Innovative funding for new shop/meat joint

[quietwatersfarm]

Don't know if this is the best place to put this but am interested in peoples thoughts.

Among the many projects ongoing at present is one that has gradually become quite central to the farm development plan. This is the provision of a new facility that acts as farm shop/expanded kitchen and 'dinner at the farm' venue.

Its on a good road with a lot of local passing traffic (and lots of locals wanting us to open up!) and would increase both 'farm gate' and our 'internet' sales potential as well as allowing great pit bbq evenings, courses and other things here to have a suitable HQ.

We have gone ahead and got the relevant planning consents in place and have the site prepared. We are now looking at the most sensible and sustainable way of funding the build without involving any borrowing (a rule we try to obey within the farms development overall). We have secured (through another venture I am involved in) the labour costs of the build (by allowing a sustainable prefab system to be used and then publicised) and also have organised most of the equipment fit out through existing friends in teh trade.

This leaves just the materials and services costs as the missing pieces of the jigsaw. Around £10 - £15k. We have looked at going in with a like minded partner who might want to buy a stake in the venture and also various 'crowdfunding' options.

In the former, we are just not sure who would want to buy into a farm shop/bbq venue which wouldn't actually need much of their input and might feel more like a simple (perhaps slightly dull) investment. On the latter we were wondering what would be a good reward to offer. So many schemes seem to offer so little and we cannot genuinely see anyone wanting to help fund a charcuterie/bbq enterprise that they might only use occasionally. As a result we had wondered about offering full reward in the form of any farm foods we offered (or events we held), at full face value, to be provided as effective repayment of the donations. This felt good because the very fruits of the enterprise being funded would then be given back to those who had funded it - seems simple! but this actually appears to break the rules of some of the 'kickstarter' type schemes.

What do people think?
would it be attractive to small investors on a crowdfunding basis to put in say, £100 and then get £100 (or maybe even £120) of goods like pork, poultry, charcuterie etc back over a set period?

[wheels]

Quite simply, Yes. I could see it appealing on many levels.

Phil

[DanMcG]

Man I wish I was closer, I'd love to invest some money in your operation...

[johngaltsmotor]

I would think that with the right publicity you could easily find enough interested parties. At least locally there are many people who "invest" in a community farm and then get regular deliveries throughout the summer based on what is in season. This would be similar, except much more flavorful

Could you format it differently than the crowdfunding such that people would purchase pork bonds (gift certificates) that are valid at a future date? Similar to other bonds, you could sell £110 for Jan/Feb at £100 and £120 for June/July at the same £100 so that it gives you more time to make use of the funding before it comes due. This would also let you plan your future sales by knowing when you were likely to have a given quantity of bonds coming due and needing corresponding product.

Especially if the bonds are good for a variety of things: ingredients, supplies, training, events, etc. I could see this having a very wide appeal. I agree with DanMcG, if it didn't require a trans-Atlantic flight to redeem them I would be interested.

[NCPaul]

Count me as another on the wrong side of the Atlantic to be of much help. I would be careful not to have all that bought shares want to cash in all at once as soon as you open. Are there other farms in your area whose produce complements yours? A small cheese maker perhaps?

[RodinBangkok]

Not sure how the concept would work in the UK ( laws or agency limitations), but a farm co operative might be something to consider also. This could include other farms for livestock production, or processors, restaurants, retailers, etc. These can be very successful once you get the base co op organization setup.

[quietwatersfarm]

Thanks for your thoughts everyone...

Points taken and understood ie; not wanting too many 'bonds' being cashed in at one time - this wouldn't be too much of an issue as production is not really a problem, especially with the new facilities. In reality I think people will often want their rewards spread over a reasonable period, in fact it will probably be preferable in most cases. Either way a sustainable supply schedule would have to be built in to the offer.

offering as wide a range as possible - this makes sense as much for us as the investors. We would think that the 'bonds' or 'credits' could be redeemable against anything at all. Meat, poultry, prepared meals, charcuterie, sauces, Christmas hampers, food evenings, courses and even event catering etc (or any mix of the above). It wouldn't matter to us what they were used for.

It might also be appealing to offer things like the economy of buying say half (or whole) a pig at the half pig price but without having to take delivery of the whole thing in one go, but spread over two or three installments to save freezer space etc.

So overall would people think that a completely flexible, 'redeem it against what ever you want' credit system for would be best?

[Dogfish]

Thoughts/observations:

-- Bond or credit redemption in the form of goods *could* bite you in the @$$ in the event of any kind of swing in the price of pork, feed, death or injury of a key figure etc; you could find for instance that if the price of pork went up you'd be on the losing end, paying people back way more than you owed them. It also may conflict with the terms on your mortgage should you have one. It would also cause a conflict I suspect with taxation whereby you may not be able to claim a business loss and therefore you'd be paying twice. I think you're factoring in the value of a pig to you personally instead of to your pocket book -- if each side is worth say $3.00 per lb then you may be looking at repaying vastly above what you actually owe in dollars. That would be $900 per pig if each side weighs 150 lbs. Bottom line is that if you were to sell those pigs you may find your money showing up without anything fancy.

-- I think you underestimate the appeal of a dull but stable investment, as most people who are wealthy are wealthy because of dull and stable investments.

-- Depending on how much land you own, you could sell a portion and lease it back if it was necessary. However, if you're growing feed you may find that the land is better off sold. This goes for equipment, excess livestock, etc.

-- The structure you're suggesting would still be a debt, just of a different kind. I mean *no* offense when I say things always end up taking longer and cost more than expected; factor an extra 25%. Be 'negative' so that you can be better prepared should crap go sideways, so that if it does, you won't be ruined. I've had crap go sideways and have been ruined, and it's not pleasant, I was only 24 though and the stakes were still low.

In my opinion, having had to hustle for this type of thing occasionally, having succeeded and failed as well, I would suggest seriously soliciting bids on materials etc or surplus/used on classifieds. Construction is enormously variable. It may take you a few months longer but I find most things are cheaper if one looks hard enough long enough. And if it won't make an immediate impact on your cash flow, why not? Considering that while you are building your efficiency will drop substantially as well. If I was doing this, I would look to save-beg-borrow-steal 50% cash so that you can offer partners a good ROI, and acquire the rest through partnerships offering a fixed rate of return within terms that don't include recourse on goods or property and replace them instead with a high rate of return. I would also be willing to bet there's money in your existing business that you can't quite see. And as stated, I think you underestimate the value of a stable and dull investment. I would recommend also sitting down and figuring out where, precisely, you and your immediates make the most money; where you get the best bang for the buck. Figure out what it is you do absolutely best and then flog the snot out of it. It may not be as fun but it could become your bread line. Be patient and it'll pan out. Avoiding debt is expensive and slow but it is safe. Raising cash through friends and family is totally legit to pay in goods, but it wouldn't be a good idea imho to do the whole thing in goods, nor within terms -- just keep it in good will.

[quietwatersfarm]

all good stuff!

This issue isn't a lack of funds as much as a desire to move several building projects forward at once and also a genuine interest in looking at alternative funding methods for such things that will increase involvement with customers, clients or anyone interested.

It will also open some brand new aspects to the current enterprise, for example; there is a animal feed mill company opposite that are keen for us to open as they have two shifts of 16 staff a day and 30 lorry drivers who sit and wait to load/unload for most of each day - they have no canteen facilities or hot food on site. They alone will provide a steady and profitable return. This is one of the reasons we were thinking of pushing this on.

We wouldn't want (or need) to sell land to fund such a facility. I appreciate what you say about borrowing but its crap if their is no real relationship or genuine interest in what you are doing (like with a bank etc) and frankly we would always rather invest the farms own funds before going down a bank route!

We are in a kind of fortunate bubble in terms costs of production etc as our whole model has always been about reducing cost (and therefore risks) associated with production. We are largely unaffected by feed prices (as we dont buy any in) and our production costs are relatively low and well controlled.

In terms of pay back, I appreciate what you are saying. It would take a window of approx 4-6months of our production to see off repayment of the kind of 'credits' we are looking at here (over and above our normal turnover) so people would see their rewards back fairly quickly and I dont see that as a particular risk.

It may be that we dont go down this route at all, just dipping our toe into this 'crowd funding' pool to see whats involved and whether there is any potential.

All thoughts and experience most interesting though, thanks.