Lessons from the farm

Over the last two years I’ve been lucky enough to launch a startup subsidiary of Fonterra called MyMilk.

Over this time I’ve spent a lot of time at kitchen tables, out in the paddock, and over the fence chewing the fat with farmers. With each conversation, my appreciation for the complexity and scale of dairy farming businesses has grown. Our 11,000 plus dairy farmers in New Zealand are a significant portion of some of New Zealand’s most successful SME owners.

These chats have often caused me to reflect on my approach to running MyMilk and my involvement with Snowball Effect. On a plane back from Invercargill earlier this year I jotted down 8 lessons from dairy farmers which I think are useful for startup life. it’s not rocket science, but here is my summary.

  1. Cash is king – I’ve always admired farmers’ ruthless focus on cash-flow. While most farms are worth millions of dollars on paper, their unwavering focus on cash-flow ensures the value of that equity is protected rather than spent. Due to the often uneven nature of revenue on farm (much like startups), farmers spend a great deal of time with their accountant coming up with a budget that ensures that cash out is matched with cash in, wherever possible.
  2. Expenses are an investment – a focus on cost efficiency rather than cost minimisation is critical. Farmers are very good at driving to understand how every dollar in results in more dollars out. Higher costs are not necessarily a bad thing, so long as there is a measurable impact on the bottom line. A common question from farmers I hear is “if I choose your product, tell me how it improves my business”. Farmers do not focus on cutting costs, but rather viewing them as an investment, continually ensuring they deliver value back to their business.
  3. Realistic resilience – in my opinion, farmers define the very essence of the word resilience. Roadblocks, setbacks, and changes of course are a way of life when you’re dealing with nature – much the same as starting a business in any industry, the key is to look for the silver lining, be adaptable, and continuously problem solve for a better solution. A farmer once said to me that a 20 year plan isn’t achieved in one season – prudent advice for any startup. While farmers focus on finding a silver lining, they are also quick to cut their losses and change course if a previous decision isn’t working.
  4. Invest in innovation – New Zealand farmers are some of the leading innovators in our country. As a country we’ve led the development of farming systems globally over the last 100 years. Farmers are always on the lookout for next generation technologies and ways to invest back in the long term sustainability of their businesses. The best farmers I’ve come across are innovators at heart and consistently trying to think ahead of the curve. As a result, they consistently deliver sustainable businesses that perform ahead of their global peers.
  5. Straight talk – it’s rare you’ll leave a meeting with a farmer without a clear understanding of their point of view. They’re straight talkers who pride themselves on their word. As such, you know a verbal agreement is as good as a signed contract. This approach makes doing business not only efficient, but leads to long lasting and sticky business relationships that deliver value for all parties over time. In the hyper dynamic world of startups, the need to get the best deal often comes at the expense of enduring customer and supplier relationships. Creating open, honest, and trusting relationships with customers and suppliers will lead to more successful and lasting partnerships over the long term.
  6. Due diligence – it’s not uncommon on a farmers kitchen table to find a large stack of brochures and marketing documents. As anyone who’s sold to farmers will understand, no decision is rushed, there’ll be a lot of questions and they’ll usually seek other opinions before making a decision. In the bustle and hustle of startup existence, it’s often easy to believe that good decision making is quick decision making. While this is sometimes necessary, for big decisions, don’t be afraid to do your homework.
  7. Know your numbers – talk to any farmer about their business and they’ll be able to tell you the economics of their business on the spot. From cow numbers, to production data, to budget performance. Farmers live and breathe their businesses and as such know they’re numbers inside out. I think this is a critical skill that all startup founders should adopt. The ability to quickly assess a decision or opportunity is only possible when you know your business inside out and is crucial to successfully navigating the many challenges of everyday startup life.
  8. Invest in your community – the remote location of many farms has driven the need for a strong sense of community amongst our farmers. A big event on one farm will often involve help from around the community. This ability to rely and pull in resources as needed, means that farmers can optimise their fixed cost investment to the day to day needs of the business. Startup incubators across the country are fertile environments for such communities to form, however I believe even more opportunity exists for greater sharing of resources across New Zealand’s startup ecosystem.

While on their own, each seems obvious, I believe it is the combination of these behaviours (plus many more) which has underpinned the inter-generational success of our farming businesses and hopefully provides a useful point of reflection for startup and business owners reading this.