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Here’s a quick roundup of some resources I have to think about local farming in the Northwest, inspired by a friend’s question.

The resource said friend shared with me:
A PhD Farmer Sara Taber from North Carolina who does interesting writing and podcasting:
https://www.farmtotaber.com/

Erin Adams of Seattle Good Business Network/Seattle Made just hooked me up with this blog: https://kingcountygreen.com/category/local-food-news/

There’s a book that was all the rage one year, I’m not sure anyone has validated it:
https://www.amazon.com/Compact-Farms-Detailed-Productivity-Efficiency/dp/1612125948/

Viva Farms has a farm school program in Skagit in partnership with WSU – one quarter of farming and one quarter of farm business. (ooo, actually looks like there are 3 quarters now). I know the folks that founded it. https://vivafarms.org/practicum-in-sustainable-agriculture-2/

Many folks do WWOOFing to learn farming. https://wwoofinternational.org/ I don’t know how many become farmers, access to land is an issue for sure.

The class I’ve organized here in Seattle is from the Food Finance Institute of the University of Wisconsin. https://foodfinanceinstitute.org/ She doesn’t do “production agriculture” (IE how to be profitable with crops) but everything beyond that from distribution to value-added-production to marketing/branding

This publication gives me admiration for what government can do. I only hope it can still produce things like this: https://www.ncbi.nlm.nih.gov/books/NBK305181/ it’s pretty amazing.

Multiple times I’ve heard that Farm Accounting is a different beast.  I’m starting to understand why. Tera of the Food Finance Institute commented that you don’t have clear COGS when you’re farming – instead you’ve got all your inputs and then your outputs and how you find value for them.  I’ve heard about this in meat production – a challenge to organic meat production is you might be able to get an organic premium for steak and hamburger, but where’s the organic premium for offal? So how do you make the whole business model work?  Or you produce apples, but what price you get depends on how much of what quality you end up with, oh and of course what’s going on in the commodity markets.  So the usual business accounting of price-cogs = gross margin doesn’t cut it.  Instead you have to think, well, I could invest more in these kind of resources to improve the % of apples that come out to be worth more and that will change the total revenue.  I’ve discovered Steve Bragg of AccountingTools Inc, and I love what I have read of his stuff. He has a book on Agricultural Accounting that is totally what I’d reach for first, but I haven’t managed to read it yet so I can’t make a total endorsement.  Anyone want to let me know?

I had the privilege of working with Tera Johnson of the Food Finance Institute last week to put on part 1 of her Consultant Training and her Entrepreneur BootCamp here in Seattle.  Business Impact Northwest hosted the training.  Tera is great because of her wealth of experience in food, beverage and agriculture businesses.  After a week of trainings we drove up to the Skagit Co-op (I finally joined!) and met with folks from the local SBDC, the Puget Sound Food Hub, and Viva Farms.  Hopefully we’ll organize future trainings up there.  Tera’s specialty is value-added processing and selling products.

The first week of training focuses on the importance of being in touch with consumer markets – crafting products consumers want and can understand.  Then it moves into figuring out who’s your target market, where they are, and then matching your business model and your market size.   If you’re in a big area like the Puget Sound region, you can probably make a living for yourself and some income for others making your product in a shared kitchen and selling at farmers markets if you have a unique niche.  If you want to go into wholesale distribution, that’s frankly a different business with much lower margins and requires much higher volume – you need to gather your resources and shoot to get to the next level of stability ASAP. Trying to grow slowly and incrementally can accumulate operating losses that eventually drag you down.  The next sessions of class will be about how to finance these different kinds of business.

To better understand where the market opportunities are, Tera shared a wealth of resources for staying informed about market trends.  Most of these are free.

The best trade shows to attend to get a sense of your market:

Attendees also shared their favorite local resources for businesses.  Local CDFIs Ventures https://www.venturesnonprofit.org/ and Business Impact Northwest https://businessimpactnw.org/ offer lots of workshops, as well as the local SBA.  The University of Washington has many programs where student groups will do projects for businesses, market research and target marketing was one such project through the BIG program.

https://foster.uw.edu/centers/consulting-and-business-development-center/undergraduate-student-programs/

Other Northwest local conferences mentioned included ProvenderSeattle Good Business Network in Seattle has been organizing some food-business related events, and Davis Wright Tremaine in Portland has started an annual invitation-only Farm-To-Label one-day conference.

Last fall I sat on a panel at Startup Week to about B2C (Business To Consumer) businesses, especially food businesses, here in Seattle. One of the questions to panelists was: Is Seattle a particularly good place to build this kind of business? And honestly, when I see what a well organized angel stack we have built around tech companies and healthcare, I have to say a relative NO – Seattle is not a particularly good place to build a food business. It can be done, we have a food truck ecosystem, there are commercial kitchens around, restaurants get developed constantly though not in any way that is transparent to me. I think we could do better.

The Edible Alpha podcast I mentioned a post or two ago is put out by a woman with the University of Wisconsin Extension program. She has developed a bootcamp for Entrepreneurs, and a training for would-be company consultants (or investors!) about how to structure financing for a growing food business. Margins in food businesses are lower than in tech companies, and cashflows available earlier, so it makes sense to combine debt with the equity. This is not something Northwest investors have as much experience with.

I am partnering with Domonique Juleon at Business Impact Northwest to bring Tera out to do her trainings. For each group it would be: two days of training, a 4-6 week break (mostly for the entrepreneurs to do some work in response) and then two more days of training.  If you are interested as an entrepreneur, please contact DomoniqueJ at businessimpactnw.org. If you are interested as a potential investor/consultant, please contact me. Our goal is 6-10 of each type in order to bring this training here. In an ideal world, we would aim for March or April of 2019 to start.

Main Street Investing

My focus as an angel investor has been about where can I help create employment, opportunities for personal development that lead to more broadly-spread financial security, and opportunities for self-determination. Small business is that intersection in my mind. Businesses small enough that employees are an important part of the business, and that relationships with customers and vendors can be as much about the persons as the positions.  I am interested in businesses that grow at a measured pace, such that they can do team building and culture building at the same pace they grow their revenue. There’s plenty of need for investment at that level – especially as we become an increasingly hourglass economy and fewer and fewer people can raise 50K among their own friends and family.

A movement of such businesses started a couple years ago in Portland, Oregon and called themselves Zebras, to distinguish their measured growth plans from Unicorns – the current buzzword for that one-in-a-how-many-ever company that will grow to a billion dollars or more, quickly.  Leading Zebras were recently featured in a New York Times article about growing companies that don’t want Venture Capital or those style deals.  There’s a great quote in the article from a VC who says he sells jet fuel, and it’s fine that not everyone wants to build a jet.  The trouble is, investors who get professional advice get directed to jet-fuel returns, and investors without advice or willing to take more measured returns, don’t know where to go.

Traditionally angel investing has been Venture Capital style -more about placing bets where the chance for payoff is large, so the chips come back and more bets can get placed, on a short enough cycle that it can be an ongoing activity.  Main Street Investing requires more patience and less ambition. Traditionally it’s more about debt, but most companies can still grow more quickly with equity. That matters because on the growth curve for a product business it often needs to be step-wise rather than smoothly linear. Equity helps climb the next step.

That more patient-return equity from investors seems to need a broad swath of folks who have done well for themselves to pay it forward once or twice. They should be looking for opportunities that are sustainable enough to return that initial investment and more, as well as being a desirable part of the local or regional economy.  For that to really happen, folks need on-ramps.  We can’t all become experts for something we’re only going to do once or twice.  The smaller return expectations mean there’s not margin for intermediaries to guide us, either.

Just in the last month two long-time small-business advisors I respect have launched opportunities to help average people begin main-street investing in an organized way.

One is the new Fledge Angel Accelerator.  It combines the successful-at-training-investors Seattle Angel Conference model of bringing new investors together to make group investments and be self-managed, with the successful smaller-business-friendly Fledge model of structuring those investments as revenue-based-financing. Revenue-based financing returns capital along the way at pace businesses can afford.  I’ve been aware of both models for years and combining them seems like such an obviously good idea I’m a little embarrassed I didn’t think of it myself!   This first Fledge program will run locally in Seattle starting in March, but Luni has done an excellent job of allowing the spread of the original Fledge model so likely you’ll have a chance to bring it to your own city.

The next program is Main Street Angels, launched by Jenny Kassan.  Jenny has literally decades of experience helping small businesses raise local capital, going back to when it was done by Direct Public Offering. Jenny helped create the JOBS act.  At some point she decided to add a professional coaching certification in addition to her law degree because she realized small business owners, especially women, need more than just straight legal advice as they grow their businesses.  Growing businesses it quickly becomes apparent that we need to be growing the investor pool as well, and Main Street Angels, launched this year, is her answer.  This is a national program with monthly webinar/calls that just started this February. I’ve joined and I’m interested to see where we go!

2/12 UPDATE: Jenny Kassan will be in Seattle at the end of March and I’m hosting an evening with her. You can sign up via EventBrite here.

B2C measures of success

I had the pleasure of speaking on a panel at StartupWeek in Seattle this year.  It was a rich assortment of content and is usually the 1st or 2nd week of October so look for it one year.  The full schedule fills in fairly close to the conference, and it’s a total bargain at $35!

Valentina kicked us off by talking about the value of quick consumer responsiveness. As an example she cited WildFang, a women’s apparel company that was able to generate 250K of new revenue in less than a week by putting out a jacket with a phrase responding to a current event. They donated all the proceeds to an immigrant rights organization and got tons of media coverage.

Scott works entirely with direct-to-consumer brands.  His key metrics are 1) the Cost to Acquire a Customer (CAC),  the LifeTime Value of a customer (LTV), and also Earn Back Period (EBC) – how many purchases must the customer make and how frequently before you’ve recouped the cost of acquiring them?  He emphasizes the value of direct contact with the consumer for customer feedback and analysis.

I spoke about my experience with companies using distribution models. I’ve learned that core metrics are footprint (how many stores is your product in?) and velocity (what are the per-week sales metrics per store?).  Distributors will often make you purchase that data, and you need to be doing it. Otherwise you will get a distorted image of your actual sales.   Velocity is sometimes called “sell through rate”. You can find more retail metrics here: https://www.thebalancesmb.com/retail-math-formulas-2890409

Much thanks to Kathleen Baxley of Startup Valuation Resources for her moderation!

In the torrent of media about entrepreneurship, I’ve found a few shows that I really like. I like them enough to listen ongoing and to even buy a season or two!  Most of the podcasts are 45 minutes to an hour, I like to listen while doing chores at home.

First up: The Profit – a reality TV show about Marcus Lemonis, a successful CEO who now invests in small businesses and gets hands on to resolve issues.  He likes to focus on People, Process and Product.  In some cases I wonder why he bothered to buy into an existing business because he so completely transforms it, but I guess starting with a customer base is worth something.   I notice he tends to invest 200-700K in these businesses to make a difference. Re-branding is a big part of it; identifying and empowering high-performing employees is a theme; it also helps that he is building a conglomerate and can give the businesses access to prove-themselves-projects & media exposure. But it doesn’t always work, he’s done two different lighting companies, the first one didn’t seem to work out, I need to watch that episode; I saw the 2nd company which did (Hangout Lighting).  The current (5th) season is available via Hulu and you could watch it with a 1 month trial subscription. I have found prior seasons on Amazon Prime.

After watching a few episodes and thinking about my own experience, it seemed to me that the number of businesses he was investing in would quickly become unmanagable.  He figured that out already and did a show called The Partner to identify a business partner to help.  I haven’t watched that yet.

At a recent alumni function a fellow BGI/Pinchot/Presidio grad turned me on to a food financing newsletter and podcast out of Wisconsin called Edible Alpha – how to successfully grow food/beverage/agriculture companies with outside capital.  I’ve found the newsletter insightful and I enjoy the podcasts where entrepreneurs talk about their journies. The two I have listened to are small companies (<1M revenue).

I am a continuing fan of Open Book Management, which doesn’t have enough adherents yet in the Northwest that I’ve gotten to experience it directly.  Zingerman’s Deli, a restaurant, catering and more operation in Ann Arbor, Michigan, is a leading practitioner.  They have their own training wing: ZingTrain. I spoke to trainer there this week about the possibility of bringing their two day OBM training to Seattle (if you’re interested, contact me or comment on this page!). She pointed out that a quick exposure can be had on their website where they offer all kinds of free recorded webinars.   Elnian herself recorded the webinar on All About Open Book Management, and there’s a rich trove of other recordings about managing culture and performance.

Finally, let’s face it, what’s not to love about Planet Money?  Short, fun, fascinating.

I’ll add a postscript bonus – a  mindfulness podcast. I have come to like Dan Harris’s 10% Happier. He’s a media professional so he does a great job interviewing his guests, he seems to know his meditation spectrum well and he has great guests, from Robert Thurman who goes really deep on the roots of Vipassana to Catherine Price who talks about redefining your relationship with your phone.

In startup-land, there’s lots of support for how to create a great investor pitch (Guy Kawasaki, anyone?), and support for financial modeling, website building, hiring/hr, legal.  But there’s very little discussion about intentional job creation.  It seems like you have to get to be a pretty good sized company before job design and employee retention becomes a “thing” and by that time a culture is already established. More support is really needed because startup companies don’t have time to do research- they need things they can grab and run with.   So what’s out there to support a small company who wants to be intentional but doesn’t know what to intend?

Amazingly, Hitachi Corporation started a private foundation years ago as part of building relations in the US.  It closed just a couple years ago, but while operating it evolved a mission of “Discover, demonstrate and expand business practices that both measurably improve economic opportunities for low-wealth individuals and enhance long-term business value”. Bang! My holy grail for sure. They did some amazing work and a gift they’ve left behind for us is a series of two-page Business Action Guides on 24 job quality topics, including Incentivizing Continuous Improvement, Non-financial Compensation, Effective Onboarding and Mentorship, Hiring for Culture Fit and more!   Browse and download this treasure trove here.

On their way to close, Hitachi granted out the last of their endowment to three organizations: The Aspen Institute, MIT/Sloan School of Management, and Investors’ Circle.

I know the Aspen Institute FIELD program from my days on the board of a microfinance/training organization (Ventures), they’ve done lots of research on business.  They are a little more research-y, and have great materials that will be helpful to grantmakers, long-term investors and policymakers, less so the CEO on-the-go.   If you’re in a larger company doing longer-term planning it will be helpful.  They also have a program for social “intrapreneurs”.  As part of their larger Economic Opportunites Program, they’re doing a series of blog posts that have small case studies and issue studies that provide a stream of inspiration.

MIT/Sloan has the Institute for Work and Employment Research. It’s also the home of Zenyep Ton’s Good Jobs Institute.   Zenyep Ton came to my attention when I decided to chat up a Mud Bay store manager. I had heard they used Open Book Management and I wanted to know more. He told me the whole company was reading/discussing her book: The Good Jobs Strategy.  I read it and found it very interesting – she highlights Costco as one of four retailers who get it right and emphasize that high quality jobs go hand in hand with operational excellence. Dr Ton describes a virtuous cycle of investing in employees who can perform, which generates results, and that generates rewards for all. Unfortunately too often retailers focus on labor purely as a cost and instead drive a vicious cycle.  I highly recommend this book, and not just for retailers.  For handy back-reference after reading, I did find a summary/analysis here.

Finally, there’s Investors’ Circle.  IC is an impact investing angel group where I now have the privilege of serving on the board, and thus learned about the great work of The Hitachi Foundation.  With the support of their Hitachi money, IC recently merged with its original incubating organization- the Social Venture Network.  Truly, SVN at 30 years old has held the heart for doing good through business.  The two organizations are working to make the most of their synergies, the fall conference is the best way to dip into this energizing pool of “we can do it!”.  Learn more here.