Answer this question before making any farm investment
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What’s the one question you should answer before you make any investment in your farm business? Welcome to Small Farm Nation Academy where we’re gonna help you learn all the marketing and business skills you need to get growing.
So the question is this, will this investment help me make money?
Now you’re gonna find that there’s all kinds of opportunities to make investments in your farm business, and you’re also gonna find the temptation to rationalize many of these investments. For example, do I need to get me a new 4-wheeler or a new Gator do I need to get me a new tractor? Oh, that sure would make my life easier.
Should I invest in having a new website, done?
All of these are opportunities to spend money that it’s easy for us as smart human beings with emotional needs to rationalize that we want these things.
But does it make sense to?
You know, many years ago, I was president of a division of a Fortune 500 company. It was a job I had… For about eight or nine years. And one of the things I hated about the job, but actually it helped me a lot of my life was once a year. We had to do these very elaborate business plans about 160-170 pages and part of the planning process every year was to come up with a projection of what our capital investment needs were gonna be for the upcoming year. For example, I might wanna buy a new copier machine, or I might want to buy some new equipment or machinery and we would have to project what it was gonna cost, when we were gonna need to expand that and most importantly, we would have to project the ROI.
So, before that decision could be made to allocate the capital to us in our business. The CEO and the board of directors would look at the prior years performance on, What did I say last year? Or, “we need capital, how much we spend, how much did I say we would get an ROI in terms of a return on that investment in terms of a higher revenue or profits or whatever it was, that we projected so we had to become pretty good at making investment decisions that we knew would have ROI and then and we could prove.
So one of the things I want you to think about the next time you’re thinking about, do I want to invest in equipment like a tractor or a CD, or a greenhouse or a delivery truck or whatever, or do I want to invest in education, like going to a conference or going to a farm, conference or trade show or marketing, which is usually a great investment, but before I spend money on advertising or a new website or even when you’re talking about hiring people, I want you to think about will this investment make me money and what’s my confidence level that it will make me money, and how will I track that? Improve that, in your case, not to a board of directors, but to yourself.
How will I show next year or six months from now, that yet, I spent this $20,000, and here’s what I got in returned for.
Now you’re gonna run into some situation, that are harder to track exact ROI return dollars, but at least set some metrics, for example, if you’re doing a new website before you say “I want a new website which might cost you 400 or… Or whatever. specify clearly what change you’re trying to affect what are your goals, what’s not happening today that you want to happen.
Maybe it’s traffic on your website, maybe it’s the conversion of visitors to subscribers, maybe it’s the conversion of people visiting to becoming customers, paying customers may be the objective is to get a higher average order size, whatever it is, come up with. Your objective didn’t make your investment if you’re gonna make it and then track the results to see if that came through for you.
If you’re making investments that don’t give you money back then you’re wasting cash that you’re gonna need later. And the last thing, I’ll leave you with is alternatives to laying out cash. Because I like that old expression. Cash is king. You can spend cash on something, for example, the example of a greenhouse you can spend cash on it. Can you also lease something?
Can you also rent something instead of buying a tractor?
Can you restart or if you’re doing, if you’re hiring a person can you are on part-time versus full-time?
Can you hire someone who commission basis versus on a full-time basis?
There’s all kinds of opportunities to look at how you allocate your capital. One thing is certain, in our business and in all businesses is that capital is finite, so you have to make smart decisions about how you’re gonna make your investments. And my recommendation is that you make sure that you’re getting a return on investment.
If you wanna learn more about marketing and strategy of your farm or craft food business head over to Small Farm Nation Academy . We have lots of courses on brand building strategy of running a business to email this building public relations and everything else that relates to getting customers in making money that over to Small Farm Nation Academy