Weathering the Storm with Innovative Income Strategies

By Megan Webb, Ph.D., Contributing Editor

Agriculturalists are the original entrepreneurs and there is no doubt we need to utilize our instincts. We strive to develop innovations with great perseverance to meet the needs of the growing population and uncontrollable circumstances. Agriculturalists simply do and produce more with less, while balancing environmental sustainability, food security and economic viability.

Agribusiness owners, operators and investors will, at some point, face uncontrollable circumstances like drought and the global pandemic crippling the workforce. These events have pushed essential businesses to new levels of innovation and placed more pressure on the bottom line.

As an agriculturalist, how have these challenges impacted you and your operation? Have you changed or transformed production from its original state to a more valuable state during these circumstances? Have you been able to reduce labor on your operation, implement technologies as a substitute, or focus on less labor-intensive production methods? Like a storm, uncontrollable circumstances unfortunately happen, but by creating strategies, we can help be prepared.

Here are a few questions that may help you identify additional income that could be generated on your operation: 1) Does the product or service meet or exceed expectations? 2) Does the product or service provide a needed function? 3) Is the product in a useful form? 4) Is the product in the right place? 5) Is the product in the right place at the right time? 6) Is the product easy for the customer to obtain?

You may be able to add income to your operation by value adding or transforming your existing business model into something more needed. Start with identifying your overheads such as equipment, facility space, storage or marketing ability, and reduce or upcycle it as much as possible. For example, could you rent your equipment when not in use? Could you sell storage space? What overhead can be reduced or transitioned to an income strategy to benefit you?

You may ask, how can I capitalize on something with little to no value or expense to me? Creating or capturing value is traditionally done from adding an enterprise, vertically integrating or adding more phases of ownership to an operation.

In the beef industry, innovative technologies like growth-promoting implants can improve cattle feed efficiency and performance. Additive technologies such as anabolic implants, ionophores and beta-agonists are considered value-adding mechanisms. Another traditional example of value adding occurs at and after cattle are harvested, known as rendering. The process of rendering is taking a product with little or no value and adding value or transitioning it into a useable product.

Try Something New

The definition of innovation is, “a new idea, method or device, or the introduction to something new.” An example of creating value includes industrial innovations such as harvesting solar power; whereas, capturing value is like a producer or food co-op, which typically generates profit from a margin of sales for the efforts of coordination and service.

Vertical integration permits operators the ability to better control the supply, quality and capture more value from commodities. Capturing a larger value of consumers’ dollars commonly occurs closer to the food-processing sector. Raw commodity growers or producers may aspire to achieve more total value of products sold by venturing in food processing.

Measuring missed opportunity is an important first step. Collect data and determine if you can identify new market potential, then determine if you can produce for it. Next, determine if you can generate a profit you’re comfortable with that attracts repeat customers. While doing this, identify your breakeven, low-margin limit and greatest margin. Remember to take advantage of available resources like co-ops, memberships and their discounts or benefits. If you can identify your customers’ preferences and provide products for that demand, you will succeed.

How can you help your operation conquer the storm and be part of this innovation era? Regardless of workforce limitations and drought, agriculturalists must innovate to see the sunshine after the storm.

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