Minimum Viable Scale

"Minimum Viable Scale"

This topic both struck nerves and hit home with readers from a vast range of backgrounds and experiences.

Due to the overwhelming interest I'm going to keep banging on and offering some perspective, experience and conversation.

In my opinion, the danger zone is what I would call "Middle Ag". What's Middle Ag? I would classify it as people trying to earn an amount they can live on. Probably a rung about subsistence farming.

What's the revenue here? Middle Ag probably holds territory around 1m to 3m revenue. It's no man's land.

Sub 1m revenue is generally safer hobby territory where sweat equity and unrecognized or unaccounted owner labour is (often happily) subsiding cost of production.

One example of this is something that I spoke to a producer in Tasmania about this week.

One of the questions I put forward to this producer was "how are you selling & collecting payment?"

"We sell on FB and email them an invoice."

It's a fine system. We essentially did that almost exclusively for 4 years. This system is "free". Drum up an invoice on a Word Doc template or straight out of your bookkeeping system, email it to the customer, reconcile payment via bank statement and then deliver the goods.

The thing is, it isn't truly free (time spent - most valuable commodity) and eventually it causes grief - it did for me.

Orders/inquiries via FB, Insta, Email, X, Text and phone call. Orders coming in while working on thr paddock, at your day job, in the butchery or on the weekend.

Eventually, due to volume, I had orders getting missed, payments not coming and eventually unacceptable response delays.

So we switched to a website to offer boxes of meat, facilitate purchase/purchase and capture information etc.

This took all the acid off immediately and found me hours of time per week, cleaned up record keeping and reduced communication time with customers.

But - it came at a cost. What does it cost to build a website? Anywhere from 5-20k. Depends how you want to do it. We outsourced web design, photography and copywriting. 15k easily spent.

Ongoing costs? Our Shopify hosting and plug ins costs us around $420 per month, constant web dev and improvements with freelancers and payment processing fees of around 1.6% + 30c per transaction. This easily soaks up a couple grand a month - the new cost for "free" invoicing via your word doc invoice.

So why do it? There becomes a time where the reliance on the key man doesn't cut the mustard anymore - well, that's what happened to us.

Why not just stay small and avoid these costs?

You can - that's your perogative. I don't think that you can do it beyond a hobby biz or something very micro and streamlined with a small amount of SKUs/offerings.

The producer in Tasmania I was talking to said that it was currently working for them (like it did for us for 4 years), but acknowledged that the revenue and profit they were generating was a hobby business and could not pay it's way to justify full time labour - which is probably close to what it's currently demanding.

One interesting effect the website has had for us is that is has drastically increased our average order size/value. I also was only invoicing manually when we were just delivering locally. Trying to facilitate national freight on a manual system would be a nightmare.

This is a good example of profitability and viability being subsidised by the founders labour.

Your Farmer,
Jake

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