By Thomas Moore, NC Food Systems Coordinator

Savvy shopper at the Durham Coop

Ready to expand into grocery stores? Run it through the SMART test first.
Photo by Anna MacDonald Dobbs

I work with a lot of new farmers who sell their products at multiple farmers’ markets, and are eager to add restaurants, grocery stores, local distributors, and a CSA program to their marketing channels.  While I applaud them for wanting to diversify their customer base, I do caution them that sometimes utilizing different marketing channels requires adjustments to their business plan, or in some cases a different business plan altogether.

 

What is a Marketing Channel?

A marketing channel is a set of practices or activities necessary to transfer goods and services from the point of production to the point of consumption.  The marketing channel will dictate your distribution strategy and inform your marketing strategy.

 

Below are the four types of marketing channels:

  1. Producer -> Consumer
    1. Ex. Farmers’ Market, CSA, Roadside Stand, On Farm Market
  2. Producer -> Retailer -> Consumer
    1. Ex. Restaurants or grocery stores that don’t require the use of a distributor
  3. Producer -> Wholesale/Distributor -> Consumer
    1. Ex. Food Hubs, Institutional Purchasing, Sysco, US Foods, MDI, UNFI
  4. Producer -> Agent/Broker -> Wholesaler or Retail -> Customer
    1. Ex. Food brokers specializing in commodity crops or specialty products

 

Using SMART Goals for Decision Making

The acronym SMART stands for Specific, Measurable, Achievable, Relevant, and Time-bound. Making business decisions based on SMART goals is a good way to gauge your growth capacity and keep you focused on your business plan.  This should not discourage you from wanting to take risks, but by running your potential opportunity through the SMART test you will be able to better asses the risk – and potential rewards.

 

One question that keeps coming up in my conversations with farmers is: I am currently selling at a couple of farmers’ markets and want to expand into grocery stores, how do I do this?

 

Now let us run this through the SMART test:

Specific Goal: Expanding sales of produce into grocery stores

Measureable: Did you expand sales of produce to grocery stores? How many?

Achievable: Do you grow enough product to expand into grocery stores? How much of a product and which product do grocery stores want to buy from you? Will you still be able to sell product at farmers’ markets?

Relevant: Does this goal align with the mission and growth strategy of your business?

Time-Bound: Do you want to enter this market immediately? Is that possible? If not, then when?

 

By running through this exercise with each potential new marketing channel, you will have a better idea if you are ready to enter additional markets.  You will also be able to plan how best to enter additional marketing channels by knowing what it will take to be successful and assessing your current production potential to meet that growth.

 

Developing a Strong Business Plan

When it comes to making SMART marketing channel decisions it is imperative to have a strong business plan from which to draw.  I recommend reviewing your business plan annually; for farmers, I recommend reviewing your business plan before you finalize your production plan for the year.  It is important that your production plan and business plan mirror each other because production planning is completely different for direct-to-consumer sales markets versus wholesale markets. This is where farmers will sometimes get into trouble by trying to transition sales strategies mid-season without first assessing their current production plan and how it supports their business plan.

 

A favorite resource of mine, Building a Sustainable Business: A Guide to Developing a Business Plan for Farms and Rural Businesses, breaks down business planning into five critical tasks and within each task addresses four key functional planning areas: marketing, operations, human resources, and finances.  I find it much easier to develop a business plan for farming though this method of organization.

 

Below are the five critical tasks for business planning:  

  1. Identify Values – What’s important to you?
  2. Review History and Take Stock of Your Current Situation – What have you got?
  3. Clarify Your Vision, Develop a Mission Statement, and Identify Goals – Where do you want to go?
  4. Strategic Planning and Evaluation – What routes can you take to get to where you want to go?
  5. Present, Implement, and Monitor Your Business Plan – Which route will you take and how will you check your progress along the way?

 

Your business plan should provide you with the information needed to guide you toward making a SMART decision as to whether you should expand or transition your market strategy.  If your business plan is unable to inform this decision, then it might be time to adjust your business plan, evaluate your growth strategy, and review your mission statement.  All of which should be tabled until your off-season or at least during a slower period of your year.

 

For more information about market channel development or if you have any questions regarding your business plan, please contact Thomas Moore, North Carolina Food Systems Coordinator.

 

Additional Resources:

Resources for Agripreneurs

https://www.carolinafarmstewards.org/foragripreneurs/

 

One-Page Planning (Business, Financial, Risk Management)

http://foodshedguide.org/planning/

 

Organic Transition: A Business Planner for Farmers, Ranchers and Food Entrepreneurs

http://www.misa.umn.edu/publications/organictransitionplanner