According to the U.S. Department of Agriculture, there are over 2.2 million farms in the United States. The average farm generates $135,000 annually in sales. To generate those sales, the owner of the farm needs to work around 418 acres of land. This is an industry of vital importance, but one where the return on investment and “return on effort” are very low.
For many family farmers, it’s a labor of love that they won’t easily abandon. Instead, like true entrepreneurs, they find ways to increase sales and enhance returns. Anyone can see this creativity in action by visiting a small family farm during Halloween.
During the Halloween season, many small family-owned farms are transformed into holiday attractions. Corn fields become haunted corn mazes. Planted fields become pumpkin picking patches. Farm hands become entertainers. For many farms these ancillary revenues are now responsible for the bulk of their annual profits. Some are even looking for ways to turn their farms into year around attractions.
After visiting several farms for the purpose of enjoying the attractions, several key lessons applicable to any business become evident:
Lesson 1: Every product can have more than one target audience
In my example, farms went from selling crops to companies to selling recreation to consumers. Seeking out new audiences is a viable strategy for increasing sales and profitability. It may require adaptation, but if you plan carefully the results can be very lucrative.
Lesson 2: Don’t underestimate your employees’ ability to adapt
Achieving buy-in from employees is essential for ensuring the success of the new line of business. Give them an opportunity to be active participants in the formation and execution of the new product or service. More often than not, they will rise to the occasion.
Lesson 3: Lucrative opportunities don’t always require large upfront investments
There is still a sense of uncertainty as to the direction of the economy over the next several quarters and years. Many businesses simply do not want (or are unable) to borrow funds for capital investment and expansion. Find opportunities that are not capital intensive and that can be implemented quickly.
Lesson 4: Incremental revenue streams can be very profitable
In the case of farms transformed into Halloween hangouts, corn maze tickets at $10 each have almost no cost of goods sold, and therefore represent almost pure gross margin. Small pumpkins that would ordinarily sell at a very low price can be sold for high prices by simply selling them during Halloween with some ornaments or decorations. The profits that a farm would generate from an acre of land throughout an entire season can be earned in an hour by selling maze tickets.
What makes the difference?
If an industry like agriculture that has existed for thousands of years can still find innovative ways to increase revenues and profits, then any industry can do so as well. Many times the differentiating factor is urgency. If your company’s viability as a going concern is threatened due to competition, obsolescence or other factors, then the sense of urgency kicks in. This increases the owner’s tolerance for risk and enhances creativity. If the owner is content with the status quo, then risking a proven business model for the promise of greater profitability becomes less urgent and desirable.
Mike Periu is the founder of EcoFin Media, LLC an independent producer of financial, economic and entrepreneurial content for television, radio, print and the internet. Over the past ten years he has started three companies and advised over 50 companies on financial strategies including fundraising. Mike also hosts regular small business webinars on a range of topics relevant to business owners.