The False Security of Farm Markets – Diversifying Your Sales Mix
Small and Medium sized farms are BUSINESSES and must be run as a business. With the plethora of fantastically fun farmers’ markets springing up like wildfire, there is a sense of false security that direct retail sales, by being a vendor at a farmers’ market, is the best and most valuable avenue for generating business profit from your farm.
Statistically, this isn’t necessarily true, and more often than not small farms and producers utilize only direct retail sales at farmers’ markets as their only venue for profit generation. If you run the numbers, and reminding yourself that “time = money,” you’ll see that vending at farm markets is often the most time expensive, most labor intensive, and results in a greater potential damage to both sold and unsold products via weather conditions and transport.
Additionally, you will find that vending at a farmers’ market is also the most statistically risky venue for generating sales as profit is directly dependent on outside forces: the weather, the number of customers any given day at the market, other vendors and insider politics, outside community events that draw your customers away, and more. Many farms find themselves spending 3-4 hours of work per each hour of direct selling through their booths. Adding the numbers of transport costs, the cost of labor, and the cost of product losses via transport damage or inability to resell those products after the market closes; many find that selling at farmers’ markets is, what we call in business, a loss leader.
A loss leader is a product or sales venue that may not make the most profit, but is intended to stimulate other profitable sales elsewhere. This means that sometimes that agricultural producer will make significant amounts of money at their farm market booth any given day, and then lose money other days for a statistic average of low-to-medium profit opportunities.
Most farmers don’t take their market booths to the next step -- to utilize their time at their booth to generate sales OUTSIDE of the market. This means that for many farmers without a diversified sales mix, vending at a farmers’ market is occasionally a loss LOSS, not a loss LEADER.
Smart farm businesses diversify their sales mix to add on other forms of profit generation to minimize the high risk of vending at farmers’ markets while still enjoying all the positive benefits that farm markets bring – direct consumer interaction, community involvement, business and branding exposure, and much, MUCH more!
Diversifying your Sales Mix Blog Series
Farmers’ markets are WONDERFUL! I couldn’t speak more highly or support them more!!!!
Over the next 8 weeks, we’ll tackle the topics of diversifying the agricultural sales mix for small and medium producers to include farm markets, should you choose, while also laying a solid business foundation for multiple revenue sources with multiple risk variables to provide a full and sound profit foundation.
To follow along, you can check back here often. As new articles are added to the series, they will be hyperlinked below. You can also subscribe to our blog by email to catch the articles as they are posted.
More importantly, let’s talk together. What have you learned in your world?
Diversifying your Agricultural Sales Mix Blog Series
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