My book order for Straw Bale Gardens (Joel Karsten, 2013, Cool Springs Press, Minnisota) came in this week.

If you are into gardening or farming, then I'd recommend it as eye-opening exploration of the possibilities of straw bale gardening.

Straw is hay without the seeds so requires a threshing stage before you bale it. The drawback to planting in hay bales is that they have hay seed that can germinate in the hay and compete with the plant you want to grow. I grew potatoes fine in haybales last year so I would have liked to have seen more exploration of hay bale gardening in the book as they are a cheaper and significantly easier to produce bale than a straw bale. Other than that quibble, it is an enjoyable book to leaf trough to see his gardening/farming methods illustrated with abundant photo-based descriptions and explanations.

I made a note of his "glove of death" technique for dealing with unwanted sprouting seeds in hay bales. It involves dipping a dishwashing glove in vinegar and selectively touching the plants you don't want. Vinegar is non-selective in what it kills so you have to be careful you don't apply it to the plant you want to grow.

This is the time of year when alot of people are thinking about gardening with plans to garden this weekend if the weather is good. If you don't go overboard on planting expenses you can potentially grow some of your own food cheaply. A few hay bales, a few bags of earth/compost for the top, and you can be in business with a small but potentially productive home garden.

The One Minute MBA has a useful video on funding phases that successful startups often go though as they grow.

In the year 1995, Isreali researchers reported that farms with a successor lined up outperform farms without a successor on many different measures of farm success (e.g., profitability, Total Farm Assets (TFA), etc...). They called this phenomenon the succession effect.

Source: http://ageconsearch.umn.edu/bitstream/44131/2/249.pdf

There are many reasons why the succession effect is believed to occur:

• The exiting farmer does not cannibalize their business as they grow older.
• The exiting farmer is more willing to build up farm assets.
• The farm has more incentive to expand and forward plan.
• The younger successor brings new ideas, vision, and energy to the enterprise.
• Long term survival becomes more important that short term gain.

The way succession in farming often occurs is that the successor goes away to a secondary educational institution and/or works outside the farm for awhile and then returns to the farm at a later date. When the successor returns there is often an increase in farm spending and investment. If the successor proves out during this expansion phase then a legal partnership arrangement is drawn up. Assets and business responsabilities are gradually transferred over to the successor with responsability for major financial decisions being the last responsability to be transferred over. The ideal age for a successor to be chosen is when the exiting farmer is around 45 years of age.

At least that is what I gleaned from the lead article Here They Grow in the Country Guide magazine article.

What is true of farming may generalize to other types of business. If you are 45 and older and don't have a successor lined up to run your business, does that affect how successful the business will be relative to if you had a successor lined up to take over the business? If you had a successor lined up, how would that affect how you run your business. Would you be willing to take on more risk to expand the business further?

I'm slowly making my way through Robert Cialdini's book "Influence: The Psychology of Persuasion" (1984, Quill, New York). This is considered a classic book on sales techniques. Previously I discussed a chapter from that book about using Reciprocity for Sales. The next chapter in that book discusses using Commitment and Consistency for sales which is what I want to discuss today.

Cialdini argues that the principles of Commitment and Consistency are used when car sales people use the low-ball technique to make sales. The low-ball technique involves quoting a lower price than the actual sales price for a vehicle and letting the customer make up their mind to purchase based upon that price. This charade can go on right up to the point where final agreements are being signed. At a certain point, however, the sales person announces that a mistake has been made and that the actual price is higher than the low ball price (e.g., perhaps after returning from a final check with the "boss"). Or, the sales person might say that some critical feature is not part of the deal and that you have to pay extra to include that feature. In some cases the customer will be on to the ruse and will walk away from the deal, but often what happens is that the customer starts to build up other reasons as to why it is a good idea to buy the vehicle so that when the low-ball price is removed, they can cite other reasons why they were going to buy the car anyway. They retain consistency with their earlier decision to purchase based upon other reasons they generated once they decided to commit.

A similar example involves an energy conservation experiment in which interviewers called up people, gave them tips about how to conserve energy, and then asked them to conserve. They were also told that if they agreed to conserve their names would be published in the newspaper. This inducement had a big effect on their energy consumption one month later. Shortly after the first month they were told that their names would not be publicized after all. Nevertheless, when the experimenters examined their natural gas usage at the end of winter they observed that they actually conserved more fuel than they had when they thought their names were going to be publicized. So here we have another example where people are falsely induced into making a decision and when that inducement is removed, the people continue to act in ways consistent with their earlier decision. The people created other reasons for why the were being energy-conserving citizens beyond the original inducement so that when the inducement was removed, they had other reasons to act in an energy-conserving fashion.

When we make a commitment to act in a certain way we often generate a multitude of reasons to support why we are acting in that way. The pattern of behavior can be resilient against one of those supports disappearing because of our tendency to generate more than one reason for our behaviors. I'm not advocating that everyone go out and start using low-ball techniques to make sales as it strikes me as unethical in many ways (although it is used in car sales all the time). It does, however, illustrate in a particularly vivid way how the commitment and consistency principles can be used to influence behaviors in a big way. Less ethically questionable forms of the technique might involve asking people to enter a contest that involves saying why they like a particular product or service. This can induce them to eventually purchase the product or service or purchase more of it. Proctor and Gamble and General Foods ran contests where they solicited testimonials and awarded the person with the best testimonial a large prize. The primary purpose of these contests was to generate sales from those who submitted to the contest.

It is important to know about some of these sales principles to protect yourself from those who are effective at using them. Cialdini offers some suggestions about how to recognize and respond to those who would use these techniques to try to manipulate you into behaving in ways you might regret. I'd encourage you to read the book for much more detail about how commitment and consistency influence behavior in many other contexts than sales (e.g., winning over prisoners-of-war to getting children to behave in desired ways).

Many entrepreneurs go into business thinking they just have to develop a product or service the public wants and they will be successful. This is not the case in agriculture and it is often not the case. Why not?

In any industry there are gate keepers, established industry players, who can make it more difficult than it should be to sell your product or service. In agriculture, many entrepreneurs ignore the gate keepers only to have it bite them as they try to grow their business.

For example, I was reading about a local farmer who was raising chickens according to a pastured poultry farming system. Pictures of the farm (see below) show a large fence with happy chickens milling about feeding off the grasslands with lots of space to roam about. Their grass diet adds lots of valuable omega vitamins to the eggs they produce. Their droppings also increase the fertility of the land. It all appears very eco-friendly and one would think the entrepreneur deserves to be successful for raising his chickens in such a humane and healthy environment and also because he has grown a large consumer base that wants his pastured-poultry products. Unfortunately, the farmer did not consult the egg police, otherwise known as the Egg Marketing Board, about his operation. If he had consulted them, he would have learned that he was only allowed to freely raise 100 chickens and sell their products. After that, he is obliged to join the Egg Marketing Board to obtain a quota to sell more eggs. It costs about 200 to 250 dollars per chicken for additional quota, which he may or may not be able to obtain from the board. In order to obtain that quota, he needs to reduce his flock to 100 or less birds and then apply for quota. Half of the farmer's income comes from his pastured poultry so the egg police now have him over the proverbial barrel. I would not want to be in his position now.

One of my favorite farm entrepreneurship authors is Joel Salatin who broke into the bigtime when he wrote a book called "Everything I want to do is Illegal". In this book he recounts all his battles with the various gate keepers he has had to deal with over the years to stay in operation. I recommend that you read this book to appreciate the hurdles that many farmers have to jump through to sell their products.

The lesson generalizes to most businesses. In most lines of business there are gate keepers, established industry players, who represent a "barrier-to-entry" for businesses attempting to grow into that space. Many businesses are like farming insofar as you may think you have the freedom to simply produce a high quality product or service, find paying customers, and you will be successful. The mere fact that you can produce something of exceptional quality, and find customers for it, should be sufficient grounds for you to be successful. That is often not the case because there are often lurking gatekeepers who require your money and time before they will let you grow beyond a certain size.

As you grow your business you might need to spend time identifying who the gatekeepers are, the nature of the gates they have setup, and the toll that is required of you to navigate through their gates. Failure to do so is could put the brakes on your growth.

As your business grows, you should allocate some time to identifying any gatekeepers who might stand in the path to further growth. As entrepreneurs we like to think we are free to operate as we choose and have chosen this lifestyle for that reason. The reality is that there are often gatekeepers who have bureaucratic and financial hoops that they expect us to jump through. If we do not acknowledge them, our business growth could stall even though we are offering a high quality product or service.

I finished planting all my potatoes last weekend. I now have 800 lbs of potatoes planted into the hay rows I prepared last fall for planting into this spring. The stakes in the picture below mark where different varieties of potatoes begin and end.

The next step in the growing process involves supplying the plant with all the things it needs to grow. Some of these elements are not under my control (e.g., weather) while others are (e.g, adding additional hay mulch to supply more area for potatoes to grow into). If all goes well, I should have a crop at the end of the season to either sell directly, process into another form, and/or save for next year's seed potatoes. This is my first time planting at a larger scale so for me this year is all about trying things out and seeing whether it is worthwhile to do again next year and at what scale.

The process of growing food might be compared to the process of growing a business. It could be argued that there is a planting stage, a cultivation stage, and a harvesting stage. The planting stage is the stage where you commit to a set of ideas that you think will be viable in the longer term. You decide to commit resources to getting a project underway. The cultivation stage is where you nurture the ideas so that they grow into something that a customer is likely to want. The harvesting stage is where you start supplying customers with the product or service you have nurtured.

Growing vegetables is a nice metaphor for thinking about how to grow a business. It can be used to stimulate thinking about the amount and type of work involved in growing a business.

Marie Forleo interviewed Ramit Sethi, author of NY Times bestselling business book for entrepreneurs, about the importance of specificity and positioning in sales. Sometimes the reason we can't sell a product or service is because we are trying to be everything to everyone, rather than focusing on the specific value proposition that we offer to specific consumer segments. Watch the video below to learn more about why specificity and positioning are important for making sales.

I am 2 chapters into "Influence: The Psychology of Persuasion", 1984, Robert B. Cialdini, Ph.D. It is often referred to in the literature on sales and maketing so could be considered a classic in these areas. It is a well crafted book with lots of research reported and cases analyzed with respect to what pursuasion principle is being invoked to cause people to buy a product or service (or otherwise act in a compliant manner).

Chapter 2 of the book deals with the principle of reciprocity and the many ways in which it can be used as a sales tool. The best illustration of reciprocity in action is a social psychology experiment Cialdini reports in which subjects were asked to rate paintings. During a 2 minute break period, one of the "subjects", who was really a part of the experiment, comes back into the lab area with two Cokes and offers one of the Cokes to a fellow subject saying "I asked him [the experimenter] if I could get myself a Coke, and he said it was okay, so I bought one for you, too". In half of the cases, he did not offer a favor to fellow subjects. In all other respects, the planted subject was scripted to act the same.

What they were investigating was how many raffle tickets the planted subject would be able to sell to the person s/he offered the favor to as compared to the person s/he did not offer a favor to. The planted subject sold twice as many raffle tickets to the people she offered the favor to.

The reciprocity technique is on display when free food samples are offered in grocery stores. If we take the sample, we feel more obligated to consider buying the full product. You may avoid taking the "free" sample because you don't want to feel any obligation to, or feel compelled to, buy the full product. The impulse to reciprocate is what may be driving these feelings of obligation or compulsion.

It is worth reflecting on whether you can use the reciprocity impulse to enhance your sales effort.

I planted my first batch of potatoes in the hay windrows this weekend. I planted 150 lbs of Norland early red potatoes.

I purchased a hand rake before I drove down to the farm because I thought it might make planting into the hay easier. It certainly did. I developed a fairly efficient planting motion that consisted of striking the corner of the rake into the hay windrow, pulling back some matted hay, sticking the potato under the back of the lifted hay mat, then putting the hay mat back into place on top of the potatoe.

I didn't cut up the potatoes as they were fairly small tubers and were a good size for planting as they were. I wore work gloves while planting and could have used a pair of knee pads but didn't bother to get them. Feeling some tenderness in my knees today.

I have 650 lbs more potatoes to plant. I'll be trying to take another dent out of that next weekend.

One question you might have about growing in hay is where the fertility comes from to grow the potatoe plant. The rotted hay is one source of fertility. The fields are also abundant with worms so there is likely to be alot of vermicomposting going on as well in the hay windrows. I also plan to add more hay to the windrow in about a month to give the plant more area to grow into.

This is my first foray into growing vegetables at a scale where I might try to derive some income from a farm product (planting fruit trees and grape vines as well but they take longer to be productive). There was some urgency to plant my early season Norlands as I want to have some of the earliest local potatoes and use these to get into the door with local restaurants or markets and possibly create customers for my other potatoes all season long. If they grow well they could be considered a premium organic potato (small red potatoe, white flesh, few blemishes, clean, unique, sustainable, eco-friendly).

Haven't spent much time figuring out possible yields and pricing. More focused on removing uncertainty about scaling up my hay-based growing efforts by getting seed into the hay and seeing what issues I might run into through the season. I've decided, however, to go big and assume it will work rather than conduct a smaller scale experiment on this approach. I had some success last year growing potatoes in hay but was using bales instead of loose hay gathered into windrows (which is a simpler longer term approach). I have also planted about 300-400 vegetable/spaghetti squash seeds into the hay so far and that could be another major crop this year. I have about a 5 acre field that I set up for hay-based planting this spring.

I spent the most of my time from monday to wednesday preparing my soil for the upcoming planting season. I rototilled my 4 garden plots (one is going fallow, one will be planted with vegtables, one will be planted with herbs and stawberries, one will be planted with malting barley and other grain crops that I might want to experiment with). I rototilled 12 strip tills for grape vines I will be planting this year. I don't think I'll have enough rooted grape cuttings to cover 6 tills so some of these tills could theoretically be used for planting vegetables if I wanted to. I also plowed about 2-3 acres of land that were overtaken with low quality forage weeds that I wanted to get rid off (Juncus Effusus), and the only way I think you can do it is by plowing them under. I never plowed land before so this was a big learning experience for me. Plowing is only the first step, there are many more steps involved to get a soil surface that can be planted into. I'm probably looking at about 25-30 more hours of tractor work to get this section of my field in shape again and I'm not sure exactly how I'll do this yet. This is somewhat stressful for me because I am a weekend and vaction farmer so I'm not sure where I'll get the time to devote to assemble the necessary equipment or do the work.

Farming is alot like entrepreneurship generally insofar as there is uncertaintly every step of the way. I don't know if my crop of potatoes and vegetable squash will grow in my rotted hay media, I don't know if I'll be able to sell what I produce or what price I'll get, I don't know if I'll have the time to reap what I have sown. I'll never know unless I do it. When one uncertainty is elimated (it grows), then I can tackle the next stage of uncertaintly (how to sell it).

Entrepreneurship is defined by the leval of uncertainty associated with new ventures. Non-established farmers are all entrepreneurs dealing with high-levels of uncertaintly. Farmers are probably navigating a degree of risk that is greater than what many non-farm entrepreneurs face. Why? Because the startup costs are significant (tractor, tractor equipment, seeding, fuel, soil amendments, fertilizers, etc...) compared to, for example, starting up an internet-based business. Most startup farmers today work off-farm to finance their farm startups. That is what I am doing and it is not something I anticipate will change after this season of planting.

Why do I do it? Because there is magic in seeing something that you have planted grow into something that can feed people, because a life spent in front of a computer is not what I imagined for myself, because there is a physical element to the work that I want embrace, and last but not least, because I enjoy the aesthetics of the land that I'm working on.

The ultimate test of whether you are a farmer is whether you can run a profitable farming enterprise. I haven't set high goals in this regards for this year as I'm still experimenting and I still have time to experiment before the taxman will come ofter me for claiming farm-related writeoffs.

What is different about this year of farming compared to last year is two main aspects: 1) in previous years I have focused on fixing buildings (ashphalt roofing, cedar shingling, fixing foundations, new doors, windows, gutters, etc...) , and not farming per se, 2) this year I have more time to focus on farming and establishing what techniques and what products might be profitable. So this year is a test for me as to whether I have what it takes to be a farmer. Again, I'm not expecting to achieve a high level of success this year as a farmer, but I do expect to have a better sense of what it takes to be a farmer next year when I think this can start to be a profitable enterprise again (5 years after acquiring the property).

As the weather turns nice in this part of the world (sunny and warm for last 5 days) it is time to get the soil at the startup farm ready for the upcoming planting season. I did the soil preparation for my potatoes last fall when I mowed my fields and windrowed the hay. It rotted down over the winter. I have about 3-5 inches of hay mulch to plant my potatoes into. I plan to plant some this weekend.

I may only plant my Norland early potatoes this weekend. About 150 lbs of Norland potatoes. I'm speculating that the hay mulch can act as a "forcing" environment. It should heat up better than ground covered potatoes during the day when the sun is out. At night it should be insulated somewhat by the hay mulch which should protect it from frost damage (still danger of frost for another month or so). I will "hill" my windrows with new cut hay around the middle of June. I have several other varieties of potatoes to plant (mid seasons, long seasons). Not sure if I will plant any of these as well this weekend.

If I am successful at growing potatoes in this way, the next question is what I will do with all my potatoes?

I'm about a third of the way into book "Imagine: How Creativity Works" by Johnathan Lehrer (2012, Canongate: Edinburgh, London). It is a good read so far and I'm learning some useful ideas about creativity. I liked his comparison of Dionysian and Apollonean creativity to divergent and convergent thinking (p. 64-65):

Fredrich Nietzche, in The Birth of Tragedy, distinguished between two archetypes of creativity, both borrored from Greek mythology. There was the Dionysian drive - Dionysus was the god of wine and intoxication - which led people to embrace their unconscious and create redically new forms of art. (As Dylan one said, "I accept the chaos. I hope it accepts me.") The Apollonian artist, by contrast, attempted to resolve the messiness and impose a sober order onto the disorder of reality. Like Auden, creators in the spirit of Apollo distrust the rumors of the right hemisphere. Instead, they insist on paying careful attention, scrutinizing their thoughts until they make sense. Auden put it best: "All genuine poetry is in a sense the formaton of private spheres out of public chaos."

Modern science has given Nietzshe's categories a new set of names. The Dionysian innnovator, trusting all those spontaneious epiphanies, is a perfect example of divergent thinking. He needs these unexpected thoughts when logic won't help, when working memory has hit the wall. In such instances, the right hemisphere helps expand the internal search. This is the kind of thinking that's essential when struggling with a remote associate problemm, or trying to invent a new kind of pop song, or figuring out what to do with a weak glue. It's the thought process of warm showers and blue rooms, paradign shifts and radical restructures.

The Apollonian artist, by comparison, relies on convergent thinking. This mode of thought is all about analysis and attention. It's the ideal approach, when trying to refine a poem, or solve an algrebra equation, or perfect a symphony. In these instances, we don't want lots of stray associations - such thoughts are errant distractions. Instead, we want to focus on the necessary information, filling our minds with relevant thoughts. And so we slowly converge on the ideal answer, chiseling away at our errors. This process is a struggle, a long labor of attention but that's the point. It takes time to find the perfect line.

Currently, I'm reading a chapter ("The Unconcealing") on the brain basis of creativity. Two primary areas that especially light up during experiments in creativity are the nucleus acumbens/domamine reward pathway (pleasure) and the prefrontal cortex (working memory). The two areas are connected by a highway of nerves suggesting that creativity is a joint function of pleasure and working memory processes. Attentional processes appear to hover between the two cortical areas. One could try to relate the activity of pleasure centers with Dionysian creativity, and the activity in prefrontal centers with Apollonean creativity. Creative output could be viewed as always consisting of Dionysian and Apollonean elements, with the relative contribution changing at different stages in the creative effort.

I'd like to make it a regular part of this blog to share with you some of the more useful entrepreneurship and investment-related links I come across in the course of my research and surfing. Without further ado, here are three links that are worth checking out.

1. The May 2013 issue of Harvard Business Review is worth a read. It is an issue devoted to "The New Rules of Entrepreneurship". Useful article on the concept of "Lean Startup" by one of it's founders Steven Blank. Also articles on how the Venture Capital landscape is changing and how to negotiate with Venture Capitalists.

   Harvard Business Review - May 2013

2. Free online course at Udacity on "How to Build a Startup" by Steven Blank and Kathleen Mullaney. Many entrepreneurs throughout the world are taking this course. In his Harvard Business Review article, Steven Blank made the provocative claim that an entrepreneur's chances of success are better if they adopt lean startup principles. He cites a recent study claiming a 75% failure rate for startups so there is definite room for improvement here. If Blank's claim is true, investors might start quizzing entrepreneur's on their awareness and adoption of lean startup principles as a way to assess whether they are likely to be successful or not.

   Udacity course on "How to Build a Startup"

3. What is your tolerance for risk? Dr. Ruth Lytton at Virginia Tech and Dr. John Grable at Kansas State University have developed an Investment Risk Tolerance Quiz that is worth checking out if you want to better understand your tolerance for risk. The role of risk taking in entrepreneurship is debatable. On the one hand, there are lots of stories about entrepreneurs who risked it all but prevailed in the end. Egon Musk of Tesla Motors is one example (watch Revenge of the Electric Car to appreciate the gut-wrenching level of risk Egon was willing to accept). On the other hand, there are management theorists who claim that successful entrepreneurs are not reckless risk takers, but calculated risk takers. Perhaps that means that unsuccessful entrepreneurs are reckless risk takers? The quiz might be useful as a means to stimulate thinking about the nature of risk and risk taking behavior.

   Investment Risk Tolerance Quiz

Just finished up my taxes for another year. Every year it seems my taxes get more complex. As usual, I leave everything to the last minute and have to set aside 3-4 days to categorize all my invoices into the various expense categories.

This year I have decided to make some improvements to my accounting system. My invoicing system is ok. My problem is staying on top of my expenses. So, towards that end, I have created monthly expense folders (e.g., Jan 2013 Expenses, Feb 2013 Expenses, etc...) and have thrown all my relevant receipts into those folders. I usually sort my receipts into sorted piles when doing taxes (e.g., fuel, electrical, heating, small tools, planting, internet, etc...), but I will probably leave my receipts in my folders and maintain a separate journal of expenses sortable by date and expense category. I know a spreadsheet can do all this, but I'll probably hack up my own php-based application to do this because 1) I can, and 2) it might be useful to eventually interface it with my php-based invoicing system to create a business dashboard.

What I hope to get from my improved accounting system is a more up-to-date sense of my cumulative income and expenses. I'll be able to better calculate how much I need to pay the taxman in my quarterly income tax installments rather than relying upon an estimate based on last year's taxes. I should be able to figure out if I should be making business investments to keep my tax rate at a certain level. Rather than making those purchases towards the end of a tax season, I could be making them during the year with an eye to optimizing my taxes and cashflow better.

So far it looks like I'll need at least 3 database tables to track expenses: Expenses, ExpenseCategories, and Businesses. The latter table is required because I operate three businesses and expenses have to be assigned to the correct business. An expense will be tagged according the business it belongs to and the expense category it belongs to. Each business will have it owns set of expense categories (there is not much expense category overlap between my internet businesses and my farm business). I can export my banking and credit card data in Comma Separated Value which will make it easier to get a list of my expenses and input them into my expense tracking system. It will still require reviewing my downloaded expenses each month and getting them ready for input, but once they are ready, I should be able to develop a script to batch input my expenses for the month according to transaction date, description, and amount.

Hopefully this will be the year when my accounting system is finally mature enough to provide me with reports on year-to-date income and expenses along with monthly breakdowns of income and expenses. It should allow me to view these reports separately for my three businesses and also offer some ability to combine income and expenses across businesses as well.

PENNSYLVANIA INVESTMENT NETWORK

Home

Contact

Entrepreneurs | Investors | About | Our Privacy Policy

© 2015-2024, Dealflow Solutions Ltd. All rights reserved.

Connecting Pennsylvania Entrepreneurs and Investors.