At first, "being too successful" doesn't sound like a real problem. But after listening to Getaway Farm's story, you'll start to understand why rapid growth can cause unexpected trouble.
This is a cautionary tale about a business that did so well it actually fell victim to its own growth. Here's what you need to know to avoid the same fate.
In this TGIM short, you'll...
- Find out how enthusiasm and creativity can actually lead business owners in the wrong direction
- Discover how to stop your growing pains before they spiral out of control
- Learn why finding your business's niche should be a big priority
Check out the full short below:
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Speaker 1: "If you're looking for an expert on growth, you could do worse than find a farmer. After all, their whole business is predicated on plants and animals growing, and when you're a farmer who sells direct to market, you learn about growth while working a tractor and a cash register."
Chris: "My job entails everything from administration, evaluation of numbers, planning with numbers, right down to dealing with human resources, hiring, firing, training, pricing, marketing, even down to shoveling manure, sweeping the floor, cutting the grass, you name it."
Speaker 1: "That's Chris de Waal, vice president at Getaway Farm, a grass-fed beef operation. Working alongside Chris are his wife Leonie, her parents and her brother, Chris and Leonie's kids, and her brother's kids too. They've grown Getaway from a small weekly stall at a farmer's market into two seven day a week butcher shops that help get Getaway's products directly into the hands and also mouths of customers. The business has grown ferociously over the last seven years, with fourteen employees now and steady sales, and no real plan."
Chris: "So much of it was gut from the next step to the next step to the next step. A lot of that gut feeling came through the relationships that I was developing with our customers and our clientele."
Speaker 1: "Gut feelings and relationships can't change the math on one growth conundrum Getaway was facing. They raise whole cows, of course, and some cuts of meat are more popular than others. They needed to find a market for those less popular cuts, and they decided to make and sell meat pies. Chris had found a new product line to help balance supply and demand. What could possibly go wrong here? At first, nothing. North Mountain Pie Company did a steady, even booming, business. If you didn't get to the market first thing Saturday morning, you weren't getting your hands on one of those pies. Before long, within a couple of months, North Mountain Pie had grown beyond its original purpose, which was, don't forget, just to take up the off cuts that would allow the butcher shop and farm business to grow. Soon North Mountain Pie was eating everything in its path, including its owners."
Chris: "You make up for it with your own labor or with Mom's labor or with your wife's labor, or even your thirteen-year-old son's labor. It got to this scenario where we were putting in so many hours that weren't on the books just to sustain and meet the demand, that we got to a point where I said, "Okay, hang on a second. If we're going to do this, we're going to have to set up proper production. We're going to need to scale up. We need to put in the infrastructure that's going to make this all possible." With that, of course, comes capital."
Speaker 1: "Basically in this scenario, Chris and his family farm are the old lady who swallowed a fly and then swallowed a spider to catch the fly, a bird to catch the spider, a cat to catch the bird, and well, perhaps she'll die. Decisions had to be made about where to invest for sure, and-"
Chris: "Honestly, the shorter return is definitely the pie company. It definitely is the pie company. It's going to do way better than farming is ever going to do."
Speaker 1: "At this point it would perhaps be instructive to check in with an expert. Ellen Farrell is a business professor who specializes in venture capital and entrepreneurship, and she says the first thing to consider carefully when faced with a growth opportunity is cash flow."
Ellen: "The element of growth makes an entrepreneurial firm extremely unstable. We're spending money to grow, but the money that we're acquiring as a result of that growth comes in later, and sometimes it's a great deal later."
Speaker 1: "In the case of North Mountain Pies, the money was flowing in the door almost faster than Chris and Leonie and her mother and their thirteen-year-old son could get the pies out the door."
Chris: "Because the margins on wholesale are "meh", and the margin on retail are "meh", but they're a little bit better, the margins on pie were, "That's not so bad." Right? There was a difference between the three, and it's very tempting to go after that high margin stuff, but with that comes the capital requirements and the labor, and all the extra management. I want to be on the farm on a tractor, and now I'm running a pie company. What happened?"
Speaker 1: "Here's the other point Ellen Ferrell wants to make: Entrepreneur need to make sure their enthusiasm and creativity doesn't draw them away from what they do really, really well. Find your niche, focus, even though the temptation will be strong to be all things to all people."
Ellen: "In those early days of getting started, and when I say early days I mean that could be years. That they feel a need to be a little bit of a "yes" person to a lot of requests. "Can you do it this way? Can you do it that way? Can you do this? Can you do that?" They sometimes can very much lose their focus."
Speaker 1: "Despite the visions of meat pies stuffed with dollar signs dancing in his head, Chris and the others at Getaway pulled their final pie from the oven just before Christmas last year, a scant four months after first hanging out the North Mountain Pie Company shingle. They didn't just back burner the most lucrative part of their business, they turned the heat off and closed down the kitchen for good. It was a hard decision, but it was made easier by a return to the group's original goals."
Chris: "We all came here with a purpose. Not to get rich, but to see Mum and Dad farm. It goes back to why we're here, and if I were to intentionally let the farm suffer by not being what it could be in order to whack out a bunch of pies and make money, then I'm just betraying everything that we came here to do."
Speaker 1: "Fine, you didn't start farming to get rich, but you do still need to grow, right? How do you solve the eight hundred pound beef carcass in the room? For Chris the answer lay in those relationships he talked about earlier. In this case, relationships with local restaurants who were willing to work with the cuts of meat Getaway had that were surplus rather than simply demanding striploin. Our growth expert Ellen Farrell really likes that."
Ellen: "It would seem to me that this is a very, very smart and thoughtful and savvy group of people who developed a lot of very good relationships, because when they recognized, "We can't do all these different things," I love the fact that when they went back to their original clients to see whether or not they would take that excess capacity that they had, that they met with success there."
Speaker 1: "Ellen says the lesson for any entrepreneur here is to remember the niche you've carved out and look there for solutions to your growth quandary before you consider diversifying. You need to make sure your core business is protected before you follow the next pie-in-the-sky idea. What has Chris learned about biting off more than you can chew? Well, he's learned it's okay to acknowledge mistakes and fix them, and to resist your ego when it says you can't backtrack on a decision. "If you're honest with yourself," he says, "you have a chance to stop the damage before it's out of control." He does have one regret about the decision he made to turn off North Mountain's ovens."
Chris: "I miss eating the pies. They were so good. So good."
Speaker 1: "Although the good news, Getaway managed to sell the North Mountain Pie company, recipes and all, to someone who has the experience, time, and cash flow to run it properly, and that someone will also be a customer for the farm's off cuts, which means soon Chris will be able to have his pie and eat it too."
- Getaway Farm
- Getaway Farm on Twitter
- Why You Need to Stop Worrying About Profit and Start Worrying About Cash Flow
About TGIM: TGIM is a podcast for people who can’t wait for the week to start. In each episode we’ll be bringing you inspirational stories about entrepreneurs who have overcome obstacles, built incredible businesses, and are now living the life they want.