3 Exercises All Value Added Farmers Benefit From
The to do list of a farmer is typically untenable. It’s a list of fifty things that have to happen today - and probably should have actually happened yesterday. So it is with no casual naïveté that I offer three things to add to that list if you are a value added farmer, at least once per year.
Do these now if you are trying to figure out what is and is not working with your value added products and then schedule in a time to revisit this exercise annually in the, hopefully, slower winter months.
Run a SKU analysis
A SKU analysis is a term used by those in the CPG world that means looking at what you sold broken down by product. It helps you see what your top sellers are and what products are lagging in sales so you can make decisions like bundling products for promotion (pairing good sellers with slow sellers) or cutting products from your assortment.
To do a SKU analysis run a report that shows you how many of each item you sold throughout the year and how that translated into sales dollars.
Often when I do this exercise with clients in my Profitability Roadmap they are surprised to see that a product they love isn’t selling or one that they thought people hated was actually an average seller. So many biases show up when we only evaluate what we sell through observation.
If you can’t run a report like this given how you keep records currently, consider creating a way to capture this information in the coming year. If you’re a small diversified veggie farmer maybe that means grouping types of veggies into categories so it isn’t so overwhelming.
Check your COGS
Your product’s COGS, or Cost of Goods Sold, tells you how much money it takes to produce your product which means it also tells you how much you are making (or losing) when you sell that product.
COGS = Cost of all raw ingredients + cost of packaging + cost of labor to prep, make, and package + co-packer fees + any delivery costs of getting your ingredients or product ready to sell
Knowing your COGS empowers you to make decisions about your ingredients and packaging and ensures that any promotions you offer to spur sales keep your profit intact. It also points you towards the greatest contributors to your COGS, which can be areas to both rethink and highlight in your marketing material.
For example, if you realize that the organic nuts in your dried peach granola is a huge cost contributor, you could decide to decrease the quantity of nuts per bag to bring your costs down AND make sure to highlight on your packaging, website, and point of sale marketing material that the nuts are organic, why that is important to you, and that it makes you different from other brands.
Ask for Feedback
Less rushing around creates more time for conversations with your customers. Whether this is informally at the farmers’ market or more formally in a group Zoom call, start asking questions. What is it that you grow or sell that your customers really love? Do they purchase from you for themselves mainly or for gift-giving? How do they use your product? What do they wish you made? Why do they choose to buy this from you and not from someone else?
You don’t have to act on every one of their suggestions, but having conversations like this helps you understand their motivations and how they interact or overlap with your own. It gives you the language that others like them need to hear in order to recognize your product as one they want to try - which is a great place to start for any copywriting, point of sale marketing materials, or social media content.
These three activities can have a big impact on what you sell, how well you sell it, and how much money ends up in your bank account for next year’s seed purchases. So give them a try and let me know how it goes!
Cheers,
Ellen