Managing Costs On a New Farm
To many people today, using the words “factory” and “farm” in the same sentence is nothing short of sacrilege. In many cases, though, the same sound business practices apply whether you are producing cars or carrots. In The Lean Farm (Chelsea Green Publishing, 2015), author Ben Hartman relates how he and other young farmers are increasingly finding that incorporating the best new ideas from business into their farming can drastically cut their wastes and increase their profits, making their farms more environmentally and economically sustainable. The following excerpt is from Chapter 11, “The Lean Farm Start-Up.”
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On older and more established farms, once wasteful habits have created inroads and taken hold they require a lot of work to root out. A new farmer has a special opportunity to establish lean habits from the beginning and avoid years of lost effort.
Our own start-up was not perfect. We made our share of mistakes. I could fill pages describing crop failures and construction fiascos, overambitious schemes and missed opportunities. Yet we did stick to a set of start-up rules, which I describe below, that helped us avert disaster and turn profits early. The rules are common in lean enterprises, though we were unfamiliar with lean ideas at the time. If we had had a list like this one, we might have adhered to the rules even more closely and avoided a few more hiccups. Other thriving small farms I have visited followed these rules, too. Those aspiring to farm on a larger scale with more capital investment will also find useful information below, though the ideas are aimed at first-time farmers starting out with little cash and hoping to make a living on just a few acres.
Principle 1: Put in your 10,000 hours (develop personal capacity first).
Principle 2: Test in small batches.
Principle 3: Add infrastructure capacity in small increments.
Principle 4: Avoid bad debt.
Principle 1: Put in Your 10,000 Hours (Develop Personal Capacity First)
Many farming entrepreneurs assume that farms are like stock market accounts: invest a truckload of capital in land, buildings, and equipment, and money will magically start flowing. But farming is a highly skilled job, not a financial game.
In his book Outliers: The Story of Success, Malcolm Gladwell makes the case that to become masterful at any task requires 10,000 hours of practice, or about ten years of dedication to your field. Elite chess players compete for ten years before they win breakthrough tournaments (with the exception of Bobby Fischer, who took nine years). Mozart famously started writing music at age five, but he didn’t produce masterpieces for another twenty years. Between 1961 and 1962, as a new band, the Beatles performed for 270 nights—eight hours per night—in less than eighteen months. They put in their hours! Bill Gates started programming as an eighth grader in 1968. He had practiced well more than 10,000 hours before he dropped out of Harvard to start his own software company. Time and again, “10,000 hours is the magic number of greatness,” says Gladwell.
Mastery in farming is no different. Only after ten years of farming for a living do I feel like I have a handle on the trade—and I grew up on a farm. Don’t be discouraged. You can start your farming enterprise before you’ve clocked 10,000 hours of practice. But be realistic. Mastery will follow years of dedication.
It takes doctors at least eight years of study and practice to become licensed. Then they continue to learn on the job. The same amount of work is required of master plumbers, electricians, and carpenters. Likewise, to gain mastery, farmers must amass years’ worth of knowledge about botany, biology, soils, plant disease, produce harvesting, post-harvest techniques, and produce storage, not to mention sales, marketing, business management, staff management, and accounting. All this in addition to “trade” skills like tractor operation and maintenance, small-engine repair, engineering, construction, basic plumbing, electricity, and perhaps heating and ventilation as well.
The Value of Manual Labor
Much of your 10,000 hours should be manual work. There is nothing wrong with a university education in agriculture; it can give you a good foundation. But learning with your hands is a must in order to farm well. Farming is a tactile profession as well as a mental challenge. Skilled farmers who rely on their farms for income will give you perspective and knowledge you won’t find anywhere else. At some point in your education, get on a farm! Be choosy. Not all farms are alike, and not all farmers share the same set of capacities. Get a sense for the type of farm you’d like, then approach a farmer whose real farm matches the one you dream of. The best university programs in farming will incorporate manual labor and on-farm internships with sit-down teaching.
Our society by and large does not value manual labor. We have this “idea that work is beneath human dignity, particularly any form of manual work,” as Wendell Berry writes. He states:
We have made it our overriding ambition to escape work, and as a consequence have debased work until it is only fit to escape from. . . . But is work something that we have a right to escape? And can we escape it with impunity? We are probably the first entire people ever to think so. All the ancient wisdom that has come down to us counsels otherwise. It tells us that work is necessary to us, as much a part of our condition as mortality.
We’d rather think than apply our thoughts. Many aspiring farmers did not grow up in communities where manual labor was valued, and so they often lack basic skills—and necessary attitudes about work—to farm well.
Manual work is not all drudgery. It connects us with the physical world; it grounds us. Its returns are physical health and a right sense of place. Manual labor can’t be replicated by reading a book. Its joys can’t be experienced behind a screen. My father used to pound his fists together in the middle of his farmwork, furrow his eyebrows, and yell with a grimace (and half a smile), “Hard, physical labor!” It wasn’t a complaint; it was satisfaction.
Farming is a manually applied science. I love learning about plant varieties, their habits and origins. I am interested in a plant’s natural (preferred) environment and what temperature a particular seed needs in order to germinate. Farming is taking this knowledge and applying it with your hands to produce food. To grow a tomato, I combine what I know about botany and greenhouses and heating systems and soils to create an ideal environment for a lifeless seed to turn into a plump, red fruit. The ideas start in my head, but I nurse the tomato along with my hands.
Principle 2: Test in Small Batches
To find new markets test, test, test. And keep your tests small. Farming is risky enough as it is; don’t add more risk by overspeculating.
If you want to raise bees for wholesale distribution, produce just enough honey to let your potential customers get a sense of your product and how they might use it to make money in their businesses. Then you can ask them to project the volume they might order and the precise type of products and services they want, that is, how they want it packaged and when they want it delivered—and only then can you begin forecasting the right volume to start producing.
With this approach your customer is your partner. Together you develop your product. Explain your goals and tell them that with their help you can grow to meet their demand. It’s okay for your supply to be somewhat erratic until you figure out precisely what customers value and how best to scale up and smooth out production. If you take careful notes that first season, you should by the end of the year have a powerful blueprint for very lean production in the second year. This is how new farm ventures can take off very quickly.
Software and Internet start-ups commonly use small-batch testing, coupled with a heavy dose of customer feedback. Instead of investing thousands of dollars in a finished product, these high-tech entrepreneurs simply get their bare-bones products into the marketplace and then fine-tune them based on feedback from real customers rather than mere speculation. Hence the ubiquity of feedback surveys on just about every website you visit. Surveys are the mechanism by which you, the customer, guide the development of a product. Eric Ries discusses this approach in The Lean Startup.
The cost savings is tremendous when you let the customer shape your product. You remove risk and give yourself time to precisely define value. Otherwise, if you are guessing at what might sell, you will likely lose years if not decades going down rabbit holes.
Principle 3: Add Infrastructure Capacity in Small Increments
Too many new farmers start out at a sprint, building infrastructure capacity at an alarming rate. They buy land, tractors, and the latest and greatest tools. They put up buildings and greenhouses. They add lanes and assemble a fleet of top-of-the-line delivery vehicles. Their infrastructure capacity is out of balance with their personal capacity.
In contrast, the lean approach is to add capacity in small doses, as you need it, as you’re capable of using it well. In the very beginning, how much infrastructure capacity do you need? Lean says very little. Start out with only what you need to produce your sampling. When you have a solid plan to produce and sell more, then scale up. It sounds simple, but many lack the discipline to grow at the right pace.
In other words, don’t jump to expensive equipment solutions before working out process kinks first. Start with a small greenhouse, master its use, and then build another. Get by with pushcarts and walk-behind tillers and master your growing before you buy tractors and wagons. Deliver your food in your car or truck, establish solid accounts, and then buy that delivery vehicle. With our mushroom experimenting, we could spend thousands of dollars and build the perfect grow house, complete with state-of-the-art climate-control systems. Perhaps someday we’ll get there. But until then our goal is to get a couple of mushroom varieties to the marketplace with minimal expense. For now, this means growing in a small area in an unused milk house, using heaters from our stash of stored prototyping supplies, and staying within a budget of less than $1,000.
Principle 4: Avoid Bad Debt
To put process solutions before equipment solutions does not mean you should never invest in your farm or take out loans. You need a certain amount of investment—infrastructure, land, and equipment—to get off the ground and to grow. We were helped by bank and family loans to help us purchase our property, build greenhouses as we needed them, and buy our small tractor once we had outgrown our tiller. And we worked off the farm for several years to subsidize our start.
However, lean farming asks that you distinguish good debt from bad debt. The debt we took on was good debt because it was applied to an investment that we were confident would pay itself off in a reasonable amount of time and yield returns for many years afterward. Bad debt is speculative investment. Taking on bad debt means spending money you don’t have to finance a scheme you haven’t market-tested and that could easily flop. You might need financing to get going and occasionally to scale up a project, but don’t get carried away. Debt that the farm can’t pay off will kick you off the farm. You’ll be forced to work for someone else so you can service your loan.
Farming costs money, and there is no way to avoid risk. Land prices are steep in many areas, and you need buildings and equipment to produce at a volume that can sustain even a small enterprise. These lean principles will help you keep your debt load sane and remove a lot of risk from the bumpy first few years.
Reprinted with permission from The Lean Farm by Ben Hartman and published by Chelsea Green Publishing, 2015. Buy this book from our store: The Lean Farm.
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