
Here you’ll detail who’s who in your operation. For livestock families, this exercise is serious because misunderstandings can lead to discontent. Decide who actually owns the company and what type of profits they’ll take from it. Look at items such as land and equipment use. For example, if you’re living on your mother-in-law’s ground, does she get a cut and is she an owner? When you use your brother’s livestock trailer, are you paying him in cash or a favor?

Summing It All Up
To serve its purpose, a business plan must be a living document. Living means change. There are two times when it’s necessary and okay to alter your initial plan. The first is during your start up phase, the second is during a year-end review. Commit to the plan, use it every month and review it with everyone involved at least annually. Referring to your plan regularly helps gage financial targets for sales and for spending and provides a road map for staying on the right track.

Best of luck and talk with you next month.

About the Author: Sarah Aubrey is the owner of Aubrey's Natural Meats, Indiana's premier source for gourmet natural beef and pork. She and her husband live in rural Indiana, where they raise beef cattle for her company.

To help farmers position themselves well for the opportunities afforded by today's market, Aubrey shares her years of experience in her first book Starting & Running Your Own Small Farm Business due out in January 2008. It offers everything readers need to know about launching a small agricultural enterprise, from initial start-up to consumer marketing. It is the first in a series of books Aubrey has planned for small farm businesses. For more information visit http://storey.workman.com/products/9781580176972/.

Subscribe to American Cowman Update e-newsletter!

Breaking industry news in your e-mail inbox every other week!
Subscribe at http://subscribe.americancowman.com/subscribe.cfm.