Diversity in Business: Another Tool for Farmers

TRICIA PHELPS CEO

Every farm is different. Like any business there isn’t one right way to operate. However, at least one goal is consistent among all farmers -- maintain a viable business. Diversity is considered a successful method of managing risk and creating financial stability for businesses of any size. For a farm, this means, exploring new markets, offering a variety of products, and extending the season in creative ways.

Using these methods of diversification, Michigan farms build their customer base to stay competitive in a growing market.

With demand for local food on the rise, we’re seeing a natural shift in the type of locations it can be found: Farmers Markets, CSAs, Retail, Restaurant, Food Service, Meal Delivery, Vending Machines. Each one comes with a new audience and a set of challenges and opportunities that accompany them. Understanding consumer preferences is important to a farm’s success, and the growth of the local food movement in general.

“The easiest gateway for most farms is to start with a CSA, and a natural add-on is going to markets and selling to restaurants,” explains Jill Lada, co-owner of Green Things Farm in Ann Arbor. She runs the certified organic 64 acre farm with her partner, Nate. Today, as their farm enters what Jill calls the “teenage years,” they are honing in on the models, distribution points, and products that fit their strengths.

Identifying these strengths leads to a more successful business. Farm owners contend with not only varied consumer markets, but also a dependency on the soil and climate. By planting a wide array of products, farms can experiment to see what works best for their business. This phase of business development involves critical observation; what thrives in this climate or soil type? What’s profitable? What does the farmer enjoy growing? What does the market demand?

“It’s different for everyone,” reflects Lada. “In general, there are some products that are more profitable than others, but there is a lot dictated by local market demand and soil quality.”

In addition to understanding consumer preferences and the richness of their soil, farms in the Upper Peninsula deal with an even harsher climate than most. Seeds & Spores is a 22 year old family farm in Marquette. Approximately 440 miles north of Ann Arbor, the climate contrast is stark. Leanne Hatfield, co-owner of Seeds & Spores, cites examples of how they’ve developed their business in response.

“We have such a short growing season and the weather can be so unpredictable, if you don’t diversify [your income], it’s hard to make it. The commercial kitchen, just like the hoop houses and online store, are a form of season extension for us.”

The limited season is a contention for all Michigan farms, so developing ways to earn revenue across all the seasons stabilizes cash flow. With creativity and planning, farms throughout the state can thrive year round.

Farming is unpredictable, and developing diversity in this business is a secret to success. In tandem, understanding the profitability of different products and revenue streams is the first step to longevity. All farmers, new or experienced, can use diversity as a tool to strengthen their finances, differentiate their businesses, and find stability.

Farms are expanding their markets in creative ways:

• Loyalty cards

• Non-traditional CSA models

• Accepting credit cards

• Creating a value-add product

• Meal delivery services

• Packaged retail items