High Tunnel
Fruit and Vegetable Production
LESSON TEN:
HIGH TUNNEL BUSINESS
PLANNING AND MARKETING
Objectives
 Identify the key components of a complete
business plan.
 Develop strategies for business and marketing
planning.
 Recognize the most ideal methods of organizing
and marketing a high tunnel operation based on
your individual situation.
Business Planning
 More to starting a business venture than coming up
with the idea and jumping in feet first
 The success of a new venture is often
predetermined before project is ever started
 Reasonable chance at succeeding depends on
careful and thoughtful planning
Business Planning
 Steps to Business Planning:
1)
2)
3)
4)
5)
6)
Idea
Organization
Feasibility
Planning
Capital
Marketing
 Each step requires thoughtful examination
 Allocate adequate resources of time and money
Idea
 Is the operation worth the effort necessary to
turn it into an enterprise?
 Getting
started is not worth the effort if you can’t
figure out how to make a profit!
 Depends
 Level
on:
of basic knowledge about the business
Ability to turn that knowledge into a profitable
business venture.
Idea
 If viewed purely as a business venture:
 Early
and accurate self-assessment of business
climate is critical
 Builds confidence and knowledge of the enterprise
 Helps secure partners, financing and customers
 Build strong understanding of enterprise
 Most
affordable risk management available
 Detailed plans and strategies come later
Organization
 Structure is one of most important decisions
 Choice can be wise move or costly mistake
 Initial legal business structure
 Important
to periodically re-examine
 May achieve optimum results at start-up phase
 May require adjustment as business matures
Organization
 Common types of formal business structures:
 Sole
Proprietorship
 Cooperative
 General Partnership
 Limited Partnership
 Limited Liability Partnership
 Limited Liability Company
 Corporations
 Selection depends on several factors
Organization
 Sole Proprietorship
 Easiest
and least costly way of starting a business
 Find location and open the door for business
 Fees to obtain business licenses
 Attorney’s fees for starting less than other forms
 Less preparation of documents required
 Owner has absolute authority over business
decisions
Organization
 Cooperative
 Belongs
to people who use it (member/owners)
 Share
in control of the cooperative
 Meet at regular intervals
 Review detailed reports
 Elected directors from among themselves
 Directors
Oversee
hire management
day to day affairs
 Serve member interests
Organization
 General Partnership
 Can
form simply by oral agreement
 Legal partnership agreement highly recommended
 Drawn
up by an attorney
 Legal fees are higher than for a sole proprietorship
 Can be helpful in solving disputes
 Partners are responsible for other partner’s business
actions, as well as their own
Feasibility
 Offers a reality check on merit of a business idea
 Review
of an individual enterprise differs greatly
from review for a large start-up production facility
 For accuracy, remove personal emotion
 Utilize or engage an independent third part
 “Getting
a second opinion”
 Develop an exhaustive set of questions to help
validate the core business principles
Feasibility
 Identify opportunities, unexpected hurdles and
other impacts that may be encountered
 Typically includes 5 areas of impact:
1)
2)
3)
4)
5)
Local Impact
Market
Technical Resources
Final Projections
Management
Feasibility
 Local Impact
 Are
adequate local resources available to support a
high tunnel business?
 Will there be negative impact/resistance to operation?
 Market
 Is
there a clearly identifiable and measurable market?
 Will business location appropriately serve the market?
 How far and how often will you have to travel?
 What are the transaction costs?
Feasibility
 Technical Resources
 Access
to quality equipment and service?
 Can the infrastructure needs be met?
 Financial Projections
 Do
market projections and production assumptions
match, and at a profitable level?
 Adequate resources for different business climates?
 Can all potential costs be identified through detailed
production budgets?
Feasibility
 Management
 Enough
experience to manage the operation? Are
all area of the operation adequately covered?
 Are adequate support services available to assist
management?
Planning
 Develop a written business plan with all details
 Helps
secure financing
 Provides
road map to keep project on track
 Good business plan should, at minimum:
 Describes
business, structure, products and goals
 Explain the roles and responsibilities of all involved
 Outline the marketing plan and strategies
 Illustrate the financial plan
 Include
assumptions and goals used to reach profitability
Capital
 Takes time and effort to research the right sources
 Examine needs, plan how funding will be utilized,
and study what is available
 Securing sufficient funds
 Need
enough to start and grow enterprise
 Requires significant preparation
 Capacity to manage funds efficiently and effectively
Capital
 Inadequate or ill-timed financing large reason for
business failures
 If financing is required, check for local funding first.
 Many
rural development groups
 Local lenders
 Some level of local participation
 When exploring options, don’t limit the search.
Marketing

Marketing is a “first, last and always” consideration
 Have a established market before production starts
 Good marketing program is essential to realizing
fullest potential and profit
 Best
strategy will yield whatever level of sales it take
to make business profitable
 Thoroughly understand needs of potential buyers
 Ability to differentiate and diversify as market changes
Marketing
 High tunnel marketing strategy should capitalize
on one or more of the benefits over traditional
production methods
 First
to Market
 Multiple Crops
 Quality
 Unique Crop
 Scalability
Marketing
 Critical to have a marketing plan that is adaptable
 Customers
‘needs’ change
 Make marketing plan changes systematically
 Avoid
negatively impacting ability to stay profitable
 Ongoing evaluation process including:
1)
2)
3)
4)
5)
Identification
Analysis
Strategy
Action
Evaluation
Marketing
1) Identification – Constantly scan marketplace for areas
of threat or opportunity
2) Analysis – Priorities are set based on ‘potential’
customer demands.
1)
2)
3)
4)
5)
6)
How quickly will opportunity/threat develop?
How will it impact our products and operations?
Is it likely to become of major importance?
How would our investors expect us to act?
What is our ability to react to opportunity/threat?
What are the costs of not reacting to it?
Marketing
3) Strategy – Develop written strategy to address
changes in market place that directly impact or
change the original plan.
4) Action – Marketing activities are a synchronized
and integrated response to the nature of
marketplace.
5) Evaluation – Regularly monitor and measure any
change to the original strategy to evaluate the
impact of those changes on profitability.
Market Diversity
 Strategy should not be highly dependent on one
venue or market outlet
 Can
make the difference between profit and loss
 Develop and participate in multiple markets
 Provides
significant risk management as well as
market research
 Consider a variety of marketing strategies/outlets
 Key
to ensuring the right option is selected
Market Outlets for High Tunnel Growers
 Farmers Markets
 Well
suited for small, individual lots of mixed produce
 Relatively easy markets to access
 Rental fee may be required
 “U-Pick” (Pick Your Own) Sales
 Popular
for perishable vegetables
 Not capital intensive, but advertising essential
 Accident liability insurance may be required
 Challenge: Coordinating harvest frequency and
customer volume
Market Outlets for High Tunnel Growers
 On-Farm or Roadside Markets
 Works
well in areas with high traffic volume
 Not capital intensive and easy to access
 Packaging and grading stricter than farmers markets
 Rules and regulations must be considered
 Wholesale Produce Auctions
 Shareholders
provide startup capital for auction
 Most buyers purchasing for small supermarkets,
roadside stands or restaurants
 Commonly commission is deducted from sale price
Market Outlets for High Tunnel Growers
 Restaurant and Institutional Sales
 Selling
to chefs and institutional services
 Most market targets are independently owned and
operated restaurants
 Institutional services include schools and care facilities
 Marketing Cooperatives
 Growers
who produce similar products or have similar
growing practices
 Can share input costs, labor, equipment
 Requires marketing agreement between members
Market Outlets for High Tunnel Growers
 Supermarket Sales
 Regional
wholesale to chain or independent markets
 Harvest scheduling is crucial
 Community Supported Agriculture (CSA)
 Economic
partnership between growers & consumers
 Consumers may pay at purchase or for whole season
 Stabilize incomes and minimize risk
 Usually used to diversify funding sources
Pricing
 Setting price is crucial component to success
 Producer can set the price, consumer controls price
 What
is your total cost of production?
 What is the competitor’s price?
 Closer to consumer = more control over price
 Gauge
the level of competition and consumer demand
 Pricing Methods
 Relative
Pricing – Acquire price info from competitors
 Cost-Oriented Pricing – Best method, must know costs
of production