Testing Your Ag Business Idea in the Marketplace
In the United States Department of Agriculture (USDA) National Agricultural Statistics Service’s (NASS) 2017, “Census of Agriculture,” they found the number of farms and primary producers decreased by 67,083 in the United States from 2012 to 2017. That is three farmers going out of business every day!
That’s three families that do not get to pass on to their kids what they have worked so hard to build, three families that now must find a 9 to 5 job, three families that potentially must move away from their home to find work. If we, as farmers and ranchers, are going to stay in business we need to find a way to capture as much profit as we can. This isn’t always easy because as you know agriculture producers tend to be price takers.
Is There a Market for Your Business Idea?
Think of the new marketing strategy (or new business) you are wanting to start and ask yourself the following questions.
- Is there a need for the product/service?
- Do I have the required experience in the industry?
- Do I have the needed resources to produce goods or services?
- Are there customers who would pay for it, and is my business model sustainable (will it make me money)?
While pursuing my MBA at Utah State University, I had a professor that introduced me to the NERCM method. The NERCM method is an easy way to evaluate your new idea and see the areas you may lack. NERCM stands for Need, Experience, Resources, Customers, and Model . Dr. Michael Glauser developed this model after noticing that almost every business that fails has one of these aspects either missing or underserved.
The Need, Experience, Resources, Customers, and Model
One of the biggest misconceptions new business owners have is that if their idea is new and exciting it will sell. To some degree, this can ring true. However, if your potential customers on the other end don’t see a need or it doesn’t solve a problem for them, you will be hard-pressed to tear them away from their hard-earned dollar.
So how can you decide if consumers will want your product or service before you spend a lot of time and money developing it? By having conversations with the consumers.
I know this may seem like common sense, but many new businesses are started purely on the, “I think that would do great here” statement. Again, if the people you are wanting to do business with do not find value in whatever you are doing, your business will never make it.
So where would someone start by gathering the market data to understand if the need is there for your product or service? If you have a new idea for a business then you should already have some understanding of the market you want to serve or who you believe the customer will be. So start simple, ask a few of these prospective customers if your new product or service would fill a need or if it would just be a want. I am not suggesting you go around and tell people your business model from the get-go. I am suggesting you create a brief survey or a list of questions to ask someone in a brief conversation in order to gauge whether this idea helps solve a problem or fills a need.
Let’s say I operate a calf backgrounding operation and I take in other producer’s calves. I think I can improve profits by utilizing my facilities and equipment that normally stand idle, for simplicity let’s say my squeeze chute. If I can offer my customers a service to run their calves through my chute to vaccinate and brand them, I can lower my total vaccination cost by purchasing larger quantities of vaccines.
I can also boost my revenue without adding more customers simply by offering these services. In order to find out if my customers would be interested in such a service, I could ask them a few questions such as, “What is the largest expense when working your calves? Do you have to hire extra help when you work your calves?”
Remember this is an extremely simplified version, but by asking these two questions you are going to figure out if you can help these customers by improving their profit. If you have multiple customers who manage small operations, they might have to hire help to gather and work their calves, increased labor costs. They might have to ship cattle to a friend’s facilities in order to have access to a squeeze chute, increased trucking costs. They also might have to purchase a week’s worth of feed once a year come branding time because they don’t have pasture available near the working pens, increased feed costs.
All these things add to the cost of that calf. If you could offer them a program in which they deliver their calves straight from their pasture or sale barn and you take care of the rest, you could show them that it could significantly save them time and money.
Everyone is willing to pay for things that improve their lives, especially if it can also save them money. Every idea you have to either improve your business or create a new business should be rooted in solving your potential customers’ problems. Once your new business is up and running it doesn’t end there, you should continue to ask your customers what they like and don’t like about your service or product. Not every idea or complaint from a customer will be profitable, but every comment from them matters and is the best feedback you can have to improve your business. Adapting to new environments and markets is what kept our forefathers in business, and it will help you stay in business for generations.
Editor’s Note : Watch for our ongoing seminars on sustainable business practices and more.
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