Tools for Risk Management Centered
Decision-Making
Dee Singh-Knights (Ph.D.),
Extension Specialist
WVU Ext. Service
Dosingh-knights@mail.wvu.edu,
304-23-7606
Cindy Martel,
Marketing Specialist
WV Dept. of Ag.
Cmartel@wvda.us
304-541-9756
Daisy Bailey,
Extension Agent
WVU Ext. Service
Daisy.Bailey@mail.wvu.edu
304-462-7061


Have a good and safe product that
consumers want and are willing to pay for.
Promote your product to the right set of
customers.

Sell the right amount to be profitable.

Offer product/service at the right price.

Being in the right location.
 All
of the above

Diversify the income
stream

Generate new income

Improve cash flow

Help community
development

Educating visitors

Work at home

Social rewards
Rank of Critical Success Factors in Agritourism
(WV Agritourism Internet Survey 2014, n=144)
Proportion (%)
100
90
80
70
60
50
40
30
20
10
0
Financial
Feasibility
Managing
Farm/Food
Safety
Manage Visitor
Location
Experience
(proximity to
other
attractions)
Matching Core
Marketing
Strong Social
Assets with (understanding
Skills
Customer
cutomers'
Expectations
needs)
Creativity and
Passion
Rank of Priority Area in Designing an
Agritourism/Farm-Based Education Short Course
Proportion (%)
100
(WV Agritourism Internet Survey 2014, n=144)
90
80
70
60
50
40
30
20
10
0
Managing Financial
Managing
Managing Visitor
Risks
Farm/Food Safety
Experience
Risks
Matching Assets
Building
Marketing
with Market
Collaborations and (Traditional and
Demand
Partnerships
Online)
Field
Creative/Emerging
Tour/Successful
Opportunities
Models
What experience can I offer the public that will make my
operation unique and profitable?
Does my region have the necessary characteristics to draw
people to the area?
Does my farm have the necessary resources/characteristics
to draw people to this enterprise?
Do we have the necessary personal characteristics to make
this enterprise successful?
PART A: REGIONAL CHARACTERISTICS
1.
2.
3.
4.
5.
6.
7.
8.
Natural Beauty
Cultural and Social characteristics
Recreational Offerings in Your Region
Shopping and Commercial Characteristics
Public Infrastructure to Support Tourism
Attitudes Towards Tourists
Accessibility of your Region
Existing Tourism Activity
Gross Total
Divide Gross Total by Standardizing Factor
1.
2.
3.
4.
SCORE
Max. Score 25
Max. Score 25
Max. Score 25
Max. Score 25
Max. Score 25
Max. Score 25
Max. Score 25
Max. Score 25
Max. Score 200
20
NET REGIONAL CHARACTERISTIC SCORE
MAX 10
PART B: PROPERTY CHARACTERISTICS
SCORE
Natural or Farm Features
Built Features and Cultural Artifacts
Site Infrastructure and Safety
Business Potential and Human Resource Features
Gross Total
Divide Gross Total by Standardizing Factor
NET PROPERTY CHARACTERISTIC SCORE
Max. Score 25
Max. Score 25
Max. Score 25
Max. Score 25
Max. Score 100
10
MAX 10
Adapted from the “Farm and Country Tourism on your Property: Assessment Tool” of the CRC for Sustainable Tourism Development, Queensland, Australia.
This module provides questions
for you to think about as you
explore “who am I in business
with”?




Link offerings - The
region is the
destination.
Make it easier for
travelers to locate
options
Make a connection with
already established
trails, groups, packages,
etc.
Collaborate!


Work to create the
entire tourism
experience or the
tourism ―package!!.
Similar businesses or
nearby communities
aren‘t competition, they
are part of your tourism
product!
◦ The more there is to do,
the more appealing a place
becomes.
Understanding your Target Market
(Customer)






Authentic Farm or
Ranch Experience
Memorable Social,
Recreational and/or
Educational Experience
Effective Customer
Service
Adequate Public
Facilities
Safe and Accessible
Environment
Meaningful Community
Relations
Source: Agricultural Marketing Resource Center, Iowa State University, http://www.agmrc.org
Agritourism
Agri-Entertainment
Specialty Market
(price premiums for valueadded, unique value)
What is the economic feasibility of this enterprise?
What are the potential returns relative to the costs
from this investment?
Are there considerable upfront costs to be incurred?
Do I have the necessary financial resources to make
this successful?


When a farm business borrows money it has an obligation
to repay debt.
If you invest in this agritourism business:
◦ Can I afford the interest (cost of capital)
◦ Can I meet cash obligations when due
◦ Can I make a profit and grow equity
◦ What is my cost of production relative to my revenue - will my
business pay for my inputs and give me enough to live on
◦ How many visitors/customers must I pursue to meet financial
goals
◦ How much should I charge for my product
◦ What does it take to make a living with this business
Goats
Farm
Tours
Farm
Sheep
Petting
and play
area
Gift Shop
(clothing,
cheese, milk,
meat)
Agritourism
operation
only –
Petting zoo



Sample Enterprise Budget – On Farm
Festival/Activity
Sample Enterprise Budget – Christmas Tree
Farm
Sample Enterprise Petting Zoo

Start with Main Enterprise Budget (main profit
center)
◦ Sweet Corn Enterprise Budget
◦ Maple Syrup Enterprise Budget
◦ Strawberries Enterprise Budget
◦ Meat Goats Enterprise Budget

How will my main enterprise change if I add an
agritourism enterprise – Partial Budget
◦ Changes in returns
◦ Changes in costs
Increases in Net Income
Increase in Income
Entrance fees
Gift shop sales
Total Increase
Decrease in Cost
Eliminate need for one
employee
Total Decrease
Increase in Net Income
Decreases in Net Income
Decrease in Income
$10,000
$4,000
$14,000
Total Decrease
$0
$0
$0
$3,000
Increase in Cost
Adding seating, washrooms, signs
$500
$0
$0
Play area for kids
Construction and utilities for gift shop
$500
$1,000
$0
$0
$3,000
Liability insurance
Employ one part-time employee
Total Increase
$100
$6,160
$8,260
$17,000
Decrease in Net Income
$8,260
Change in Net Income
$8,740
What is the economic feasibility of this enterprise?
Can I deliver this product at a reasonable cost?
Can I attract enough people to my enterprise to make it
profitable?
Total Fixed Costs (TFC): $4,000

Insurance - $1,000

Parking Lot Improvements - $1,000

Farm Market Improvements - $1,500

Child play area - $500




Total Variable Costs (VC): $80

Wages/hour (5 workers @ $7/hr.) $35

Desired proprietor income - $40

Giveaways/Promotion - $5



Cost charged per
tour (P): $120
Break-Even Point (BE) =
TFC/(P - VC)
BE = $4000/($120 - $40)
BE = 50 farm tours to
cover Wages and Promotion
Break-Even Point (BE) =
TFC/(P - VC)
BE = $4000/($120 - $80)
BE = 100 farm tours to
cover all Variable Costs

Changes in Cost per Tour:
◦ Cost per Tour $100 = need 200 tours
◦ Cost per Tour $120 = need 100 tours
◦ Cost per Tour $140 = need 67 tours

Changes in Proprietor's Income:
◦ Proprietor's desired Income/Tour $20 = need 67 tours
◦ Proprietor's desired Income/Tour $40 = need 100 tours
◦ Proprietor's desired Income/Tour $60 = need 200 tours
Will I be able to generate enough cash on a regular basis to
pay daily operating expenses?

Can I pay my bills when they come due Liquidity?
◦ Provides information on the farm’s ability to
meet financial obligations when they come due
◦ Helps to identify the sources and uses of cash
in the business
◦ Early warning system for cash flow shortages
◦ Does NOT provide an estimate of profitability
◦ Helps plan for cash fluctuations in the business


Uncertainty due to legal actions.
Civic responsibility – serious health issues, even
fatal

Required in some instances

What regulations apply depends on:
◦ Type of product/service
◦ Level of interaction with hazards

‘Another petting zoo, another e-coli outbreak’
◦ http://www.foodpoisonjournal.com/tags/e-coli-lawyer/

Developing an on-farm food safety plan
◦ Familyfarmed.org food safety plan

Agritourism General Farm Safety Plan
◦ Agritourism General Farm Safety Assessment
Checklist

Agritourism Emergency Response & Legal
Liability
◦ Agritourism Emergency Response & Legal Liability
Assessment Checklist

Understanding the market

Who is the potential customer?

What is the potential market size?

Knowing your competition

What is your unique marketing position/advantage?

How you will reach your potential customer?

Making the sale

Remember, selling is just one part of marketing!
◦ Customer follow-up and retention
◦ Building a brand and creating community
◦ Continuously monitor and enhance your firm’s reputation and image


Online marketing goals mirror those of traditional
marketing.
You are trying to:
◦ Reach the customer
◦ Give your product pitch
◦ Make the sale
◦ Provide customer follow-up and support
◦ Retain customers
◦ Establish and maintain your business image
◦ Build a brand
Trying to do all of this
PROFITABLY!!!
This module provides questions
for you to think about as you
explore the question of ‘should
I develop a business plan?”

A business plan help you to:
◦ Identify an opportunity
◦ Understand how you can meet that
need
◦ Determine if you can do it profitably
◦ Determine how you will let customers
know you are in business and how your
business can benefit them.
Planning does not begin after production, but
well before the first seed is planted.
Identify
Values–What’s
important to
you?.
Where are you
and what have
you got?
Where do you
want to go?
How can you get
there?
Which routes
will you take?
How will you
monitor
progress?
This module provides a 3-day of
successful agritourism
operations in North Carolina
Cindy Martel,
Marketing Specialist
WV Dept. of Agriculture
Cmartel@ag.state.wv.us
304-541-9756
Daisy Bailey,
Extension Agent
WVU Ext. Service
Daisy.Bailey@mail.wvu.edu
304-462-7061