The Business of Farming

Homestead Organics CEO Tom Manley had a vision in mind for his parents’ farm. He left the corporate world behind in 1997 and after a thorough analysis, he realized the right thing to do was to grow big and grow fast. Then he had to figure out how to do it.

When Manley took over Homestead Organics it was a 400-acre farm with a small feed service. Today, Homestead Organics employs 14 people, serves hundreds of farmers, offers multiple products and services, handles over 7,500 tonnes of grains, and has $1 million in infrastructure.

“When I first looked at the business, I realized we needed to achieve economies of scale and we needed to deal with the onslaught of conventional operators who wanted to get into organics,” he said. “We had to increase the volume of our merchandise and make it efficient.”

When Manley first started, organics was a niche market, and the larger companies were watching to see what would happen.

“The reality of the business world is that the larger players let the startups prove the market, develop the standards and all the other costly things. Then the large players buy or take a position in the new market and reap the rewards without putting in the development costs. We had to grow fast to withstand their eventual arrival.”

Manley and Homestead Organics succeeded with their plan. Now he travels across the country advising people who want to grow their food business.

Develop a Business Plan

In order to grow you need a plan with a clearly defined objective.

“Ask yourself questions,” advised Manley. “Do you want the best product in volume that would sustain your income needs, or do you want to sell your product around the world? It has to be ambitious. There has to be a clearly defined objective.”

“With an objective in hand then it is time to find a mentor, someone who has been there. That person will ask you the tough questions about business plans and finance and target markets. A mentor can get into your mind space. Most of your challenges are in your brain. Get your mind around specific issues so you can grasp them… understand them. Then take it one page at a time.”

Manley has an easy formula to help with planning an expansion. “You have to intensify the revenue stream on a per acre basis. Intensifying typically means value added. By starting from farm size you have to do the math and add up the gross revenue and operating costs per acres. That gives you a net revenue per acre in your pocket. Multiply that by the number of acres you are operating. Allow for overhead and risks, crop loss, etc. Having calculated your net revenues, ask yourself if you can make a living off that.”

“If you don’t have many acres and low effort per acre, then you have to create your own work out of the small acres which means value added products. And don’t forget your story. It could be a family story, or nostalgia, or geographic, or whatever. It must be attractive or compelling to attract consumers.”

Low Cost Marketing

Once you have your business plan in place, start to market it.

“When we started our expansion, we made sure we were present at various trade shows and events. We met lots of farmers and had a very real face-to-face presence. We did public speaking, which doesn’t cost a lot of money, just time. We held meetings with farmer marketing groups and put booths in trade shows that gather farmers together.”

Manley advises that others who want to grow their farm business do the same, and then some. “One thing you have to do is get in the face of the media,” he said. “We became relatively well known by sending out lots of press releases. We got into the local papers and then into the monthlies. Every time we had something that was new or different, we made it into a news story. We also called the media, told them we could give them an interview and send them photos. We made their jobs easier.”

By making people in the media aware of them, and by handing them well written and informative stories, Manley and Homestead Organics became a “go to” source for the media.

Manley also applied for government grants that could help him grow his business. “We found one grant to cover half the cost of our website – $5,000. We couldn’t afford the $10,000, but $5,000 was doable and we created a great site from the start. Now we have a content editing tool to go with it so I can manage it myself. We loaded it up and refer to it all the time in advertising, media releases and at networking events. The site has useful content and links. We’ve made it a go-to place.”

Volunteering was another way Homestead and Manley got more recognition in the market place. “Our mission is to serve and develop organic agriculture, so we volunteer a lot in the organic sector. I sit on committees and I attend conferences and create awareness. You meet someone who knows someone else and that comes back to you.”

Learn to Delegate

Farming is a business and business is complicated.

“Trying to be everything to everyone is a recipe for disaster, but you have to be a master at multiple domains,” said Manley. “In the small business world it all rests on the shoulders of the entrepreneur/farmer. You have to be somewhat skilled or familiar with everything. The important thing is to exercise your skills where you are best, and to hire out in areas you’re not that good at. Take for example the farmer who puts out a sign that says “best fruit in the valley,” but if he’s never there, he’s not going to sell it. He’s probably great at growing the fruit, but he has to team up with someone good in sales and marketing.”

“Even if you aren’t good at everything, you still need to be aware of the importance of all those things. Then you contract out, or hire someone to do them.”

Financial Management

Finances and financial management can make or break a business.

“Growing a business with a little amount of money means you probably need to get other people’s money,” said Manley. “It’s out there, you just have to find it. The money could be from the government or from small investors, or from family. Again, it’s about marketing. You have to sell the investment opportunity. Most importantly you have to ask. Ask is a big word. There’s a lot to it. But, you can never find financing if you don’t ask. You have to ask the right people and ask often enough. You can ask for help designing an investor certificate and then get your story behind it. Remember, people love stories.”

Tom Manley will be in Courtenay, BC speaking on growing a business and most specifically on financing at the Island Agricultural show (iashow.ca) February 13 and 14, 2015.