Research can be the most enjoyable part of this process. This is where you get to ask a lot of questions of a lot of people. Learn more about what you are planning to do before you get started. It is important to understand a few things:
- This is a business. When you ask questions that are more personal in nature (like financial questions), be ok with their reluctance to answer those questions.
- Look at area processors and consider a product or products that compliment what is being made rather than try to make yet another version of the same old thing. If the market is responsive to that product and other processors seem enthusiastic, then go ahead, but it is not only rude, but does not make financial sense to make a product in an already saturated market.
- Not every tells the truth. Always “follow the money”. If someone says they make a living on 1500lbs of sheep milk cheese a year, and they sell it for $16/lb, they have another income source that they are not telling you about. Don’t get pushy, just be aware that this may not be a business that you can use as a template for your personal business plan.
- Call ahead before showing up. Cheesemakers are busy and while they are polite about customers visiting, a potential competitor asking questions about starting a like business in the same area will not generate the same warmth.
- It is normal for people to answer questions, but not allow you to see the processing area. They may be willing to show you the processing area, but ask that you don’t take pictures. Respect their wishes.
The point of the exercise is to learn more about:
You will need to speak to a number of different types of operations, from heritage breed dairy farmers to dairy processors, to get a basic idea of the proposed enterprise.
Heritage Breed Conservation
There are going to be some special challenges that people who dairy farm with heritage breeds face that people with the more traditional dairy breeds do not have to deal with. You will need to answer some of these basic questions to help you fill out some of the financial bits and for marketing information. Complete the Questions to Ask Heritage Breed Dairy Farmers Worksheet if you are interested in working with heritage dairy breeds.
You will be asking questions of people that are already dairy processing. It may be interesting to ask people in your area who have left dairy processing to see what you can learn from them as well. You will want to do about three (or more) interviews. Ideally, interview farmers that are the same size as yours, use heritage breeds, and have similar philosophies. Complete the Questions to Ask a Dairy Processor Worksheet if you are interested in doing any sort of dairy processing.
(Note: You will be using a lot of this same research to complete the Market Research section of your business plan. Look forward to the Business Planning section to learn more about how and why Market Research is important for business planning.)
Most people have no idea what it is that they want to make. They just know that they want to make something. With that, there is a vague plan to sell it, and maybe a vague idea of who it is that would buy the product. With heritage breeds, you can look at the traditional dairy products made by that breed. You can also look at products that were made (or still are made) in your region. There are resources in this workbook that will help you learn more about traditional dairy products that are tied to a breed, or certain regions. Market research allows you to determine:
- Who you are planning to market your product to
- What you plan to make and sell to those people
- Where you plan to sell the product
- When you can sell this product
- Why you are making this product
- How you plan to get this product to the customer
There is no one way to start this. You can start with what you plan to make, who you plan to sell this to, or any one of the above bullet points. They are all related. The following worksheet will walk you through the market research analysis. Take a step-by-step tour of the who, what, where, when why, and how of dairy processing. Complete the Market Research Worksheet
In this section, you are trying to look at the reality of dairy processing using heritage breeds. A few things to consider and discuss are:
- Heritage breeds tend to have less volume of milk compared to more commercial breeds. They will have greater yields. How much money does the dairy processing venture have to pay the dairy farming part of the venture to make this a sustainable venture?
- Industrial cheese operations purchase their milk at below cost of production. This is how they can make money. You are looking at dairy processing because you want to make the dairy sustainable (to justify the breed) and make a living? How do you think you can compete with those people? Are you different enough in the marketplace to play with that competitive disadvantage?
- Who are your competitors? Consider both regional and national competitors. Be thorough in your description of your competitors.
- People are very interested in products made from Heritage breeds. The Livestock Conservancy has defined what Heritage means as it relates to cattle and dairy products. What is the local “food scene” like? If it is not a healthy “food scene”, how much time would it realistically take to develop one? Can you afford to wait? How close is that “food scene”?
- Can people afford to purchase your product? Will they buy enough to justify the enterprise? How much are products like yours selling for in your region? Somewhere else?
In this section, you will learn to develop the assumptions you need to create your financial plans. You will look at the production potential based on the number of animals that you have and their average production. This will help you determine what the potential is for existing animals and dairy infrastructure. This can be a theory lesson as well. (Financials will also be covered in the business plan). Try to work through the following worksheet to determine your revenue potential and the expenses you will incur.