1. What Does it Take to be Successful in a Producer Owned Business? By Marsha Laux Iowa State University Extension Value Added Agriculture Program

2. Success = _______ (you fill in the blank)

3. Define Success Is it just $$$$? Is it just $$$$? Know where you are going – be specific Know where you are going – be specific Goals – timelines – plans Goals – timelines – plans If Profit, then what level, when? If Profit, then what level, when? Specific for your business plan Specific for your business plan Re-evaluate life’s priorities as it relates to your producer-owned business Re-evaluate life’s priorities as it relates to your producer-owned business

4. Unique Selling Proposition? Comparative or competitive advantage? Comparative or competitive advantage? Better than Better than Cheaper than Cheaper than Different than Different than _______ than _______ than

5. Is it all about the PRODUCT? Product sell itself? Product sell itself? Better than, different than,…… how? Better than, different than,…… how? Competitive positioning Competitive positioning Packaging, labeling, pricing, brand Packaging, labeling, pricing, brand Delivery, ease of transaction, availability Delivery, ease of transaction, availability Margins, service, market share Margins, service, market share Customer relations Customer relations Telling a story with your product Telling a story with your product

6. Food is Big Business $800 billion spent on food/US/2001 $800 billion spent on food/US/2001 Adding 50-80 million people in US by 2020 Adding 50-80 million people in US by 2020 Add another $200 billion to food expenditures Add another $200 billion to food expenditures

7. “With $800 billion in food sales, I can easily get 1/1000 th of a percent!” NOT!

8. Verify & Test Who are your customers? Who are your customers? Test market – customer focus groups Test market – customer focus groups Letters of interest from customers Letters of interest from customers Validate your idea Validate your idea Go sell something --- sales trump surveys every time Go sell something --- sales trump surveys every time Specific & quantitative Specific & quantitative

9. Key Questions: Can you make a business case? Can you make a business case? Is this fad, growth or highly competitive? Is this fad, growth or highly competitive? Will you have revenue diversity? Will you have revenue diversity? Can you execute a good business model? Can you execute a good business model? Will your actual business structure make sense? Will your actual business structure make sense? Can you convince a stranger to buy or invest in your product or idea? Can you convince a stranger to buy or invest in your product or idea?

10. Know thy competition! Research, research, research…… PLAN Research, research, research…… PLAN Who are you going to replace in the market? Who are you going to replace in the market? Identify parallel customer choices Identify parallel customer choices Time, Money, Family, Social & cultural Eat out, dine in

11. What is the value of your product? Priced comparatively… Priced comparatively… What is your advantage? What is your advantage? Know yours and competitors margins, costs, prices Know yours and competitors margins, costs, prices Constantly scan other products – how do you compare? Constantly scan other products – how do you compare? Review & modify Review & modify Be ready to adapt Be ready to adapt Revisit your business plan Revisit your business plan

12. Be paranoid about the market! (at least adopt a healthy paranoia) Listen to what the market is telling you Listen to what the market is telling you Great marketers are great listeners Don’t ever assume you know it all or enough Don’t ever assume you know it all or enough Be tenacious Be tenacious

13. What is your business model? How do you make money? How do you make money? By being the most efficient producer By being the most efficient producer By buying cheap inputs By buying cheap inputs Deliver cheaper Deliver cheaper Perception is REALITY Perception is REALITY Value is created in distribution and via marketing, NOT in PRODUCTION Value is created in distribution and via marketing, NOT in PRODUCTION

14. Know the “Numbers” Have a sound knowledge of the financial dynamics of your business Have a sound knowledge of the financial dynamics of your business Don’t need to be a CPA, but know& focus on key results areas: Don’t need to be a CPA, but know& focus on key results areas: Gross margins, return on investment Gross margins, return on investment Monthly fixed costs Monthly fixed costs Sales/employee Sales/employee Cash flow Cash flow Plan to which business measures you will manage to! Plan to which business measures you will manage to!

15. Cash is LIFE & Lack of Cash is DEATH! Know and understand your cash flow Know and understand your cash flow Plan for the ebbs & flows Plan for the ebbs & flows Work with your banker, your CPA, revisit your business plan Work with your banker, your CPA, revisit your business plan

16. Have enough capital! (and then some…) It doesn’t work without enough working capital…….. It doesn’t work without enough working capital…….. Plan for the unexpected Plan for the unexpected The biggest cause of failure is inadequate capital The biggest cause of failure is inadequate capital Go accrual – review your ratios Go accrual – review your ratios Don’t do this for the bank, do it for yourself and your business! Don’t do this for the bank, do it for yourself and your business!

17. Your business is a reflection of YOU True entrepreneurs take things personally True entrepreneurs take things personally Take the blame and the credit Take the blame and the credit Success or failure Success or failure Determined by what you do, how you plan Determined by what you do, how you plan Your willingness to adapt, to fight for what you want Your willingness to adapt, to fight for what you want Refusal to make excuses – make it happen Refusal to make excuses – make it happen

18. Plan, Plan, …. EXECUTE! Create action plans Strategic objectives Strategic objectives Know where you are going Know where you are going How are you going to get there? How are you going to get there? Detailed budgets Detailed budgets Assign responsibility Assign responsibility Work on timelines --- “DEAD”-lines Work on timelines --- “DEAD”-lines

19. ANTICIPATE! Anticipate what will happen --- plan for the unplanned Anticipate what will happen --- plan for the unplanned Do you have a fallback plan? Do you have a fallback plan? Contingencies will help make your business a success Contingencies will help make your business a success If you fail to plan you plan to fail! If you fail to plan you plan to fail!

20. Get your mental focus right Focus on priorities Focus on priorities Is your ladder leaning against the wrong wall? Is your ladder leaning against the wrong wall? Peter Drucker: replace “achievement” with “contribution” Peter Drucker: replace “achievement” with “contribution”  By contributing, you are keeping your focus where it should be – your customers, family, employees, shareholders & industry.

21. Be PASSIONATE! Without a fire in the belly, you will not be successful Without a fire in the belly, you will not be successful Passion – be willing to fight for what you must believe in: Passion – be willing to fight for what you must believe in: YOU YOU YOUR BUSINESS YOUR BUSINESS

22. Contact Information: Thank you! Marsha A. Laux mlaux@iastate.edumlaux@iastate.edu Iowa State University Value Added Agriculture Agricultural Marketing Resource Center 1111 NSRIC Ames, Iowa 50011-3310 Phone: 866-277-5567 Fax: 515-294-9496 www.agmrc.org