"Our small, early-stage company recently signed up for your service. We got numerous inquiries, several of which we are pursuing, and hopefully will find an investor partner as a result. It is almost impossible for young companies to attract investment capital in the current financial climate, but you managed to bring a number of qualified and interested parties to the table. I would recommend your service to any early-stage company seeking capital.
Bruce Jones, CFO
Posted on November 30, 2017 @ 09:01:00 AM by Paul Meagher
I recently decided to scale up the water holding capacity of my farm property by purchasing a used 2000 gallon plastic tank. Here is what the beast looks like:
This was not a carefully planned purchase. There was a good deal on it ($250) and I envisioned a few possible uses for it on the farm so I purchased it before someone else got it. Now that I have purchased it, the concept of scaling up seems much more visceral and real and is the inspiration for my thoughts about scaling up today.
1 US gallon of water (3.785 L) weights approximately 8.34 pounds or 3.78 kilograms at 62 °F (17 °C). 2000 gallons of water would weight 16,680 pounds or 8.34 US tons. When I said this to my wife she said it would take ALOT of water to fill it up. That is true, but we have a big roof on our farm property to potentially collect the water from.
In the left side of the photo you can see a 1000 liter water tote (264 US gallons) that is currently collecting water off a side roof on the barn. That tote can be filled within 4 hours in a heavy rain event. I'd estimate that I could fill the 2000 gallon water tank at least half full (1000 gallons or approx 8000 lbs) in one such rain event by collecting water from one side of the main roof - the right side. When I drop off the tank, I may end up placing the rain collector around there for now. I'll wait til next spring to hook it up.
So one principle of scaling up is that you should have the capacity to scale up before you do so. I could have filled the big tank with runoff from the farm house more slowly but I was mainly thinking of using my barn roof when I purchased this tank. A 2000 gallon tank seems to me to be the size of tank appropriate to collecting rain off a much larger roof surface such as a barn. I can cycle through emptying and filling the tank more quickly with barn roof runoff. The equivalent idea in business might be to make sure you have the person power in place before you start scaling up a line of business. Match scale to capacity.
Another aspect of scaling up is that there are multiple consequences of scaling up, not just one. I am scaling up my water holding capacity, but I am also scaling up my water pressure in ways that I haven't tried to calculate yet. All of the vines and trees I've planted are located down hill from the farm. When I tried to gravity feed irrigation from my 1000 liter water tote I was disappointed with the non-existent pressure I was getting. I eventually had great pressure when I attached a transfer pump to the water tote.
I don't know right now what water pressure I should expect from a discharge valve at the bottom of an overflowing 2000 gallon tank. The normal state for my smaller 1000 liter tank is to be full. When rain events happen on a full tank an overflow pipe positioned at the fill level keeps the tank from filling the tank any higher. There is alot of downward force involved in a full 2000 gallon tank. I'm sure some Texas or Alberta oil field worker could enlighten me quickly. They could probably also enlighten me on the ground preparation work that should be done and perhaps the best way to elevate the structure if I decided I wanted even more pressure.
The point is that when you scale up, you don't just scale up on your desired dimension (more water) you also scale up in other dimensions which may (more pressure) or may not be (more groundwork required) positive outcomes but which will need to be addressed in your planning. The more you can quantify the outcomes across all dimensions the better your scale planning is likely to be.
Another aspect of scaling up is having a use for your scaled up capacity. I must admit that I currently don't make much use of the water I do currently collect so why should I bother collecting even more water? One answer is that it would be better NOT to use a transfer pump as a long term solution to pressurizing my irrigation water. The larger water holding capacity will allow me to pressurize my water more and perhaps allow me to realize my original gravity-based irrigation plans for the vines, fruit trees, nut trees and my home gardens. If that is true, I will be able to take advantage of the increased storage capacity and gravity pressure to help my plants grow better.
Finally, suppose that I start collecting water and find a use for the larger capacity of available irrigation water. That might be a good time to make the decision to scale up further by adding another 2000 gallon tank. In other words, don't prematurely over scale your operation. I would like to have more water holding capacity but there is a sensible limit right now as to how far I should increase my capacity. Likewise, when scaling up a business operation, is there some natural limit to how far you should try to scale up in this iteration of your business?
To conclude, scale planning is important for any business that plans to grow which I have tried to illustrate with the example of scaling up my farm water holding capacity with a bigger water tank. This is a relatively simple example of scaling up but it nevertheless illustrates some of the issues involved.
Posted on November 24, 2017 @ 01:57:00 PM by Paul Meagher
Entrepreneurship is not a spectator sport. One of the main activities that entrepreneurs engage in is building. They build to solve problems on the way to achieving a goal.
One goal I finished addressing today was winterizing my green house. A section of the plastic on the roof ripped open in a windstorm so I eventually ended up replacing the full roof with hard plastic Tuftex panels - transparent on the south facing side, white on the north facing side (mostly because the cost of the transparent panels was double the cost of the opaque panels). These hard plastic panels added some needed rigidity to the building and I added gussets and braces to the worst walls to strengthen the walls and help ensure they don't flex and wander as much in the wind.
The green house winterizing project didn't end with the roof project as I had to figure out what to do with the screen window I leave open during the summer and fall (so it doesn't overheat). It is now time to close the window area in. Usually, I use plastic but this year I decided to re-purpose an old window and make it so that it is easier to open and close the window on an as-needed basis. Here is what I ended up building.
The purpose of this blog is to give a simple concrete example of what I mean by building value. Something similar has to be done on an ongoing basis to build anything of any value. As you keep building, the value of what you build keeps increasing and you may find yourself investing even more time, energy and capital into building value. Or you may just say it is good enough which is where I am at now on my greenhouse winterizing goal. Time to move onto solving the next problem.
Building is how entrepreneurs solve problems and add value. They build their way out of problems. I've heard several investors say that the reason they wouldn't invest in a project is because the entrepreneur was "not a builder".
Building isn't always about building something new. Most of my building has been fixing up something that currently exists so it looks or functions better. Building new stuff is more exciting, but fixing old stuff may be equally if not more important. Unfortunately, new stuff doesn't stay new for long.
Posted on November 22, 2017 @ 09:20:00 PM by Paul Meagher
I was listening on the radio to a couple of female entrepreneurs talk about running their restaurant. The interviewer
asked them what they were reading hoping to get some good motivational or business recommendations. One of them
responded by saying she was reading the building code.
As a restaurant owner she was probably not required to read the building code but it likely comes in handy
if you are planning any renovations or additions.
Sometimes what you have to read to get ahead is not particularly pleasant stuff to read, but it could be very beneficial if you can persist at trying to absorb it. For me, reading the building code is a metaphor for all
that unpleasant but useful reading that could help your business survive and thrive.
There is no rule that says that what you read always has to be pleasant or that what is pleasant to read is what you should be reading. If you are wasting too much time on book keeping and accounting, maybe you need
to spend some time reading about basic book keeping and accounting. Or, maybe you have to read municipal council minutes because you heard they are planning a project that might impact you. Or how about a legal text on the laws relevant to your business.
So the next time you think about what book you should be reading next, don't just think of all that NY times best-seller stuff that is interesting but not useful. Perhaps you might also be inspired by this blog to read your local or national building codes or literature of similar gravitas.
Posted on November 21, 2017 @ 12:26:00 PM by Paul Meagher
I am slowly making my way through Geoffrey West's book Scale (2017). I am finally getting into his discussion of cites and how we might think about them. He makes this interesting observation:
This may seem obvious, but the emphasis of those who think about cities, such as planners, architects, economists, politicians, and policy makers, is primarily focused on their physicality rather than on the people who inhabit them and how they interact with one another. It is all too often forgotten that the whole point of a city is to bring people together, to facilitate interaction, and thereby to create ideas and wealth, to enhance innovative thinking and encourage entrepreneurship and cultural activity by taking advantage of the extraordinary opportunities that the diversity of a great city offers. This is the magic formula that we discovered ten thousand years ago when we inadvertently began the process of urbanization. Its unintended consequences have resulted in an exponentially increasing population whose quality of life and standard of living have on the average also been increasing. ~ 252.
Geoffrey then goes on to define a city as follows:
Cities are emergent complex adaptive social network systems resulting from the continuous interactions among their inhabitants, enhanced and facilitated by the feedback mechanisms provided by urban life. ~p 253
In discussions of city planning, the name Jane Jacobs often comes up. She helped to derail the plans of powerful New York city planner, Robert Moses, from putting an expressway through some culturally important neighborhoods of New York - Greenwich Village, SoHo and Little Italy. She also argued that it was the interactions in these neighborhoods that made them great and that putting a freeway through the center would destroy that.
West's definition of what a city is shares alot with the definition of what ecology is. Charles J. Krebs in his book Ecology (6th Ed, 2009) defines Ecology as follows:
Ecology is the scientific study of the interactions that determine the distribution and abundance of organisms. ~p 5
This definition suggest that we might be able to use some of the tools from ecology to understand the distribution and abundance of organisms in our cities. Those organisms include humans but also wildlife like these 2 deer that visited me last week when I was working outside.
I think it is worth reflecting on what makes a city great and whether it is a quality of the interactions that it affords, the quality of the
physical infrastructure or some combination?
I don't think the great cities of this world are all made from the same cookie cutter. They can be great for different reasons. They can be larger or smaller in size. Some may be a hotbed of innovation where others may be a hotbed of cultural activity, community spirit, natural beauty, or educational attainment.
I started reading from begining to end which I will continue to do, but I also started jumping around to the pictures and then reading all the yellow highlighted sections in the book that denote important topics. One such highlighted topic that I want to comment on is given below:
A Plan for a Beginning Farmer
In the first year don't tackle every crop in the seed catalog. Pick just a few. Starting out, I would seed mixed salad greens and a hardy spinach variety, such as Gazelle, as soon as the ground is workable, and
every week until temperatures linger consistently above 72 F to 75 F. Greens are a sure sell in most markets. Then I would seed
determinate red tomatoes in time to set out after the last frost in your area, or a few weeks earlier if you have a greenhouse or
tunnel. BHN 589 is a dependable variety. In the fall, when nights start to cool to below 68 F, I would seed greens again. If you
can master greens and tomatoes in year one, you are off to a good start. Other easy crops for the first year include radish,
sugar snap peas, head lettuce, romaine, kale, and green beans. If you want to try starting a CSA, take on 10 customers and keep
your season to 12 weeks. Keeping it simple will more likely result in success, and that will build confidence. ~p. 5
This plan is very interesting to me for a variety of reasons, some
of which are listed below.
Planning that gets to this stage of simplicity and clarity offers useful guidance. The objective of business planning is not complexity, but simplicity of process and purpose.
The planning horizon implicit in this plan could be 2 years. That plan would involve using the first year of operation to gain skills and sufficient success and confidence that you are ready to scale up the next year. What isn't mentioned here is that Ben decided to go whole hog and used some angel money (from his family) in the first year to build up infrastructure for the second year so he was ready to scale to a full income level then. Trying to get infrastructure such as water lines, formed beds, greens houses, cooling areas, washing stations in place can be more difficult to do when you are also scaling up your farming orders (e.g., more CSA clients, restaurants, farmers markets). Ben Hartmann, like farming innovator Jean-Martin Fortier, focused in their first year on getting infrastructure in place while downgrading the importance of making a full-income from production in that year. Some income is necessary, however, to accelerate your learning and to validate the enterprise.
The plan can also be implemented as a multi-year plan. You can keep your day job and start commercial farming as a side business. You might not be as ready to scale up in year 2 if you are taking this approach but you may be under no pressure to do so. If you have income from a job you like you can scale up the farming enterprise at whatever pace works for you.
I focused on a two year planning horizon in the title because that seems to me an important planning horizon for any type of business that involves building infrastructure before you can scale to a full-income level of revenue. I thought this plan for a beginning farmer is worth reflecting on as it makes clear some of the issues involved in 1, 2 and 3+ year plans and what you might be doing in each of those years in anticipation of scaling up to the next level.
I am taking the course because of my interest in food production and the promise of a more scientific approach to doing so.
The Netherlands is arguably the world leader in agricultural production: they produce the highest amount of
agricultural products per acre anywhere in the world. I figured if I want to learn about a scientific approach to crop production it might be good to learn what a university in the Netherlands has to say.
One interesting factiod about agricultural production is that from 1950 to 2012 global agricultural production has more than
tripled while only taking up 10% more land area. Can we continue to intensity production in a sustainable way to meet the demands of an increasing population which is projected to be 9 billion by 2050 (currently estimated at 7.6 billion)? That is the main issue that the course tries to address.
The contribution of land area to crop production is not expected to increase significantly during that time so most of the
increases will be due to other factors like technology, knowledge, and innovation.
The faculty at Wageningen have developed a framework called Theoretical Production Ecology that they hope will contribute to the required productivity increases in a sustainable way. I'm not an expert on this approach but I do know that it involves
simulating crop production based on the main parameters that drive the production of that crop. It is a quantitative approach involving the use of animated charts so you can interact with the parameters, see the effects, save the results and compare that with crop model results using different parameters.
The two takeaways for me so far are:
1) There is a Moore's law type of innovation happening in agriculture (not at the same explosive rate but still impressive).
Instead of packing ever more computer performance onto smaller chips, we are packing ever more growing power into smaller spaces. That
might be an underappreciated fact about what is happening in agriculture today. Whether the current approach is sustainable is another issue but
we should at least acknowledge that agricultural productivity has been increasing and take note of what is on the horizon that might lead to
greater productivity and that is also sustainable.
2) The mindset behind theoretical production ecology might be used to think quantitatively about factors of production in other contexts. Entrepreneurs may not be growing tomatoes, but they are growing businesses and perhaps there will come a day when we have models that allow us to vary the main growth parameters of a business and envision how that set of parameters generates different types of yield (number of units produced, profit, expenses, carbon credits, etc..). We can then compare that to
another set of selected parameter values and visualize the different types of yield that configuration produces. Based on these comparisons we would select the optimal set of parameter values for our production plan. This would be a more theoretical approach to business planning. The business models might be specific to the type of business we are engaged just as crop models are often specific to the type of crop being grown.